Investing your money can be an emotional affair. On one hand, you might be excited about creating financial stability and building generational wealth. On the other hand, you might feel some anxiety and fear, especially in light of the accurate volatile stock market and sky-high inflation.
Those concerns — and how you approach them — can have long-term effects, according to a 2021 study by the Financial Industry Regulatory Authority. The study, Financial Anxiety and Stress Among U.S. Households
, says people who experience long-term financial anxiety and stress are less likely to plan for retirement.For those who have fears around investing, financial therapy might be a good option to explore what’s driving those feelings.
Financial therapy combines behavioral therapy and financial coaching to help Excellerate your thoughts, feelings, and behaviors around money.
Celia Hughes, a certified financial therapist based in Los Angeles, says financial therapy marries the two disciplines.
“There’s this real gap between emotional health and financial health and money,” she says.
If you’ve never heard of financial therapy before, that could be because it's a relatively new discipline. The Financial Therapy Association
was established in 2010.
A certified financial therapist is an individual who meets specific requirements in the areas of financial therapy, financial planning and financial counseling, and therapeutic competencies. The certification, from the Financial Therapy Association, is one that both financial and mental health professionals can pursue.
Financial therapists can help investors understand their worries and fears around money, guiding them to that lightbulb moment.
The difference between a financial therapist and a financial advisor is that a financial therapist explores the feelings and beliefs behind your financial habits, while financial advisors focus on helping you reach your financial goals.
For example, if you have $50,000 saved in cash and fear of going broke is keeping you from investing some of that money in the stock market, you might speak to a financial therapist. However, if you have $50,000 and want to know the best strategies for investing the money, a financial advisor would probably be a better fit.
It’s important to note that not everyone who calls themselves a financial therapist is a certified financial therapist. Some behavioral therapists focus on finance and don’t have financial qualifications. Likewise, Hughes says, some financial professionals aren’t credentialed therapists, but they help you explore the emotions behind money.
Financial therapists can help with any negative feelings and limiting beliefs you have around your finances. For instance, you might be carrying some generational financial trauma, and you're terrified of starting your investing journey. Or, despite being a high earner, you might not invest much because you don't believe you'll be fortunate enough to see positive returns.
If you’re curious about what working with a financial therapist could look like, Hughes explains her approach with clients struggling to kick-start their investing journey.
“We would do some digging and see if we could get to the root cause of that fear. Is it a lack of belief in your own worth and belief that you’re worthy of having a financially stable future? Is it fear of the unknown? Or you don't understand investment and how it works so you’re afraid to provide your money to something you don’t understand? So, we would try to get into some of that root work and then work on setting small goals,” she says.
Hiring a financial therapist can be a big decision, so you want to choose the right one. You should look for some of the same things you would when seeking a behavioral therapist. That means finding someone who specializes in your problem area and who you feel comfortable being vulnerable with.
If you think a financial therapist is what you need and you’re ready to get started, you can search the Financial Therapy Association to find one.
Limiting beliefs can stall your investing journey and keep you from reaching your financial goals, the therapists we talked to said. In some cases, fears can keep you from enjoying the fruits of your labor, too. How do you move forward despite fears? Here are a few tips the therapists shared with us.
Some people, including those who grew up in marginalized communities, have money stories they tell themselves that are developed in childhood. These stories can either push you toward your goals or hold you back, the financial therapists say.
Perhaps you grew up watching your parents struggle to make ends meet and now you think money is scarce and shouldn't be spent. Maybe you’re afraid to invest because nobody in your family owned assets. Or maybe you invest but are afraid of losing money, so you always play it safe. According to the Wells Fargo/Gallup Investor and Retirement Optimism Index,
Black investors are less likely than white investors to feel comfortable taking on a lot of risk. They’re also more likely to provide frequent financial help to relatives.Aja Evans, a licensed mental health counselor and financial therapist based in New York City encourages people to ask themselves hard questions about their money beliefs.
“Feel your emotions, identify them, and then make a plan with your money, and then you can move forward,” she says.
Retirement planning might seem like a low priority for some investors, especially if retirement is decades away. And economic uncertainty in 2022 probably hasn't encouraged would-be investors. Recurring expenses may take priority, or maybe some want to use their money to live in the moment.
Hughes says sometimes people struggle to begin investing because they struggle to focus on the future.
“Some reasons are a lack of education and understanding how compound interest works and why it’s so important to start investing at a young age,” she says.
Compounding interest will help grow your money. That's a biggie because of that inflation we just mentioned — money's value erodes over time. The longer you save for retirement, the better.
If you have trouble thinking about retirement, Hughes recommends thinking about a person you know who is at retirement age and how they’re currently living. This can help create a connection to the future, so you can envision what you want for yourself and then put a plan together.
It could also be beneficial to think about future generations. What steps can you take now to help your children and grandchildren be better set up for success?
