When Money-Opposites Attract

when money opposites attract

When money-opposites attract: One’s a saver. One’s a spender. One would rather be at the mall. The other is into investments. While they love their differences overall, they struggle with disagreements about money.

Money is the third most frequent topic of marital arguments, after chores and children. Ironing out the wrinkles in money beliefs, behaviors and decisions can go a long way toward reaching financial goals with peace and harmony – whether those goals be at the mall, or in the savings account.

How can couples handle mixed money messages?

Try three steps.

Step 1: Money Script Awareness

Sometimes we don’t realize the underlying money beliefs that drive our own and our partner’s decisions. These are often called money “scripts.” (You can find yours using an online test developed by Dr. Brad Klontz here.) Share with each other the money messages you grew up with. Examples might include “Money doesn’t grow on trees,” or “You only live once.” The goal in sharing is to begin to reach an understanding of the other’s background.

Share who influenced you when it came to handling money. Money script influences can come from various authority figures – parents, grandparents, teachers, coaches, or spiritual leaders.

Share what you believe is the most important value that money provides to you. Values derived from money can include security, achievement, sharing, and spontaneity/having fun. Even a general rejection of money (think 1960s hippie culture) can be a money value.

Step 2: Concentrate on conversation

Now that the money differences are on the table, how do conversations about it go? It’s important to communicate about how you communicate. The goal is for each partner to feel heard and understood.

If one or both are falling short on feeling heard and understood, “active listening” is one tool to try. In an abbreviated form of active listening, each partner takes a turn being the sharer and the listener. The sharer tells their story or shares their statement about a topic. The listener then completes three steps.

  • mirror back what they thought they heard,
  • check for understanding, and
  • empathize if appropriate.

For example, say the sharer talks about feeling discounted or ignored with important money decisions. The listening partner listens without comment. The listening partner’s three steps might begin like this:

  • “So what I heard you say was…” (repeat back, even if it’s verbatim, what you heard)
  • “Did I get it all?” (If yes, go to next step. If no, listen to what was missed, and go back to mirroring what you heard.)
  • “I can see how that would be difficult/challenging/etc. for you.” Or, if it’s true, “If I were in your shoes I would feel the same.” This empathetic statement is not necessarily an agreement (although it’s nice), but at a minimum an acknowledgement of understanding.

All three of these must be completed before it’s time to switch roles.

Step 3: Respectful Negotiation

With enhanced understanding, a couple is better equipped to come to a mutually agreeable solution.

Several years ago a couple of young successful professionals debated in the financial advisor’s office whether they should be saving 10% or 20% of their income. One felt strongly that with the lower savings they could hire help at home for the house and lawn. But it was equally important to the other partner to be debt-free by age 40.

After discussion, awareness, communication, and negotiation, they compromised to agree that they would both be satisfied saving 15% of their income, hiring some house help, and keeping their debt-free status as a goal, but not a rigid expectation. 

What about you? What challenges have you encountered in a romantic partnership when it comes to money differences? How were you successful in overcoming them? Or are you still challenged by them? Share in a comment below.

If anything in this post resonates with you, I help people in three primary ways:

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Challenges and CoastFire: My Story

Headshot of Holly Donaldson

My story: The following is an updated excerpt from the introduction to my book, The Mindful Money Mentality: How To Find Balance in Your Financial Future (Porchview Publishing, $20).

As a behavioral economist (in a field that studies the psychology of personal economic decisions), I have a keen interest in our relationships with money. I care about maximizing its usefulness as a tool rather than elevating its status as an end.

But for much of my life, I had those two reversed.

I did my own financial planning backwards. I put the pursuit of money first, life second, and myself last. In other words, I floated in a fog about my attachment to money, swept along by society’s encouragement and my own beliefs. My money mentality was not aware, awake, or intentional. It was unconscious. It was anything but mindful. 

Ironically, I was one of those successful savers. Starting when I was a teenager, I kept track of every penny I spent. I could not wait until my 21st birthday so I could start contributing to the 401(k) at work. 

Money as the Main Goal

In my 20s and 30s, I focused on money as an end, determined to define my success as a person by the amount of money I made. As a result, I made some choices that caused me, and those around me, to suffer unnecessarily. I fretted over how much essential things cost. It hurt me to spend on myself for anything nice, much less on anybody else. I now realize that having money was a way to feel good about myself. In my mind, my earnings defined my success as a person. This is the area where I was most imbalanced, and I regret some of the decisions I made then. 

After college, I joined a Miami bank training program. I saw that most of the trainees chose to live in a new suburban complex requiring a Metro commute. I chose to live in cheaper North Miami, only ten minutes from downtown, proud that I was saving on rent, gas, and Metro fares. The building was newly renovated but occupied mostly by taxi drivers who kept odd hours, and the crime rate was higher in my neighborhood. My car was broken into in the parking garage. I did not get much exercise because, as a 5-foot-3-inch 20-year-old, I didn’t feel safe going outside. 

Further, while my coworkers were discussing the fun evenings they had had at south Miami neighborhood restaurants, I thought, “Bah, humbug!” I was proud not to “waste” my money on frivolities. I ate mostly sauteed vegetables and microwave popcorn in my apartment. Over the seven-month training program, I not only did not exercise enough, I unconsciously distanced myself from the camaraderie of the other trainees. While I eventually fixed the exercise deficiency later in life, the friendships I might have made and enjoyed today are absent. 

