psychology of money

How To Avoid Holiday Spending Hangovers

How to avoid holiday spending hangovers: How do you get through the season without one type of hangover or another? Halloween is now the second biggest holiday for consumer spending after Christmas. What used to be a couple hours of candy collection with a homemade costume and a paper grocery bag is now practically a national holiday. More candy is consumed. More costumes are purchased. Yard decorations have grown to need extension cords with extensions. When it's all over, where does all the stuff go? In the attic, the garage, the storage unit, or the garbage? Thus, the Halloween spending hangover starts with stuff. Next comes Thanksgiving, where we stuff ourselves with, literally, stuffing. We stuff our brains with football and TV. Some families stuff all of the important conversations for the past year into a few hours at the table. The air is stuffed with emotions. Thus, several types of Thanksgiving hangovers start with stuffing. And finally, Christmas, the king of holiday stuff. Decorations, trees, food, family, parties, gifts, more candy, cake, and alcohol can all lead to some kind of hangover. When it's over, depleted bank statements and depleted emotions can cause the same headache as chips and eggnog. Christmas - king of stuffed hangovers. What do overdrinking, weight gain, TV watching, family dynamics, and overspending have in common? Unaware, we are stuffed in over our heads before we know it, leading to regret later. How can it be caught before it goes too far? Have an Awareness Strategy To avoid regret later, it helps to have an awareness strategy to keep track along the way. For example, I joined Weight Watchers in December 2000. The best tool of the program for me was the daily journal. Logging what I ate every day had more impact on my diet decisionmaking than any other single factor. It brought the awareness to what I was eating. I lost 20 pounds by the next Christmas. Similarly, when a group of experimental homeowners were given an electric meter next to their thermostat, they used 7% to 19% less electricity than those with outside meters. Another proof that awareness works. Ideas For Building Spending Awareness The holiday season often leads to a spending hangover. The most effective, and for some, drastic method is to use cash. But it's not the most Covid-friendly method. Here's how it can go: Decide on the holiday spending maximum.Take that amount of cash out of the ATM.Go shopping at physical stores that will take cash.When it's gone, you're done shopping.Voila', no hangover. Some people even keep a separate envelope for each person on their list (kind of crude, but effective). [And my grandmother would have wanted me to add that it's physically risky to carry around a bunch of cash, especially at the holidays, so be aware of your surroundings while using this method, too.] What About Online Shopping Increasingly, though, holiday shopping is being done online. You could use the same concept, but use a pre-paid debit…

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Letting Go of Money Self-Doubt

Letting go of money self-doubt is one of the best gifts you can give yourself. Sometimes these messages 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? "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?" Painful statements, these are. While sometimes spoken out loud, they are spoken silently far more often. Money Self-Doubt Origins Where does money self-doubt come from?  It could be one traumatic event or a repetition of harmful moments that lead to flawed beliefs about our financial capabilities. Without counterbalancing mantras like, "You're still good. You just made a mistake," or "You can do this," the message delivered can be, "You're a screwup. You're a failure. You will never get it." 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. Money Self-Doubt Results Without realizing these beliefs exist, we allow th to influence what actions we take or fail to take. It 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 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. Letting Go of the Messages 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 two suggestions to start: 1) Be aware of those 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 work alongside you, not put themselves ahead or above you. 2) Be aware of body messages. Self-doubt, sometimes manifesting as shame, has a feeling to it - it might be tightness in the chest, nausea or butterflies. Breathe through the feeling and redirect your thoughts to positive truths. You are smart. This is something…

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Holiday Thoughts on Accepting Gifts Graciously

