Just about everyone has a complicated relationship with money. Studies show that money is a common area of conflict for couples. Even before the recession, 3 out of 4 Americans identified money as the no. 1 source of stress in their lives. With record high debt and record low savings rates in the years leading up to the economic crisis, the average American seemed to suffer from a money disorder.
Money disorders are persistent patterns of self-destructive and self-limiting financial behaviors. I believe that they result from distorted beliefs about money we develop from our financial flashpoint experiences. Financial flashpoints are painful, distressing, and/or dramatic life events associated with money that are so emotionally powerful, they leave a lasting imprint.
Whether it's a childhood of poverty or want, a message about money internalized from a parent, a nest egg lost to an economic downturn later in life, or someone rushing in at the last moment to save the economic day, everyone has experienced a financial flashpoint in their lives. Recognizing them is the first step in stripping them of their power. Then we can learn to identify our money beliefs, spot them when they are creeping into our minds, and revise them into healthier, more productive ones.
In Mind Over Money, we describe three categories of money disorders:
1. Money Avoidance (also includes Underspending and Excessive Risk Aversion):
Financial Denial: When, rather than face financial reality, we try to minimize money problems by refusing to think about them altogether (e.g. avoiding looking at a bank statement or paying a credit card bill).
Financial Rejection: The experience of guilt whenever money, of any amount, is accrued. People with low self-esteem are particularly prone to this disorder, and it leads to a whole host of financial and psychological troubles.
2. Money-Worshipping (also includes Pathological Gambling, Workaholism, and Overspending):
Hoarding: When stockpiling objects or money provides a sense of safety, security, and relief of anxiety.
Compulsive Buying: Compulsive buying is overspending on steroids. Compulsive shoppers are consumed by their money worries. They often learned, early in life, that the ritual of shopping provides a temporary escape from worry and anxiety.
3. Relational Money (also includes Financial Dependence and Financial Incest):
Financial Infidelity: Telling "little green lies" about one's spending or finances to one's partner, like making purchases outside an agreed-upon budget or lying about the cost of a big-ticket item. Extreme examples might include taking out a second mortgage behind your partner's back or opening a secret bank account.
Financial Enabling: Giving money to others whether you can afford it or not; giving when it is not in the other's long-term best interest; having trouble or finding it impossible to say no to requests for money; and/or even sacrificing one's own financial wellbeing for the sake of others. A common example is when parents support adult children who should be able to support themselves. Financial Enabling becomes increasingly common among family members in a down economy, when there is sense of guilt about less fortunate relatives.
The basics of financial health aren't complicated, and we are all capable of mastering them, no matter who we are, or our level of wealth. When we identify our financial flashpoint experiences, challenge our distorted money beliefs, and practice healthy financial behaviors (e.g. maintain reasonable and low debt, have an active savings plan, and follow a spending plan), we don't just become materially richer—we become emotionally wealthier as well.
Check out Dr. Klontz's YouTube video on Money Disorders.
Copyright © 2013 by Brad Klontz