A Vicious Cycle

It was not easy for me to accept that what you have is not who you are. I didn’t understand that if you looked to your net worth to find your self-worth, your net worth would never be high enough. It was a vicious cycle: I never felt good enough, so clearly I didn’t have enough; when I had more, I still didn’t feel good enough, so clearly I still didn’t have enough, and so on. 

The Turning Point

When I was 39 in 2005, my then-employer, a regional bank, merged with another one. The new bank had very different priorities. A startup division of a brokerage company had been trying to recruit me, so as part of the decision to make a jump, I ran a financial analysis to see how much risk my then-husband and I could take on.

I told him, “I have done these calculations six ways to Sunday. It appears that right now, if we do not save another dime, when we are 60 we are guaranteed a double-wide mobile home and early-bird specials at Denny’s.” I was being facetious, but it was clear to me that this was not good enough. We would need to keep working and saving for more. 

To my surprise, he said, “Sounds good!” 

I had always assumed that I would have to maximize my earnings as much as possible until age 60 because that was what everyone was supposed to do. Suddenly I had the space to step back and think: what do we really need? I thought: “I guess it’s not too bad to be nearly 40 and know I have at least what I have now. In fact, if I had to, I could definitely live with that.” Nowadays my story would be called “reaching CoastFIRE.”

I felt liberated. Suddenly I had a world of choices before me. 

New Choices

When I began to understand the meaning of “enough,” the pursuit of money ceased to control me. As a result of changing my money mentality, within a few years I was able to:

  • start my own business
  • write a book about money and mindfulness
  • realize I would rather be debt-free than live in a big house in the city
  • build a small house in the country
  • spend more time on my new porch.

From that point on, I made more decisions from a position of security and confidence, rather than pursuing the vague goal of achieving another dollar without knowing why. 

Sacrifices Without Regrets

As I near 60, I have no regrets about the decision to leave corporate life. Financially, I have made sacrifices. I have had to pay (a lot) more for health and disability insurance. I won’t have as big of a pension as if I had stayed for seven more years. (But oh, how long those seven years would have been.) I haven’t had an employer match to my retirement plan. On paper, becoming self-employed vs. staying as a corporate executive is not a move many financial advisors would recommend making.

But even with a divorce and remarriage in my story in the meantime, I’ll still be okay. Looking back, the best investment over the past nearly 20 years has been the freedom of time to work how I wanted, doing what I love to do in the way that suits me best. It’s also meant plenty of time for important people in my life, as well as for my physical and mental health. 

It’s Never Too Late

Money is not the destination; it is merely the vehicle. The hardest work for me has been to figure out what life I wanted to live to be happy. Once that became clear, the tough decisions fell into place. 

If I had figured out what I wanted first, I might have saved myself a couple of decades of unnecessary work and worry about not having enough. The irony is, those years probably shortened my life, which is one way to avoid running out of money!

CoastFire isn’t for everyone. But the principle of mindfully paying attention to the pursuit of money is. It’s a joy for me when a successful saver discovers that they might actually have a choice to hop off the savings hamster wheel and start enjoying what they’ve got.

Got a similar story? Share your thoughts below.

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Using A Retirement Income Buckets Approach

buckets

Using a retirement income buckets approach: One of the most common questions financial planners receive from soon-to-be-retirees is, “What’s the safest way to give myself a paycheck once I quit working?”

The question often stems from the knowledge that needing to withdraw funds in a down market can be both ill-advised and scary.

Those who have been around long enough probably know someone who retired close to a particularly bad market year, like 2001, 2007, 2008, or now 2022. Because that someone had to, or chose to, sell some investments at that terrible time, they ended up living off of much less than they originally thought. This can be a scary thing to watch. It makes one wonder, “How do I make sure that doesn’t happen to me?”

A Buckets Approach

Enter a buckets approach to retirement income. Below is a link to a video excerpt from the online course, “Retirement Readiness,” outlining the approach in more detail. (A link to the course can be found at the bottom of this article and here.) A description for each of the buckets follows below.

https://youtu.be/mkeqzgJfeFc

Bucket 1 – Cash and Money Market Accounts

The first bucket will provide your paycheck. Here is how it works.

  1. Calculate any retirement income you will have (pension, Social Security, dividends, interest, rental property, for examples);
  2. Figure your annual recurring expenses (do not include one-time expenses such as replacing a car, roof, or paying for a special trip or wedding);
  3. Subtract 2 from 1 to come up with the difference; and
  4. Keep 1 to 2 years of that difference in Bucket 1.

For example, Justine retires at 65. She expects to live past age 82 so she is waiting until 70 to claim Social Security. She has a pension of $800/month ($9600/year). Her recurring expenses are $70,000 annually. The annual difference is $70,000 – $9,600 = $60,400. To start retirement, she decides to keep 1.5 years of the difference in Bucket 1 so $60,400 x 1.5 = $90,600. She puts that in a high-yield money market account and sets up an automatic transfer of $5833.33 monthly to her checking account. Voila – she has a new paycheck.

When she turns 70, she will collect $45,000 in Social Security. At that time the annual difference will fall to $70,000 – ($9,600 + $45,000) = $15,400. She decides to keep 2 years of the new difference in Bucket 1, so $15,400 x 2 = $30,800. She reduces the monthly transfer from the money market to $1283.33 per month.

Bucket 2 – Bonds, CDs, and Bond Funds

The second bucket replenishes Bucket 1. As the paychecks come out, the principal in the money market account will naturally decrease. Eventually it will decrease to a level that makes you say, “Yikes! I only have xx in my checking and money market.” Everyone has a different level of “Yikes.” When the balance approaches your unique Yikes level, a transfer is made from Bucket 2 into Bucket 1.