Accepting gifts graciously can be difficult. “Oh, thank you…but I didn’t get you anything!” How often has that awkward response ruined a nice giving moment? We are wired for reciprocity. It’s hard to accept a gift without feeling the need to give one back. For a long time I struggled with this. Sometimes I didn’t give gifts that I wanted to, because I was afraid of imposing an obligation with my gift! How silly. It took time to realize not everyone thinks the same way. Some people can accept a gift graciously. I learned that when someone has the desire to say Thank You, Happy Birthday, Merry Christmas, or Happy Arbor Day with a gift, a little gratitude is all that’s needed to make the kind gesture complete. The Best Gifts The best gifts, in fact, might not even arrive in a package. Several years ago, I wanted to give my Toastmasters group a gift, a final thank-you speech, to express in 10 minutes how the program and its members changed my life. The response to my going-away speech was overwhelming – appreciative tears all around. I gave a gift; and immediately, unexpectedly, got 30 gifts back. In my past, I would have said, “Thanks, but I wasn’t THAT good,” or found a way to deflect the praise. Not very gracious. Instead, I soaked it up with as much grace, courage, and humility as I could muster. Because I allowed that to happen, the exchange felt complete. I left the speech on an emotional high, and I hope everyone else did, too. Navigating Expectations If I am moved to be the generous gift-giver, I check in - am I doing so without expectations, out of the goodness of my heart? There's a saying that I bear in mind, "Expectations are premeditated resentments." On the other hand, if I am overwhelmed with someone else’s generosity – intangible, tangible, or financial – how will I handle it? How often can we graciously accept, honor the giver's gesture, and allow the exchange to be complete, especially when it feels like a lot? With so many messages about self-determination, independence, and not “needing” others in our lives to get by, it can be easy to forget how gift exchanges weave the fabric of our support networks - friends, colleagues, community and family - together. Handled well, exchanging grows and beautifies the fabric. When not handled so well, or not happening at all, the fabric rips apart. How Will You Handle Gifts? Accepting gifts graciously pays rewards. Consider what giving and receiving this season will do for you and for those around you. With a plan for handling both sides of giving, we have the potential to enter the new year with relationships that feel richer. And enriched relationships are the best gifts for all involved.

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Money Carpenter or Money Gardener?

What’s the difference between carpentry and gardening? With the first, you can start with a vision, follow a plan to the letter, and end up with exactly what you first imagined. With the last, you can start with a vision, follow a plan to the letter, and end up nowhere close to what you first imagined. Success in carpentry is largely within the carpenter’s control. Success in gardening is largely not within the gardener’s control. Alison Gopnik, a developmental psychologist, in her book The Gardener and the Carpenter, describes carpentry and gardening as two different models of modern parenting. The former molds children by steering them in certain directions; while the latter allows children more freedom, within guidelines. What if we applied carpentry and gardening to success with money? Money Carpentry Some people believe that achieving financial success depends, like carpentry, on acquiring the right set of knowledge, skills, and tools. All they have to learn is how to use them in the right combinations and right order. Indeed, many firms in the financial industry would like customers to believe their advisors are money carpenters. You place your order with your vision in mind, and their carpenters will make it happen. Financial success actually can happen this way. Certainly having knowledge, skills and tools increases the chance it will. Money Gardening Money gardeners, however, understand knowledge, skills, and tools can only get them so far. They know that life, like money, is as unpredictable as the weather, so they do what they can to protect themselves from well-known hazards. They also accept there are hazards they can’t prevent or protect against, without significant expense. When they have a bumper crop, they are proud but grateful, and they save for the future. When they have a drought, they don’t give up. When you view money as gardening, you regularly tend to it with skills and tools, but not too often. You know it may not turn out exactly as you envisioned in the beginning. In fact, it probably won’t. It could turn out better, it could turn out worse, but more likely, it will turn out different.   That can be scary, or it can be exciting. Will it be storms or sunshine? We have no control over that. Money carpenters find it hard to accept this variability. Money gardeners, as a certain saying goes, accept the things they cannot change, change the things they can, and have the wisdom to know the difference. While money carpenters might feel safer with formulas and blueprints, money gardeners feel more free.

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Does More Money Lead To A Happier Relationship?

