Financial Psychology Center

Alex Melkumian

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Financial Psychology: Restoring Financial Wellness in a Post-COVID Economy by Alex Melkumian, PsyD

Debut psychology book highlights the negative impact of financial stress and how individuals can recover.

Los Angeles, CA – June 1, 2022 – In his debut book, Dr. Alex Melkumian, a pioneering psychologist in the growing field of financial psychology, provides a definitive guide to financial psychology and how it can be used to deal with the modern, overbearing challenges of financial stress.

With financial stress a major public health issue (APA, 2017), it is crucial that mental health practitioners begin to assess for and treat financial stress in conjunction with comorbid symptoms. If theorists, researchers, and clinicians adapt techniques of various modalities to treat financial stress, clients and patients will benefit from a more qualified, educated workforce of those in the helping professions. The eclectic combination of theories outlined in this book serves merely as a starting point for the evidence-based treatment of financial stress.

The sad truth is, even though financial stress is pervasive and omnipresent, few people understand where their financial challenges are coming from. They are riddled with shame and guilt that they can’t just manage money better. Even though financial stress can come from money mismanagement, our ability to work with money stems from our deeper relationship with money. This relationship with money is complex, encompassing all our experiences with money leading up to this point.

In his new book released today, Financial Psychology: Restoring Financial Wellness in a Post-COVID Economy, Dr. Alex Melkumian, founder of the Financial Psychology Center, explains why many times we aren’t in control of our financial lives and the motivations that drive us, particularly around money. In fact, we are often so busy believing a particular money narrative that we are unable to see the opportunities around us for greater financial peace. Dr. Melkumian highlights how our unconscious mind with its roots deep in our personal histories is driving our money story, making the rich man feel a pauper and the poor man feel wealthy.

Does that mean the solution is just thinking positive?

“Unfortunately, not,” says Dr. Melkumian. “The foundation of our financial behavior is so intrinsically tied up in our beliefs and emotions stemming from the past that its crucial for the individual to really unwrap their financial story if they want to discover true and lasting financial wellness. If you have a positive mantra, that’s great, but it’ll only get you so far. You need to start with the foundation of your finances and realize that every decision you make is guided by your financial beliefs, emotions and values, embedded in your history with money from your first encounter of it at an early age. This is the root we need to get to using financial psychology.”

Dr. Melkumian draws on a decade of helping people resolve their money issues in order to share with readers some of his groundbreaking work in the field of financial psychology. This work has helped clients uncover the foundations of their self-defeating financial behaviors, focus on their relationships with money, and transform their financial lives.

The book starts by looking at the macrocosm of our current society. How the pandemic, the gig economy, and new trends such as “Work From Home” are impacting how we think about our own survival, income, and wellness. Financial Psychology demonstrates several ways to navigate this new normal to relieve the emotional stress of economic insecurity and to succeed in our new reality. Part Two of the book examines the practice of financial psychology as it relates to healthy and unhealthy financial behaviors. Part Three is a deep exploration of Financial Therapy—a long-term solution to the reactive emotional turmoil, distress, and hopelessness caused by dysfunctional and limiting financial beliefs and behaviors. As a guide to clinical financial psychology, this book also offers an Appendix, with case histories illustrating Financial Therapy in action for individuals and couples.

Financial Psychology isn’t just a book about “understanding money”. It’s about understanding our relationship with money and how to heal it. For more information, please visit www.FinancialPsychologyCenter.com. The book is available in print and ebook versions from Amazon: https://www.amazon.com/Financial-Psychology-Restoring-Wellness-Post-COVID-ebook/dp/B09WWYYC5W

About the Author

Dr. Alex Melkumian, Psy.D., is the Founder and CEO of Financial Psychology Center. He is a clinician, addictions specialist, consultant, peak performance coach, researcher, and recognized expert in financial psychology. As a practicing clinician for the past 15 years Dr Melkumian has worked with populations ranging from the chronically acute, dually diagnosed patients to highly motivated individuals committed to self-improvement. He is an author and public speaker who works to bring people harmony and ease in their lives, no matter what the issue.

Dr. Melkumian is considered a leading expert in the emerging field of financial psychology and has been featured in Forbes, CNN, CNBC, The Wall Street Journal, Washington Post, MarketWatch, Fox Business and USA Today.

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The fine line between entrepreneurship and hardship

When creation and business converge

Are you an entrepreneur? Some can confidently say that they are, in fact, an entrepreneur, but most of us would hesitate. The difference lies not only in knowing the definition, but also in enduring the hardship and hurdling obstacles that tend to revolve around money. Their charisma stems from their creative mind, observing the world through a different lens – but at what cost? The entrepreneurial role entails many challenges and obstacles, such as intermittent income, that is usually followed by a surge of self-sabotage and negativity. The ugly truth behind the successes of entrepreneurship is revealed especially when dealing with suffocating financial dilemmas. The price people pay for unleashing their mind seem quite high; however, the beauty lies in our ability to acknowledge the difficulties without crumbling into a void of uncertainty.

The dualistic nature of humanity can be seen through numerous aspects of daily life, including how we balance financial and emotional issues. Kevin Leyes, the Chairman of Leyes Enterprises and CEO of Team Leyes, writes that “failure is a reality” for entrepreneurship (Leyes, 2020). While some may think that having a brilliant idea is enough for you to plan a business, Leyes emphasizes having a feasible yet unique idea is as hard as generating income. Similarly, the optimistic view of entrepreneurship can easily be crushed by reality – the balance of expectation and rationalization becomes important to keep one’s financial and mental health well.