Bucket 2 is comprised of a combination of CDs, bonds, and/or bond funds. CDs and bonds have maturity dates, so they are structured in a ladder (staggered maturity dates usually 6 to 12 months apart into the future). As each one in the ladder matures, the principal is either transferred to Bucket 1, or, if Bucket 1 is comfortably above the Yikes level, redeployed into a new CD or bond with a maturity date at the end of the ladder. If bond funds are used, they are laddered according to the duration in the fund, and funds are sold as needed to replenish Bucket 1. Using bond funds is a bit riskier due to the lack of maturity dates, so at least some portion in CD and individual bonds are recommended.

Bucket 3 – Stocks and Stock Funds

Bucket 3 replenishes Bucket 2 through harvesting gains in stocks. Here is how that works.

  1. Review Bucket 3 on a regular but infrequent schedule (at most quarterly and at least annually).
  2. If there are gains, transfer those to replenish Bucket 2.
  3. If there are no gains (i.e. the market is in a correction), then do nothing until the next scheduled review.

In this way, stocks are not sold at the most inopportune time. With up to 5 years of paychecks in hand in Buckets 1 and 2, you have provided yourself a secure cushion from market corrections.

Final Notes

Whether each bucket is held in a tax-deferred account or a taxable account makes a big difference. Buckets may be spread across accounts in different combinations to minimize taxes.

You can find many varieties of Bucket approaches online. The goal of this particular Bucket approach is not to generate the best returns of any retirement portfolio ever on record, but rather to help prevent retirees from selling during downturns by providing security in Buckets 1 and 2. It works best for people who want the feeling of security from retirement income but don’ t need the high cost of an annuity to get it.

For monthly tips on retirement income, taxes, and psychology of money in retirement, subscribe to the free e-letter, “The View from the Porch, ” at https://bit.ly/3t2uwfn. And for a short online course on retirement readiness, see Simple Finance Retirement Readiness: https://bit.ly/3p3BkXE.

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3 Myths About Ideal Retirement: More Than Money at Stake

view from the porch

3 myths about ideal retirement: more than money at stake.

I knew a man who couldn’t wait to retire from his government job. With a good financial plan, a few decades of hard work and wise money decisions, he was able to call it quits at 55. Thrilled with his newfound financial freedom, he immediately took to cooking, golf, dating, traveling, fishing, and having fun. For the first few years, every time I saw him, it appeared the lifted burden of work had lightened his step and his heart.

At 65, he moved to a Florida retirement community. It’s the kind with restrictions on residents’ age (55+), house colors, landscaping, and mailbox designs. One of the few ways to stand out is by the cover on your golf cart. To outsiders, everyone looks the same, dresses the same, exercises the same, and seems to adore their life in the sunshine.

No One to Talk To?

Yet, one day on the phone he said, “Y’know, I really like talking with you. I don’t have anybody to talk to here.”

This was a shock. “What?” I said, “What about golf and pickleball friends? Aren’t there some retired CEOs, executives, people that think like you, that you have something in common with?”

“Nah,” he said, “I don’t have that much in common with anybody here.”

I thought that was crazy. He talked like them, dressed like them, shopped like them, and exercised like them. He probably was just as well off, financially, as any of them. How could he not have someone to talk to?

Unfortunately at that time, I was unfamiliar with the signs of depression. Five years later, it took his life.

Three Myths About the Ideal Retirement Life

According to Mitch Anthony, author of many books on retirement, there are three myths about the ideal retirement life.

Myth 1: “This part of my life is going to be about ME.”
Anthony says, “This is a formula for emptiness.”

Myth 2: “I am going to surround myself with people like ME.”
Anthony’s reply: “This is a formula for stagnation.”

Myth 3: “I am going to do nothing but relax.”
Anthony: “This is a formula for boredom.”

Emptiness, stagnation, and boredom don’t sound much like the ideal retirement. Yet, these three myths form the basis of a lot of financial plans.

A Mayo Clinic gerontologist told Anthony, “A life of total ease is two steps removed from a life of total disease. The first step is they get bored, the second step is they grow pessimistic, and then they get ill.”

I’m afraid that’s what happened to the man who appeared to have the ideal retirement plan, but ended up having no one to talk to.

The Dark Side of Retirement Plans

Writer Robert Laura describes the “dark side” of retirement. For some who don’t think about how to bring meaning and purpose to their life after work, serious mental health maladies like depression and addiction await. Surprisingly to some, the U.S. age group with the highest suicide rate is adults over age 75. In fact, Florida retirement communities have some of the highest suicide rates in the country.

Of course not everyone in retirement communities is depressed. It’s more common to see residents who live vibrantly, filling time with volunteering, mentoring, and close social circles. Ironically, few of these things require much money.

5 Parts to Plan For More Than Money

For those like the man above, jumping from the work treadmill onto the retirement scene with only the financial part of a plan can be risky. Instead, consider suggestions for the non-financial parts of a well-thought-out plan:

  • Ask yourself how much of your identity is tied up in what you do, rather than who you are.
  • Start creating a life to retire “to” rather than simply a job or business to retire “from.”
  • Consider gradually reducing to part time and taking extended vacations, rather than showing up one day, and having nowhere to go the next.
  • In your ideal week, identify how would you spend your time, and with whom?
  • Have a diverse social network outside of work.