“Finances play a role in determining marital happiness, and conversely, marital happiness and stability influence a client's long term financial plan." This was part of the conclusion of a study on money and marital happiness published in the August 2015 Journal of Financial Planning (the JFP study). Marital happiness and money agreement, it shows, are linked to a degree that if one is doing well, the other is inclined to follow. Unfortunately, the reverse is true, too. Frequency of money arguments has been found in past studies to be a predictor of divorce.  This more recent study supports that conclusion, too. According to another survey, published in June 2014's Money magazine, of all age groups, couples in their 30s have the most arguments about money. Argument frequency declines as couples age; and moreso if they have no children, or no children at home. Money Arguments have nothing to do with levels of income. But interestingly, both studies show that money arguments have nothing to do with levels of income. Whether couples are barely scraping by, or living large, if the couple isn't on the same page about money, more of it won't make the relationship any better. There are many tools and resources available for couples who want to work on a better relationship with money. One that I use in my practice are Money Habitudes(TM) cards, by Professor Syble Solomon. The cards help bring awareness to our money "scripts" and how they differ between partners. There are also too many books to mention here.  Email me at holly@hollydonaldsonfinancialplanner.com if you would like a resource list. Sometimes Professional Help is Needed Financial professionals can be of some help to couples struggling with money issues.  Sometimes a financial therapist or mental health professional is needed to work on other factors that contribute to marital happiness first - such as self-esteem; perceived control over one's life; and agreement about chores and children - the two topics in the JFP study that beat out money in the top 3 for argument frequency. There is no denying it - the relationship we have with money itself sets the tone for the relationships we have with significant others. It's in everyone's best interest to do what we can to improve it.

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Retirement Life: More Than Money at Stake

I knew a man who couldn’t wait to retire from his government job. Because of decades of hard work and wise money decisions, he was able to call it quits at 55. Thrilled with his newfound freedom, he immediately took to cooking, golf, dating (he had divorced at 49), 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. After about ten years, he moved to a Florida retirement community where the roofs and mailboxes are almost identical and one of the few ways to stand out is by the cover on your golf cart. It seemed to outsiders that everyone looked the same, dressed the same, exercised the same, but seemed happy with their life in the sunshine. 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.” I was shocked. “What? Surely there are some retired CEOs, executives, people that think like you, 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 looked like all the rest of them, dressed like them, played golf and pickleball like 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. Myths About The "Ideal" Retirement According to writer Mitch Anthony,  there are three myths about the “ideal” retirement: “This part of my life is going to be about ME.” Anthony says, “This is a formula for emptiness.” “I am going to surround myself with people like ME.” Anthony’s reply: “This is a formula for stagnation.” “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. 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 that they get bored, the second step is that they grow pessimistic, and then they get ill.” The "Dark Side" of retirement 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 among white males over 65 years old. Women seem to fare better. Anecdotally, several women I know have vibrant lives in retirement communities, filled with volunteering, teaching others, and various circles of friends. South Dakota financial planner Rick Kahler responded to Laura’s article with several wise suggestions: Ask yourself how much of your identity is tied up in what you do, rather…

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Money Worrier Or Money Warrior?

