Finances and Feelings

Finance Money

Number crunching. There is no doubt that managing your finances involves working with numbers. Tallying expenses, projecting income, calculating and comparing rates of return, balancing budgets, and analyzing cash flows are just some of the number crunching steps in the financial management process. However, if you are one of many Americans who reported experiencing anxiety when working with numbers, then managing your finances may be the chore that is perpetually at the bottom of your to-do list. Take heart, math phobics! You are not alone in your anxiety. Studies show that even those who are knowledgeable about financial matters and competent in math-related activities struggle to effectively manage their finances. Researchers have found that the connection between knowledge about finances and financial behavior is not as straightforward as it is often assumed.
So if knowledge isn’t the factor, what is?
Let’s get more to the heart of the issue. While the concept of budgeting is highly valued and promoted in our society, less than 1/3 of Americans prepare a detailed written or computerized household budget each month. The dollar amounts on a budget are not just numbers. They represent values, traditions, expectations and, sometimes, dreams. To create a balanced budget, number crunching is useful. But, to create a useable budget, feelings about each income and expense category must be considered. The loan from your relative may be smaller and at a lower interest rate than your other debts. However, feelings associated with that loan may lead you to incur higher costing debt in order to pay off your relative’s loan.

Similarly, if your feelings influence your spending (such as during a trip to the mall after a stressful day), then taking steps to reduce your debts may be like using an air freshener in a locker room; only the symptoms are temporarily treated. Being financially healthy may depend more on your feelings about money than your ability to calculate compound interest, differentiate between leasing and buying a car or create a diversified portfolio.

So whether you are a number cruncher or math phobic, take a moment to consider the following steps to getting in touch with your feelings about finances.

Step 1. Recognize your feelings about finances. Being able to identify your underlying feelings is a necessary step to making changes in your financial behavior. Which of the following words capture these feelings? How do these feelings contribute to patterns of behavior that you want to change or continue?
Worry Fear Jealousy Insecurity
Contentment Envy Panic Hope
Frustration Happiness Anger Disappointment

Step 2. Think about the feelings you learned about finances as a child. Was money a source of happiness or a cause of conflict within your family? Focus on your earliest memories of interactions with money. The influence our families have on our feelings about finances can be automatic and subconscious. However, since this finances/feelings connection is learned, you can choose to change it.

Step 3. Share your feelings and early memories about finances with a trusted friend, family member, partner or financial therapist. When you understand the underlying feelings that drive your financial decisions you can become empowered in the decision-making process.


Jean Theurer, CFP®, Registered Marriage and Family Therapist Intern