The best retirement plans start with a plan for a fulfilling life first in order to match up those parts with money decisions. Many people go at it the other way around, asking “How much income can I get with the amount of money I have?” and assuming that answer will dictate their lifestyle.

That’s why good planners ask first how you want to spend your time, before asking about your money. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.

Dedication to Mental Health Awareness

Following May’s Mental Health Awareness month, every June I republish this story in memory of the man who inspired it. Retirement is a life transition that has an under appreciated impact on mental health.

Resources for Ideal Retirement Plans:

Dori Mintzer, Ph.D. has a weekly live interview series and podcast called “Revolutionize Retirement.” In it, she interviews experts on retirement life.

See, The Mindful Money Mentality: How To Find Balance in Your Financial Future (Porchview Publishing, 2013).

Sign up for a free monthly e-letter with retirement readiness tips, “The View From the Porch.”

Continue Reading3 Myths About Ideal Retirement: More Than Money at Stake

Financial Anorexia? Stuck like Scrooge

blank stare or self-doubt emoji

Financial anorexia: Stuck like Scrooge. What is financial anorexia? Financial anorexia is a type of spending disorder. People who suffer from the eating disorder of anorexia may obsess about food and the number on the scale. People who suffer from the financial disorder may obsess about money and the number on their bank statement. For those suffering from financial anorexia, they never believe they have enough to enjoy what they’ve got.

According to Ken Donaldson, LMHC, a licensed mental health counselor in Seminole, Florida, “Anorexia is characterized by a distortion of perception.” Someone suffering from the eating disorder believes they still need to lose extra pounds, when to everyone else it’s clear they are harming themselves. Someone suffering from the financial one believes they still need more money, when it’s clear they are depriving themselves.

While the eating disorder of anorexia is deadly serious and can be fatal, financial anorexia can be dangerous in other ways – to mental health, friendships, and family relationships. Financial anorexics can seem to be more engaged in extreme deprivation than in enjoying life’s simple pleasures. Family members are most often affected by the wealthy relative whose reluctance, reclusiveness or reticence are, at a minimum, puzzling, but more often, hurtful.

Where Does Financial Anorexia Come From?

According to Donaldson, anorexia is fueled by isolation – the more the sufferer depends upon their own distorted perception, the worse their condition becomes. Ebenezer Scrooge (in the beginning of Dickens’ tale) is an isolated penny-pincher and money hoarder. He is the stereotype of the financial anorexic.

Another root cause can be fear. What are anorexics often afraid of? Stated fears might include:

  • a catastrophic world event;
  • a very expensive health issue;
  • hyper-inflation; or
  • “spoiling” family members or friends.

Certainly some of these things can and do happen. Yet our societal messages, and brains wired to look out for danger, emphasize catastrophic scenarios like these past the point of their actual probability.

Yet, other fears might be at work that aren’t as overt. Unstated fears might include loss of self-worth or security.

Anorexia is also fueled by our cultural norms. Western society still worships conspicuous wealth and Twiggy-like figures. “You can’t be too rich or too thin,” sums it up.

Most people understand the “too thin” part, but “too rich”? Is it possible to be “too rich”? Financial anorexics, like Scrooge, typically amass abundant resources. However, their wealth does not come from a healthy relationship with money. They might be “too rich” for their actual needs. Further, the more they have, the more they have to fear losing. The hoarding-like behavior only gets worse the more successful they are at it.

What Can Be Done About It?

At some point in life, many financial anorexics realize, to their immense regret, that they worried more about what might happen, and didn’t, than enjoyed what they actually had.

Exposure to new information sources is one method of help. According to Donaldson, “New information will disrupt the pattern.” Support groups, a counselor, and therapy can provide external points of view. For financial anorexia, a visit with an understanding financial professional, who can provide concrete reassurance, often is a good first step. All of this exposure also helps break the distorted perceptions brought about by isolation.

Sometimes the new information has to come from, unfortunately, a painful life-altering event. How did Scrooge turn around? The Ghosts of Christmas Past, Present and Future showed him more to be afraid of – and how his isolation and withholding were harming others – than the fears he made up for himself.

At some point, it makes sense to ask a few questions:

  • What have all the years of saving been for?
  • How much is too much to spend on seeing family or friends? 
  • How soon is too soon to leave a stressful, unhappy job if it’s taking years off of your life?
  • What is it truly worth to take the trip you have been dreaming about for so many years?
  • How much is too much to spend on self-care like massage, therapy sessions, or a manicure?
  • What if the thing you are afraid of is completely unknowable? What if it wouldn’t be solved with money anyway?

Working With an Understanding Professional

A 2017 study sponsored by the CFP Board supported the psychological benefits of working with a financial professional. The study concluded, based upon a survey of over 800 consumers, that, “Working with a CFP® professional ultimately removes the negativity consumers experience relating to their finances and instead elicits feelings of confidence, optimism, ease, and security.”

Confidence, optimism, ease, and security. Those sound better than catastrophes, worry, and fear.

How do you want to feel about your financial future? Share your thoughts below.

Want more information about financial psychology? Sign up for our monthly e-letterschedule a call, or check out  The Mindful Money Mentality: How To Find Balance in Your Financial Future.​

Continue ReadingFinancial Anorexia? Stuck like Scrooge

How To Let Go of Money Self-Doubt

blank stare or self-doubt emoji

How to let go of money self-doubt:

What is money self-doubt

Money self-doubt is an inner belief that one cannot trust themselves with a decision about money.