"Worry is the misuse of the imagination," said Dan Zadra. Much of my life I have spent misusing my imagination, attempting to prepare for crises that never happened, only to be blindsided by the ones that did. I am a classic money worrier. 1987 The first unexpected financial crisis I remember was the October 1987 stockmarket crash. I was 21 years old, and had a small savings account and a 401K.  A friend who worked at Smith Barney in my building came to my office looking like Chicken Little: eyes bulging, sweating, arms flailing, yelling, and grabbing his hair. Although I rarely become that animated, I could identify with how he felt. Change My Thinking? Right. Later, I heard, if I didn't want to worry so much, all I had to do was change my thinking. Easier said than done, for me. It's taken at least 10 years to begin to grasp how to think like a warrior instead of a worrier. When it comes to money, there is ample soil for worries to root. To list all the ones I've had myself, and heard in my office, would take a whole book, but the most common ones seem to be, "What if I screw up this investing stuff?" "What if I don't have enough?" or some version of, "What will happen to me in an economic catastrophe?"  Worriers first imagine the worst. We don't want to be caught unprepared. Yet now, I realize, it's not possible to prepare for everything my worrying mind can create. Think, Warrior. Warriors are strong in mind and body, but they know that physical strength and mental energy are finite. Both must be used resourcefully. Wise warriors ask: - Is this something I can do anything about? In other words, is it within my control? If not, I am wasting energy. - If I can do something, is it clear what that something is? If yes, then do it or schedule to do it. - If it isn't clear yet what I can do, then I must wait. While I'm waiting, I can use my energy to imagine positive outcomes, perhaps even outcomes that may not require my energy at all. Taking Control Of What We Can Several years ago, I met someone whose worry was that she may not have "enough." At first glance, it wasn't obvious whether or not she was right. So we talked about what she would like to do in her life's next chapter. Her burning desire was to leave the corporate world and teach yoga full-time. She had assumed that would be out of the question. We talked about what sacrifices in her lifestyle - line item by line item - she would be willing to make, and not make, to achieve her dream. After running several scenarios through the financial planning software, she was able to craft her own version of "enough". Through focusing on what she could control - her lifestyle and spending decisions - she gained warrior-like confidence. Her personal…

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When Does Financial Advice Become Couples Therapy?

I had just finished giving a talk on the psychology of money to a group of professionals, and a participant waited in line to speak to me afterwards. The person before him took quite a while, so I figured whatever he had to tell me must be pretty important to him. With a passionate look in his eye, he approached me and said, "I don't think any of this emotional stuff about money is my job. I am not a psychology professional, and I don't want to pretend to be one. In fact, I think I am asking for liability problems if I start bringing up things I don't know about. I am bound to get myself in trouble, and maybe make it worse for them. Clients come to me for investment and financial advice. That's what I'm good at, and that's what I'll give them. End of story." If you work with financial advice, and especially couples, long enough, emotional issues come up. Many financial advisors tread lightly with​​, or even avoid,​ confronting emotions behind clients'​ spending, investing, and sharing decisions. What if a​ couple brings up something the advisor doesn't know how to handle? What if it produces a big ugly argument? What if somehow they get blamed for starting it? How does a quantitatively-skilled financial professional understand when they are being helpful, and when they might be causing harm? The best thing I have learned to do is simply help with awareness. There are two possible outcomes from it: 1) the awareness and talking out loud with a third party helps the couple come to their own compromise and resolution; or 2) the awareness and talking out loud helps the three of us realize that resolving it might require more help than I am able to give. In other words, I never presume I have an​ argument's answer, but I ​am willing to explore whether they have the answer within themselves. The worst that happens is that I'm wrong, but at least then we all know it and own it, rather than ignore it. How do we​ get to this place of awareness? Trying these questions: 1. Is this normally how the conversation goes when you talk about this issue? 2. How does it normally end up? 3. What have you considered doing about it? 4 (If necessary). It sounds like this is a place where you might be stuck, and could use some outside help to work through. How would you feel about doing more work on it with a counselor? With two clients in the room, the importance of bringing up these issues is more than doubled. If a couple is handling money disagreements in an unhealthy way, studies show the relationship itself is at great risk. And breakups and divorces cause way bigger money problems than the typical argument subject. Keeping this fact in mind means financial advisors ​might ​have a vested interest in helping couples face difficult money issues. Focusing only on the numbers may seem easier, but in the long run, the story for all three…

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What Were Your Generation’s Money Messages?

