As we go into the holiday season, some may experience an impending dread about their finances. Gifts. Travel. Company. Holiday meals. Parties. It all costs money. Nagging questions like, “Should I be spending this much on X?” or “Is there a better use of these funds?” come up and are often ignored or pushed aside, but a lingering anxiety remains. Rather than going into practical tips to get through this season of spending, let’s back up and talk about the emotional undercurrents that come into play as we think and make decisions about our finances.
I was so excited to be contacted by a reporter last month from Real Simple working on a story about “wealth mindset” that questioned its legitimacy. (Check out the link to the finished piece in the “In the Press” section below.) Influencers and self-proclaimed experts peddle expensive courses and coaching that will allegedly revolutionize your relationship to finances, and change your financial outlook. This is an oversimplification of the complex set of tools that is required for folx to make progress and lasting change, as understood widely through the study of behavioral finance.
When I worked in the non-profit financial empowerment sector developing financial education curricula internationally, we had a framework to create content for maximum impact on 3 distinct components: knowledge, skills and attitudes. The concept is this: people need knowledge such as what interest is. People need skills applying that knowledge such as how to read a credit card statement. And lastly, but importantly, people need attitudes that affirm their ability to acquire the knowledge and apply the skills such as “I want to know how much I’m paying for an item I put on a credit card that I carry a balance on” instead of “I’m going to buy it anyway, so I don’t want to know the damage I’m doing.”
So this is the trifecta that we aimed to change in the nonprofit world: knowledge, skills and attitudes. In our work at Brooklyn Plans, we pair that approach with a fourth component: expertise. The financial system is so complex in the U.S. that it would take an in-depth multi-year course to teach folx the knowledge, skills and attitudes required to calculate how much surplus is available for saving from after-tax income on a monthly basis, determine the best student loan repayment plan, and select the options in a 401(k) and rebalance it regularly. Enter the Financial Planner. We have the skills, knowledge and attitudes to help individuals cultivate their own to succeed.
Facing your finances can be tough. There’s so much wrapped up in it: fear, anxiety, avoidance, the nagging sense of failure, feeling behind, feeling dumb, etc. All of these feelings that come up when looking at your finances are legitimate, though not necessarily true. For a lot of folx, working with a professional in finance alone can alleviate the stress, anxiety, lack of clarity and purpose, but for others these issues are so deep-seated that they result in avoidance, procrastination and an unwillingness to do the work that is required from clients to make true progress.
The wealth mindset work may have some value to it and it may do something for some people, but there’s just so much more to this work than just mindset, and honestly, if that’s the issue for you, then I think the best referral is therapy or qualified energy workers if you’re into a less Westernized approach combined with doing the work with an expert. Don’t waste your money on self help courses or influencers who have monetized the avoidance and struggles people have with facing their finances and are selling their product as a quick fix to resolving your financial woes. Work on your mindset. And do the work on your finances. Preferably with expert guidance.