Sometimes these beliefs operate in the background, quietly driving decisions when we don’t realize it.

Other times they’re front and center.

What does money self-doubt sound like?

Money self-doubt beliefs often sound like critical messages:

  • “I knew I’d screw it up.”
  • “I’ll never be good with money.”
  • “If I can’t manage my own finances, I’m a failure.”  
  • “Why am I so stupid with money?”

Money Self-Doubt Origins

Where does money self-doubt come from? 

It could be a single traumatic event or a repetition of harmful moments that lead to flawed beliefs about our financial capabilities. One time being taken by a scammer, or many times being told by an abuser we aren’t capable.

Without counterbalancing mantras like,

  • “You’re still OK.”
  • “You just made a mistake.”
  • “You can do this.”

the self-doubt can take hold.

Society and media also don’t help, offering a choice of money self-image as either, “good with money,” or not. Individual instruction is rarely given in school, or in families, much to our society’s detriment. While financial professionals are often proficient in finance, many are not good educators. A few even try to make money more complex than it is, to keep clients feeling less than sure about themselves.

Case Study: Sondra (not her real name) is a highly educated and accomplished professional. Her parents came from Depression-era families where money was tight in their younger years. Money was never talked about in Sondra’s home, although she was given everything she needed. She grew up with the belief that her parents didn’t discuss it with her because they believed money was something she was not capable of handling. When she went to talk with a financial advisor, he threw so much jargon at her that she was too uncomfortable to admit she didn’t understand what he was talking about.

Money Self-Doubt Results

Without realizing these beliefs exist, we can allow them to influence what actions we take or fail to take. Self-doubt can affect who we allow into our lives, and who we don’t. It can affect our choice of career. Or how we spend, or choose not to, on our own needs, wants, and wishes. Ironically, money self-doubt can lead to overspending with some people, and over-deprivation with others.

Sondra chose a career where she was assured a salary and the chance of a bonus if she worked hard enough. She worked longer hours than she wanted to. She lived minimally, foregoing many comforts and rewards of her hard work. Her dreams of having more work-life balance were put on hold because she never felt financially secure. In her personal life, she chose friends and partners who also didn’t talk about money, leaving a gap in her closest relationships.

How To Let Go of Money Self-Doubt

If you’ve been operating under flawed assumptions, and now you know it, you’ve taken the first step to reset your relationship with money.

What else can you do? Here are 4 suggestions:

1) Be aware of body messages. Self-doubt, sometimes manifesting as shame, has a feeling to it. It might be tightness in the chest, throat construction, shortness of breath, nausea or butterflies. Instead of trying to get rid of the feeling, breathe through it and name it: “I am feeling shame/doubt about a money issue.” Redirect your thoughts to positive truths: You are smart. You are capable. You know how to ask for help. This is something you can handle.

2) Ask yourself a simple question: “Is this true?”

For example if you have a belief that “I’ll never be good with money,” and you had to prove that in a court of law, what evidence do you have? Sometimes asking this question can be one way to help our brain separate facts from fictional beliefs.

3) Call someone supportive to talk about your feelings. (But make sure they truly are supportive.) If you’d like professional help specifically about money psychology, check out the Financial Therapy Association.

4) Become aware of those in your life who are too willing to reinforce doubt-based messages – family members, partners, friends, or even (especially) financial professionals. Instead, seek the company of those who say, “I am confident you can handle this,” and will walk alongside you, not put themselves ahead or above you.

After talking with a friend, Sondra decided to educate herself about money. She began to read books that explained things simply, and take online courses that took a simple approach. Patiently, she interviewed many financial professionals. The more she talked about money, the more confident she became. In the end, she found someone who prioritized her financial education and independence. She began to feel more secure, and gained the courage to consider a daring career move.

The Gift of Letting Go

Letting go of money self-doubt can be one of the greatest gifts we give ourselves to reach peace and security about our financial future.

For more on unspoken money messages see Chapters 2 and 3 of The Mindful Money Mentality: How to Find Balance in Your Financial Future, or this 5-minute video with mental health counselor Ken Donaldson on Money Shame.

Continue ReadingHow To Let Go of Money Self-Doubt

Death By A Thousand Indecisions

indecisions

“Then indecision brings its own delays, And days are lost lamenting over lost days. Are you in earnest? Seize this very minute; What you can do, or dream you can do, begin it; Boldness has genius, power and magic in it.”

Johann Wolfgang von Goethe, Faust

Death by a thousand indecisions. As Goethe asked, are you “in earnest”? When it comes to decisionmaking, sometimes it’s quick: Ready-Fire-Aim. With other decisions, we take our sweet time. How much is indecision costing you?

Like death from a thousand cuts, indecisions can slowly deplete our energy, leaving little behind for ourselves or others.

Decisions are Draining

That’s because decisions are draining. Neuropsychologists like Dr. Moira Somers tell us that decisionmaking depletes our mental energy. According to Dr. Somers, every day we wake up with a finite amount of mental energy. As the day goes by, the more decisions we make, the less energy we have. And the bigger they are, the more energy they use.

Think about life’s transitions. One reason transition times, good or sad, are so stressful and exhausting – a move, a death, retirement, a child, a divorce – is the many seemingly small, plus a few momentous, decisions.

Further, lack of sleep, hunger, grief or even excitement can start the whole day off depleted.

Then, every indecision we “make” is a decision. In fact, a pattern of indecisions can take physical form, and stress us out every time we see it.