Members of the Greatest Generation are famous for their frugal habits, sometimes to the frustration of their Baby Boomer kids.   It can be hard to understand why Mom or Dad refuse to part with Ziploc bags and empty shoeboxes, or why they will not buy something nice for themselves. Many of us recognize that these habits probably evolved after being raised in a time of true scarcity - the Great Depression.  What I didn't know until recently was how this money mentality was reinforced by our government throughout World War II. A baby boomer friend recently showed me a historic relic I had only read about but never seen: a war ration coupon book, issued in 1943. It belonged to his mother, born in 1928. The language and tone on the ration book is striking. Authoritarian, even threatening. If you had been a young person holding this ration book, what money messages might you have received? My own thoughts, if it were me at that time, are below. "Rationing is a vital part of your country's war effort. Any attempt to violate the rules is an effort to deny someone his share and will create hardship and help the enemy." (Yikes! Both of those sound pretty bad. I'll comply.) "This book is your Government's assurance of your right to buy your fair share of certain goods made scarce by war. Price ceilings have been established for your protection. Dealers must post these prices conspicuously. Don't pay more." (Those evil dealers/merchants. They're always trying to get us to pay more than what's fair.) "Be guided by the rule: 'If you don't need it, DON'T BUY IT.' " (Right! I got through the last ten years with one pair of shoes; the next pair can last that long, too.) Contrast the last message to the one to "go shopping" following the 9/11 attacks.  The word "ration" itself is used 9 times on the outside of the book, plus on every stamp in the book. Other scarcity terms pervade: "This book is valuable. Do not lose it." "Without the stamps you will be unable to purchase those goods." "Do not throw this book away...You may be required to present it..." You may ask what self-respecting Americans would have put up with this rationing garbage. Yet, at the time, the government had been given credit for bringing us out of the Depression. We had been attacked by Japan, and German U-boats were off our coastlines. Who else would you turn to for protection? If you wanted "rationed goods," (many of them household staples), the government was the provider, unless you wanted to risk a $10,000 fine (a lot of money now, and in 1943?), imprisonment, or both. Stiff penalties awaited noncompliant rule-breakers. From this place of fear, a message of scarcity to a Depression-battered generation must have seemed natural, even patriotic. Money messages from authority make the most impact in our formative years, and in times of fear. It depends on who we view at the time as authority: parents, teachers,…

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Letting Indecision Delay Your Estate Plan

https://youtu.be/Ufyt8eEq1jk The best reason I ever heard for not seeing an estate planning attorney came from a late client who, upon learning that over half of his estate might be taxed, said, "I don't mind. The government has a lot of good programs."  (I responded, "Ok. How can you be sure your money will go to the programs you like?") I don't believe, despite his political views, that he really wanted to leave half of his money to the government. I do believe it seemed better than addressing his mortality, though. Talking and thinking about our own death is stressful, so it's no wonder many people avoid it, deny it, and don't want to deal with it. But what if your reason is simply, "It's too hard to decide"? No doubt about it, estate planning can involve gut-wrenching decisions, like choosing a potential guardian for your minor children. (Ugh.) Or figuring out what's "equal" vs. what's "fair." Who to include and who to exclude? Which charities will handle a bequest most responsibly? Leave money in a lump sum, or spread it out over time? In-laws, multiple marriages, step-relatives, girlfriends, boyfriends....today's families are complicated. Perhaps you and your spouse or partner disagree. Or you and your children do. The more you delay, the more the questions, and their unknown answers, multiply. You might want to brush it off, like my client, since you "won't be around anyway to worry about it." But until then, it can still eat at you. A lot of people think they must make all the decisions before they go see the attorney. But when you think about it, estate planning attorneys deal with such decisions all the time. Many of them are actually pretty good at suggesting alternatives you might not have considered. Attorneys are more than just note-takers; they are advisers and advocates. The good ones are smart people who love to come up with creative solutions to legal questions. So when I hear someone can't decide, I encourage them to make the appointment anyway. Addressing our mortality may not be pleasant, but it's better than being eaten alive by indecision.

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