It might be good to take baby steps when trying to change your financial habits. This could look like doing research about whatever is creating uncomfortable feelings.
“Take the time to say, ‘Hey, where can I get some information to understand what a Roth IRA is? Or a 401(k)?’ Then decide what your goals are so you can move forward in a way that feels good,” says Evans.
Passive investing is a way to take pressure off yourself, especially if you’re struggling to understand the sometimes complex finance world. It’s a hands-off form of investing for those who don’t want to learn the more complicated stuff or who don’t want to take on investments with greater risk. Examples of passive investing include using robo-advisors or investment vehicles such as ETFs, index funds or mutual funds.
“You don’t need to be a finance expert, just let compound interest do its work,” Hughes says. “Even if you put a small amount of money into a mutual fund, when you start to see it grow, that feeling can be really energizing, and that can enable someone to move forward with a financial plan.”
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An earlier version of this article misattributed a quotation about a financial therapist’s approach and misstated the requirements to become a certified financial therapist. This article has been corrected.
A financial advisor is a professional who provides clients with guidance around money matters, personal finances, and investments. They may work as independent agents or be employed by a financial firm. They can offer services in a variety of areas such as tax or estate planning, paying for college, and investment management.
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It's so important to let our loved ones know we care during this Christmas season and always. (iStock)
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Consumers are keenly aware of the money pressures while they write their gift lists, and financial professionals are no exception.
“Last year was more a splurge coming out of COVID. This year, it’s more important to make sure I don’t have any financial stress coming out the holidays,” said Jacquie Carroll, an accredited financial counselor. Concerned about inflation’s toll and looming recession worries, Carroll is avoiding the stress by changing up her holiday gift strategy, and planning to spend around half as much as last year.
Various surveys and consumer sentiment gauges show people trying to figure out how they’ll handle holiday spending. For example, nearly nine in ten consumers told Michigan State University researchers that worries about high prices and their own financial conditions would influence their spending behavior.
These financial advisers, counselors and bankers usually spend their time advising people on how to strengthen their finances. But this time they are taking a leaf out of their own pocket book.
The post-lockdown “revenge travel” trend has not yet abated. More than 53 million people are traveling this Thanksgiving weekend, which is just shy of pre-pandemic levels, according to AAA. Consumers will spend up to $960.4 billion in November and December, up from $889.3 billion for the same period last year, according to National Retail Federation projections.
Of course, there are all kinds of useful conversations and unsolicited advice families can chew on over the Thanksgiving weekend. But if holiday spending strategies come up, here are tips from financial professionals who are practicing what they preach:
After the pandemic toppled 2020 holiday plans, Carroll felt she had to make up for lost time with her holiday celebrations and gift giving last year. She didn’t commit to capping her gift spending during 2021. This year, however, she is doing just that.
A concrete number is critical for setting goals and sticking to them. “Whenever we have vagueness in the mind we can’t accomplish anything,” said Carroll, director of program evaluation and a regional directed at AccessLex Institute, a nonprofit organization focused on aspiring lawyers and legal education.
Carroll is not new to budgeting. She devotes half of her earnings to necessities, puts 20% towards retirement and short-term savings and uses the remaining 30% for discretionary spending, which includes holiday spending. Throughout the year, she tucks away 2% of her disposable income for holiday spending.
But sticking to a precise cap on gift expenses this year is particularly important this year, she said. The gift money is dedicated for her nieces, nephews and grandkids. For everyone else, Carroll is stepping up her baking this year. “I’m using cookies to spread the joy to everybody,” she said.
With friends and family around — especially with the memories of COVID’s social distancing and isolation — it’s easy to get swept up in the euphoria of togetherness and a good party. It’s also easy to buy one more bottle of wine, an extra wedge of cheese or an impulse gift.
This year, Phil Blancato, CEO of Ladenburg Thalmann Asset Management in New York, is trying to resist making those additional splurges by pulling back his gift and food expenses by 10% to 15%.
“That’s the exuberance number,” he said. This isn’t a technical term and there’s no one “exuberance number” for every household. But for Blancato, it’s a handy label that keeps his spending intentional when the potential consequences of getting swept away are higher.
“You want to do a little bit extra because it’s that time of year,” Blancato said. “People like me and, in general, people are going to do less of that little bit extra. That one extra thing is no longer going to be something that you’re going to buy in a year like this.”
As Americans geared up for 2021’s holiday shopping, the yearly inflation rate was 6.2%. One year later, the yearly rate, as of October, was 7.7%. That’s a lower-than-expected number following the 8.2% rate during September. The point is, it’s a different economic environment.
“You really shouldn’t go into the holidays with the same mentality that it’s same holiday as it always been. Going into it with that mentality, you’ll blow right through that budget,” said JR George, senior vice president, marketing at Trustco Bank TRST, +0.26%.
This year, George is shopping early. Last year, he started shopping on Cyber Monday — the Monday after Thanksgiving. This year he has already completed roughly 80% of his holiday gift buying.