What does not-deciding look like? A pile of unfiled papers. Empty boxes stacked in the garage. The “miscellaneous drawer” in the kitchen. The “junk room.” Scattered financial accounts in too many places. Unfinished projects.

With a finite amount of mental energy at hand, who can blame any of us for having some kind of to-be-decided pile/stack/assortment hanging over us all the time?

Dealing with Indecision

What to do about it?

  • Make big decisions in the morning, before depletion sets in.
  • Automate it: Use a system to take care of small decisions automatically
  • Eliminate it: Ask often, “How important is it?”
  • Date-Activate it: Calendar the decision to deal with and be done
  • Delegate it: Ask for help

Automate It

An automation example I love and have yet to implement is the decision of what to wear. Michael Kitces, a noted financial expert, famously has a closet full of the same blue shirts, pants, and shoes. One less decision each day for a busy guy.

Another example is cooking. Thanks to Cassy Joy Garcia’s book, Cook Once: Eat All Week, our household now pre-preps ingredients on Sunday. Then, each work night is 15-30 minutes to assemble and cook the ingredients with pre-planned healthy recipes. The meals are delicious, but the best part is not having to make the decision of what’s for dinner. Hallelujah.

Eliminate It

In the summer of 2021 I began thinking about a new car. My financial plan called for me to sell my would-be 7 year old car in January 2022 and buy another one. I couldn’t decide what kind of car to buy.

Aware that the indecision was draining me, I wondered why I was having such a hard time deciding. Then it hit me. I didn’t need a new car. In fact, I didn’t need a car at all. My husband and I had both switched to working from home. Why did I need a shiny hunk of metal to sit in the garage? We had my husband’s car, which was only 2 years old. We ran a 6 week experiment without using my car to see if it caused any problems.

When we saw that it didn’t, I felt immense relief. This told me I was making the right decision. Besides, it was a good time to sell a used car. $15,000 later, we are both very happy about eliminating that decision!

Date-Activate It

My calendar rules my life. It tells me what to do, where, and when. If this is not you, then this tip might not work.

One decision that goes on the calendar every year is whether to take a ski trip and if so, where. The local ski clubs publish their trips around August/September. Ski season pass discounts usually end on Labor Day. So I have the calendar marked for that timeframe to do my research, poll my skiing girlfriends, and make the decision. While it feels sooner in the season than I would like to make a commitment, if I did not give myself a deadline, I would dilly dally into December as all of the good trips filled up. And in the meantime, I would be spending a huge amount of mental energy on something that’s supposed to be fun.

Delegate It

Part of my indecision problem has been the flawed belief that I should be able to do everything myself (and perfectly, which is a topic for another blog post).

However, after a divorce, when my brain was extra foggy, I had significant success with hiring a friend to help organize. At the same time, I had estate planning documents updated with a local attorney. With my friend’s insight, coordination, and diligence, I quickly had an uber-organized office AND an updated “emergency box.” I felt the fog lifting as things came together.

It turns out that hiring help accelerated my decision making and used less energy. Perhaps this is what Goethe meant by the boldness in beginning. Delegating to others can be bold.

Getting Better and Better

Goethe said in that boldness to begin the decision we find genius, power, and magic. Further, there is a spiraling effect – the fewer decisions left to make, the more time to do what we do best. This is far better than a daily slog through indecision-infused mud.

At some point, with excess energy, I felt ready to give back. Someone close to me suddenly lost her husband and her mother within a three month period. She had an overwhelming number of decisions to make about seemingly small stuff, and was in a grief-stricken state to be doing so. I feIt the capacity to help her. I could not have made that statement before I had my own house in order. I don’t know if that counts as genius, power, and magic, but it felt really good to do.

What About You?

What if you took an indecision pile and automated, eliminated, date-activated, or delegated?

Who might you then be able to help?

Genius, power, and magic are waiting, if we have the boldness to begin.

Continue ReadingDeath By A Thousand Indecisions

The Ideal Retirement Plan: It’s About More Than Money

view from the porch

The ideal retirement plan: it’s about more than money.

I knew a man who couldn’t wait to retire from his government job. With a few decades of hard work and wise money decisions, he was able to call it quits at 55. Thrilled with his newfound financial freedom, he immediately took to cooking, golf, dating, traveling, fishing, and having fun. For the first few years, every time I saw him, I could see the lack of work responsibilities had lightened his step and his heart.

At 65, he moved to a Florida retirement community, the kind with nearly identical roofs, lawns and mailboxes. One of the few ways to stand out was by the cover on your golf cart. To outsiders, everyone looked the same, dressed the same, exercised the same, and seemed to absolutely love their new life in the sunshine.

Happy on the Outside But No One to Talk To

One day on the phone the man said, “Y’know, I really like talking with you. I don’t have anybody to talk to here.”

This was a shock. “What?” I said, “Surely there are some retired CEOs, executives, people that think like you there, that play golf, and that you have a lot in common with.”

“Nah,” he said, “I don’t have that much in common with anybody here.”

I thought that was crazy. He talked like them, dressed like them, shopped like them, and played golf and pickleball with them. He probably was just as well off, financially, as any of them. How could he not have someone to relate to?

Unfortunately at that time, I was unfamiliar with the signs of depression. Five years later, it took his life.

Three Myths About the Ideal Retirement

According to writer Mitch Anthony, there are three myths about the ideal retirement plan.

Myth 1: “This part of my life is going to be about ME.”
Anthony says, “This is a formula for emptiness.”

