While there are some who breathe the rarified air of having their financial lives totally together, most people struggle. Your degree of struggle might range from small—not being sufficiently organized—to complete and utter meltdown.
In the messier situations that my clients have faced, I see seven recurring themes. The good news? They are recoverable with the right actions.
1. Lack of Financial Knowledge. Unfortunately, we do not teach financial literacy in school as we teach English or Math. But we should. Unless you are fortunate enough to have parents who sat you down and helped you understand money and all the aspects of managing a financial life, you were left to your own devices. As a sound bite society, we take our knowledge from entertainment outlets versus educational ones. If you don't understand the basics of risk management, cash flow, budgeting, retirement planning, education cost planning, tax and estate planning, chances are you are not even asking the right questions.
2. Not Enough Time On Task: Regardless of Wall Street's desire to present themselves as modern mystics operating their secret black box, you are fully capable of understanding financial information. Yes, our busy, over-programmed lives leave very little space for anything but the basic operational aspects of our money life. We pay our bills, collect information for taxes once a year and fill out renewals for our auto or homeowner's insurance; maybe we even look at our investment statements or 401(k) accounts from time to time. But when was the last time you read information that would help you build a broader base of knowledge so you could make better financial decisions? Try putting an hour a week on your calendar to learn something that will help you better understand one aspect of your financial life.
3. Ego. Very few people will stand up and say "I don't know", especially when it comes to money. My gender is especially guilty of the caveman "I got this" approach when nothing could be further from the truth. We are measurers. We measure our success against our friends, relatives, neighbors and colleagues. Our yardstick of success: who has the better car, bigger house or went on a more lavish vacation? Our ego pushes us to spend more than we should on things we don't truly value beyond showing the world that we are successful. As economist Tim Jackson said so well: "We spend money we don't have, on things we don't need, to make impressions that don't matter."
4. Money Avoidance. If a child burns his fingers on a hot stove, chances are the next time he’ll give that stove a wide berth. Adults are the same way. If we don't understand something, we tend to avoid it. The topic of money very often brings up feelings of pain, confusion or associated unpleasant memories from childhood. If you grew up in a family where money was the center of conflict, the mere mention of it may be enough to cause your stomach to feel queasy, your chest to constrict and your brain to retreat into shut down mode. We react because we are wired to react from past experiences. It's our own personal hot stove.
5. Don't know whom to trust. Open any news website or magazine and you’ll be hit with conflicting stories, commercials, sales pitches and predictions of disaster. You've seen the commercials from the big Wall Street firms that proclaim "You can trust us to guide you through your life." And the next page features a story about that very same firm being fined BILLIONS of dollars for screwing the public. Who should you believe? Ignoring the facts because you liked an ad or your boss or your cousin or the guy at the gym likes the firm is not a shrewd move.
6. Financial Arrogance. Financial arrogance is another type of Money Avoidance. Instead of being born out of past experiences, this is more in the realm of "I have plenty of time to deal with these issues" kind of arrogance. As if whatever fate lies in wait for you cannot possibly affect you until you're good and ready. If you think that because "my parents weren't sick a day of their lives and died in their sleep at 98" you don't need to think about disability or premature death—you are living in delusion. Or if you refuse to save for retirement because you just "know" that you're going to inherit, you are probably suffering from the same arrogance.
7. No Objectivity. Being objective about anything that's really important to you is somewhere on the spectrum of rare to impossible. Every parent on the soccer field has a kid who is getting a scholarship to a Division 1 University—no problem. The same lack of objectivity applies to your financial life. If you’re a golfer, the cost of the country club is a necessary expenditure, while your travel-minded spouse thinks golf is a waste of money and a vacation is money well spent. Her cost of personal care and massages is a waste to him; his cost of tools and gadgets is absurd to her. Being objective is really difficult because we see the world as we see it and the things we value are important and necessary. But maybe they aren’t as important as we think.
So, what can you do when your financial life creates anxiety? I guess that depends on whether it's important enough to shift your thinking and take action in your very own best interest.