It’s not a worry about supply chains and product availability. Spreading out the purchases avoids a truncated spending spree that might make George more likely to rely on credit cards and potentially face credit=card debt, he explained.
Like Carroll and Blancato, George isn’t new to budgeting. He has made peace with the fact that he may be giving less to some friends, family and colleagues — and in some cases, nothing. “I’ve thought a lot harder about who I’m giving gifts to,” he said.
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By Andrew Keshner
'It's more important to make sure I don't have any financial stress coming out of the holidays'
This holiday shopping season coincides with four-decade high inflation, declining personal savings rates, ballooning credit-card debt, a growing list of layoffs in the tech sector, and storm clouds signaling a recession.
Consumers are keenly aware of the money pressures while they write their gift lists, and financial professionals are no exception.
"Last year was more a splurge coming out of COVID. This year, it's more important to make sure I don't have any financial stress coming out the holidays," said Jacquie Carroll, an accredited financial counselor. Concerned about inflation's toll and looming recession worries, Carroll is avoiding the stress by changing up her holiday gift strategy, and planning to spend around half as much as last year.
Various surveys and consumer sentiment gauges show people trying to figure out how they'll handle holiday spending. For example, nearly nine in ten consumers told Michigan State University researchers that worries about high prices and their own financial conditions would influence their spending behavior.
These financial advisers, counselors and bankers usually spend their time advising people on how to strengthen their finances. But this time they are taking a leaf out of their own pocket book.
The post-lockdown "revenge travel" trend has not yet abated. More than 53 million people are traveling this Thanksgiving weekend, which is just shy of pre-pandemic levels, according to AAA. Consumers will spend up to $960.4 billion in November and December, up from $889.3 billion for the same period last year, according to National Retail Federation projections.
Of course, there are all kinds of useful conversations and unsolicited advice families can chew on over the Thanksgiving weekend. But if holiday spending strategies come up, here are tips from financial professionals who are practicing what they preach:
Stick with hard numbers
After the pandemic toppled 2020 holiday plans, Carroll felt she had to make up for lost time with her holiday celebrations and gift giving last year. She didn't commit to capping her gift spending during 2021. This year, however, she is doing just that.
A concrete number is critical for setting goals and sticking to them. "Whenever we have vagueness in the mind we can't accomplish anything," said Carroll, director of program evaluation and a regional directed at AccessLex Institute, a nonprofit organization focused on aspiring lawyers and legal education.
Carroll is not new to budgeting. She devotes half of her earnings to necessities, puts 20% towards retirement and short-term savings and uses the remaining 30% for discretionary spending, which includes holiday spending. Throughout the year, she tucks away 2% of her disposable income for holiday spending.
But sticking to a precise cap on gift expenses this year is particularly important this year, she said. The gift money is dedicated for her nieces, nephews and grandkids. For everyone else, Carroll is stepping up her baking this year. "I'm using cookies to spread the joy to everybody," she said.
Identify the 'exuberance number'
With friends and family around -- especially with the memories of COVID's social distancing and isolation -- it's easy to get swept up in the euphoria of togetherness and a good party. It's also easy to buy one more bottle of wine, an extra wedge of cheese or an impulse gift.
This year, Phil Blancato, CEO of Ladenburg Thalmann Asset Management in New York, is trying to resist making those additional splurges by pulling back his gift and food expenses by 10% to 15%.
"That's the exuberance number," he said. This isn't a technical term and there's no one "exuberance number" for every household. But for Blancato, it's a handy label that keeps his spending intentional when the potential consequences of getting swept away are higher.
"You want to do a little bit extra because it's that time of year," Blancato said. "People like me and, in general, people are going to do less of that little bit extra. That one extra thing is no longer going to be something that you're going to buy in a year like this."
What a difference a year makes
As Americans geared up for 2021's holiday shopping, the yearly inflation rate was 6.2% One year later, the yearly rate, as of October, was 7.7%. That's a lower-than-expected number following the 8.2% rate during September. The point is, it's a different economic environment.
"You really shouldn't go into the holidays with the same mentality that it's same holiday as it always been. Going into it with that mentality, you'll blow right through that budget," said JR George, senior vice president, marketing at Trustco Bank (TRST).
This year, George is shopping early. Last year, he started shopping on Cyber Monday -- the Monday after Thanksgiving. This year he has already completed roughly 80% of his holiday gift buying.
It's not a worry about supply chains and product availability. Spreading out the purchases avoids a truncated spending spree that might make George more likely to rely on credit cards and potentially face credit=card debt, he explained.
Like Carroll and Blancato, George isn't new to budgeting. He has made peace with the fact that he may be giving less to some friends, family and colleagues -- and in some cases, nothing. "I've thought a lot harder about who I'm giving gifts to," he said.
-Andrew Keshner
(END) Dow Jones Newswires
11-29-22 1234ET
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