Myth 2: “I am going to surround myself with people like ME.”
Anthony’s reply: “This is a formula for stagnation.”

Myth 3: “I am going to do nothing but relax.”
Anthony: “This is a formula for boredom.”

Emptiness, stagnation, and boredom. Doesn’t sound much like the ideal retirement. Yet, these three myths form the basis of a lot of retirement plans.

A Mayo Clinic gerontologist told Anthony, “A life of total ease is two steps removed from a life of total disease. The first step is they get bored, the second step is they grow pessimistic, and then they get ill.”

The Dark Side of Retirement Plans

This is what writer Robert Laura termed the “dark side” of retirement. For some who don’t think about how to bring meaning and purpose to their life after work, serious mental health maladies, like depression and addiction, await. Florida retirement communities have some of the highest suicide rates in the country, particularly growing among white males over age 65.

Of course not everyone in retirement communities is depressed. It’s common to have constant fun, be social, and live vibrantly, filling time with volunteering, mentoring, and circles of friends.

Plan For More Than Money

For those like the man above, jumping off the work treadmill onto the retirement scene without a plan can be risky. Instead, South Dakota financial planner Rick Kahler responded to Laura’s article with several wise suggestions for the non-financial part of a retirement plan:


*Ask yourself how much of your identity is tied up in what you do, rather than who you are.
*Start creating a life to retire “to” rather than simply a job or business to retire “from.”
*Consider gradually reducing to part time and taking extended vacations, rather than showing up one day, and having nowhere to go the next.
*In your ideal week, identify how would you spend your time, and with whom?
*Have a diverse social network outside of work.

As one example, writer Douglas Bloch complained his parents’ retirement community had no children, while his retired friends were finding fulfillment in their own neighborhoods mentoring youngsters in math.

The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That’s why good planners ask, what’s the money for? For most, it’s not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.

Dedication to Mental Health Awareness

Following May’s Mental Health Awareness month, every June I republish this story in memory of the man who inspired it. Retirement is a life transition that has an under appreciated impact on mental health.

Resources for Ideal Retirement Plans:

Dori Mintzer, Ph.D. has a weekly live interview series and podcast called “Revolutionize Retirement.” In it, she interviews experts on retirement life.

Mitch Anthony’s book, The New Retirementality.

Holly’s book, The Mindful Money Mentality: How To Find Balance in Your Financial Future

Sign up for our free monthly e-letter, “The View From the Porch.” We never share your email address.

Continue ReadingThe Ideal Retirement Plan: It’s About More Than Money

The ABCs of Behavioral Economics

The ABCs of Behavioral Economics: This article was originally published in NAPFA Advisor magazine.

Behavioral economics, with its long lexicon of “biases,” has enjoyed great popularity for a couple of decades. However, it’s also one area where financial planning students feel the least prepared. Experienced advisors, too, find this relatively new field fascinating, but yearn for practical ways to apply it, especially amid the market volatility of the past couple of years.

Sometimes it’s helpful to boil things down to basics. At the risk of oversimplifying, here are three reminders, A-B-C style, of what behavioral economics is about, how it works, and how advisors can use it.

A—What is behavioral economics about? A: Actors (economic ones) are not always rational.

Economists used to assume that actors (people and companies) always act rationally to increase their profit, wealth, or “utility.” The father of behavioral economics, Daniel Kahneman, won a 2002 Nobel Prize for proving they actually don’t. However, even today, both clients and advisors still tend to assume finance is about facts, not feelings.

Throughout my early banking career, I made this assumption. For example, when the estate tax exemption was $675,000, I reveled in suggesting ways that nearly every client could save on estate taxes. One husband, whom I knew liked to argue, pushed back when I brought this up. “Why do you automatically assume I want to save taxes?” he blurted.

His wife looked at my jaw hanging open. I answered, meekly, “Because nearly everyone I talk to wants to save taxes?”

“Well, maybe I don’t!” he said. “The government has a lot of good programs.”

Before that day, I had never asked how anyone felt about paying taxes (who would ask such a stupid question?), or what the idea of legacy meant to someone (too personal, I might upset them). My job, before that day, was like Sergeant Joe Friday, “Nothin’ but the facts, ma’am.”

Now I know all facts, especially anything with the word “estate” in it, for goodness’ sake, come with feelings. It’s far better to get to the feelings first if we want any chance of rational decision making.

B- Why Does This Happen? B: Brains have powerful primitive parts.

In his 2011 best seller, Thinking: Fast and Slow, Kahneman divides the brain into two systems: System 1 and System 2. To oversimplify, System 1 is the older, primitive part, and it generates emotional responses. System 2 is the newer, intellectual part.

Most of the time we’re quite aware of what’s going on with System 2 (intellectual), and quite unaware of System 1 (emotional). We fail to remember how much more powerful System 1 is than System 2. To make matters worse, System 2 falsely believes it can override System 1 anytime it wants.

For example, have you ever been sitting at a traffic light and suddenly heard a honk from the car behind you? My System 1’s initial thought is, “Who the !@#$ is honking?” as I glare in the rear-view mirror. A fraction of a second later, it occurs to System 2 to, duh, see if the light turned green. System 1’s embarrassment kicks in with a little wave in the mirror, “Sorry!”

One of the signs of a true professional is the ability to override System 1 through experience and practice. Kahneman uses firefighters as an example. After many fires, they learn that fear doesn’t go away. They accept it as part of the job, then, with experience, use it to make split-second but measured decisions.

In the last couple of years, have you not been a little scared, at least once? A study from the Journal of Behavioral Finance showed financial professionals are just as prone to emotional errors as retail investors. Knowing and accepting this should make us even more cautious. Younger advisors know from their training not to act irrationally based on fear. Senior advisors know from experience not to act irrationally after seeing advisors who did.

Our System 2 can try saying, “I won’t be scared the next time the market falls 10%,” but your System 1 will decide that involuntarily, not you.

System 1 beats System 2 to the punch nearly every time because System 2 is wired to conserve energy. So, it allows System 1 to do most of the work, which mainly involves scanning for threats. Fear isn’t wrong. It’s unavoidable. Whether and how we handle it is our hallmark.

C—What can we do about it? C: Curiosity can help.

How do we foster conversations in which System 2 creates a measured response to System 1 impulses? One way is to concentrate on being curious. This means to expect our own emotional response but not react to it. Accept whatever the client brings up. Focus on better understanding the client’s responses.

Here is an example:

Client: “I think we should buy/sell/do something different than what we’ve been doing.”

Advisors’ thoughts under the influence of System 1:
Fear: “Are you leaving?”
Guilt: “I should have called you sooner.”
Contempt: “You stupid idiot!”
Impatience: “No. You are acting irrationally. I don’t have time for this. Here’s my advice. Take it or leave it.”

Advisors under System 2 (with System 1 emotions in the background):
“I understand, and I would like to hear more about what you’re thinking.” (Fear: Yikes! No! You might blame me for this.)

“It sounds like you are really concerned. Tell me more.” (Contempt: After all our meetings, why can’t you just be calm?)

“I’d be happy to talk about that further. Help me understand how you are feeling.” (Impatience: Do I really have to listen to this?)

We can help the client discover their emotions themselves, simply by creating a safe space for it. Upon reaching that point of self-discovery, ironically, they feel more understood by us. Once someone feels understood, only then will System 1 sometimes step aside and make them ready for System 2-based factual advice.

Sometimes Advisors Need to Hold the Advice

In a 2016 article for The Journal of Financial Planning, Brad Klontz wrote,


The secret is this: when we are doing our best work, we are bringing little or nothing new to the exchange. We are asking no questions. We are offering no advice. We are making no recommendations. We are providing no analysis or insights. We are abandoning our goals and agendas and are just bringing ourselves. Sure, we are facilitating a process, but we have learned that our effectiveness grows as our ability to be present grows. In our best moments, we are engaged in exquisite listening, which is the best therapy.

Klontz, Van Sutphen, and Fries, “Financial Planner as Healer: the Role of Financial Health Physician,” Journal of Financial Planning, December 2016

Behavioral economics can feel counterintuitive: Expect irrational responses, and accept that feelings are more powerful than facts. By not immediately reacting with advice, we become the best advisors.

For more on applying behavioral economics principles to real-life financial planning, see The Mindful Money Mentality: How To Find Balance in Your Financial Future.

Continue ReadingThe ABCs of Behavioral Economics

Guest Rap Song Post: It Won’t Go To Zero

Guest rap song post: It Won’t Go To Zero. In early 2010, Ken Robinson, JD and Certified Financial Planner in Ohio, produced a funny rap video with a serious educational message: “It Won’t Go to Zero.” Whenever markets start back on their once-in-a-while roller coaster ride, it’s a good time to resurrect Ken’s lyrics and rap-star antics. Thank you Ken!

In 2007, the stock market began falling and didn’t hit bottom until 2009. Although it recovered throughout 2009 and 2010, it took several months to 2 years for the investing public to actually believe it. Who could blame them after the traumatic crash – a 50% drop in the S&P 500 – in the fall of 2008? Ken’s video in early 2010 occurred during a recovery many didn’t yet recognize.

During those couple of years, people and pundits asked, “Is this time different?” “Will it ever come back?” “Is this the New Normal?” “What if it goes to zero?” In times like these, it is usually confusing and difficult to separate reality-based facts from emotional actions.

Get to the Chorus

The chorus of Ken’s song goes,

“The markets are resilient, and although they may bend, they won’t break, the stock downturn will come to an end. I can’t say what might finally make things turn around, but eventually we will get back on solid ground. I’m not here to be some investment hero, I’m just letting you know; the markets won’t go to zero.”

The lyrics are just as relevant today, in a different decade, under a different New Normal. I wouldn’t change a thing he’s saying. In fact, yesterday I had nearly this exact conversation. I just wish I’d had the talent to say it in a rap song.

Check it out: https://www.youtube.com/watch?v=C3GtxtWSZxE

Choose Composure

Ken’s message is to keep our composure. After a recent NBA playoff win over the Memphis Grizzlies, Steph Curry of the Golden State Warriors was asked by the reporter, “You were down 13 points. How did your team come back to win?”

His answer: “Composure.”

Fortunately for the Warriors they did not have pundits on the sidelines screaming, “You’re finished!” “A comeback is impossible!” “This time it’s different!” Unfortunately for the investing public, scary messages are way too available on nearly any media source we choose. And the primitive part of our brains is hard-wired to look for danger, whether or not it might truly exist.

Choose media messages wisely. When things get scary, no matter what you are hearing and reading, choose composure.

For more on the ways our brains mix up our money messages, see chapters 6 and 7 of The Mindful Money Mentality: How to Find Balance in Your Financial Future, or any of the books on our Recommendations page.

Continue ReadingGuest Rap Song Post: It Won’t Go To Zero