One of the reasons why we see the world through a skewed lens is because of the expectations we set. Some see it as reinforcing push to achieve our goals. Others see it as the ultimate source of frustration and agony. There is no denial that expectations do push us to do our best and to achieve the goals we have set for ourselves; however, neglecting the unhealthy aspects of it can be detrimental to our wellbeing as well. Realizing and adopting duality of expectation and rationalization plays a vital role in creating a balance to view reality in ways that are not harmful to our minds. When you put expectation and rationalization on a scale, one can imagine that expectations are filled with a false sense of truth that has been attributed to an arbitrary entity or belief. On the other hand, rationalization can lead to a different kind of myopic perspective of reality in a way which every behavior is explainable and justifiable. Jean Piaget, a developmental psychologist, suggested “magical thinking”, which is children believing that their thoughts can influence reality (2). However, he forgot to mention that some adults also struggle to differentiate between thoughts/expectations and reality. Independent business owners can set up a series of expectations just for them to be obliterated by the cruel truth of the society we live in. Just like the wisdom that finds a balance between reason and emotion, it is equally important to find a middle ground in order to prevent money issues from taking over one’s mind.

The flexibility and the independence of entrepreneurship comes with a great cost. However, it is important to note that embracing the above mentioned dualities can help mitigate financial stressors that may be accompanied by being an entrepreneur. It is not to say that all problems will be solved through these new views; however, it gives another perspective to face the problem at hand and navigate through it to reach the optimum goal.

References:

  1. Leyes, K. (2020, June 17). 5 Things You Didn’t Know About the Dark Side of Entrepreneurship. Retrieved January 27, 2021, from https://www.influencive.com/5-things-you-didnt-know-about-the-dark-side-of-entrepreneurship/
  2. Johnson, J. A. (n.d.). The psychology of expectations. Psychology Today. Retrieved April 12, 2022, from https://www.psychologytoday.com/ca/blog/cui-bono/201802/the-psychology-expectations

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Untangling your past relationship with money

You have to address the past to make it through the present.

In this weekly column, I’ll help you sort out financial gray areas—from prenups to inheritances and more. Submit your money matter here.

Growing up low-income, I’ve developed the propensity to save and not spend. Although this is a wonderful problem to have, I’d like to have a better relationship with my money, in the sense that I’d like to feel more comfortable spending it. There are things I’d like to buy myself, but I struggle to actually make the purchase, even if they’re only $20–$30 and I’ve budgeted for it. Do you have any advice for this?—Death by 1000 Paper Cuts

Dear DB1000PC,

Every now and again, I find myself massaging the contents of an online shopping cart, trying in vain to get that dollar amount down into something that feels “reasonable.” Like you, I came from a low-income background and my money habits are indicative of that: a $20–$30 purchase that I know I can buy without consequence will cripple me temporarily, sometimes to the point where I just don’t buy the $22 eyebrow gel from Sephora that I want but don’t need.

I want to help you figure out why this feels so bad. Unfortunately, I’m not a therapist, but Dr. Alex Melkumian, founder of the Financial Psychology Center, is. “I think [with] a lot of decisions that are made based on emotions, we have a hard time dealing with [them], because emotions are unpredictable,” he said. “At the root of somebody who’s holding onto their money and not spending it is a fear that they’re not going to be able to get this money back. They have a fear of being in survival mode.”

Getting to the heart of this particular matter isn’t easy, but just like getting a grip on your finances or any other problem, having a plan helps.

  1. Understand the story you’re telling yourself. We are who we are because of our past, but untangling what stories we learned about money in the past is useful for moving forward. “The understanding that those beliefs and those memories impact [your] financial decisions to this day is a really important piece,” Melkumian said.
  2. Feel your feelings. “The most prudent financial decisions are made out of a place of emotional neutrality,” Melkumian said. Once you understand why you are the way you are, it’s time to do a little more work: First, acknowledge the feeling you have and how it relates to your past, but understand that that’s just a feeling and not reality. “We want to be aware of our emotions, but not have them be at the forefront of our financial decision-making.”
  3. Give yourself permission. Now it’s time for a little reverse psychology—trick yourself into dismantling that narrative a little. “In your spending plan, you would do a line item that’s called “mandatory splurging,” Melkumian suggests. Allowing yourself to spend just a little bit of money by literally baking it into your overall budget means there’s a safeguard against getting totally out of control. Be flexible with yourself, too—and remember, this is a rule you made, so you can break it (within reason) and adjust it to fit your needs.

Doing this work isn’t easy, but be patient with yourself and know that it will get easier over time.—Megan

Original article by Megan Reynolds is published here: https://www.morningbrew.com/money-scoop/stories/2022/03/03/untangling-your-past-relationship-with-money

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Love and Money: The biggest symbiotic relationship we know

The biblical legend of Valentines has forever tied and named February as the month of Love. As we enter this month, we are always reminded of how love is intertwined with everything we do and have, especially money. Despite the fact that these two domains seem beyond unrelated, when you look beneath  the surface, you notice that many commonalities  underlie the connection between the two. Take a healthy relationships as an example – for a matter of fact, you need a healthy relationship with people and with money. Establishing a strong and flourishing relationship with your partner is crucial to deepen your connection, just like having a healthy relationship with money is important for your future endeavors. Love can help one’s financial situation prosper, and visa versa. However, it has the ability to sabotage it as well.

Similar to the 5 languages of love (words of affirmation, quality time, physical touch, acts of service and receiving gifts), money also has its own set of languages – emotional, practical, spiritual, and cultural. It is crucial to recognize that the root of most problems are embedded within one or all of these four realms. But this does not entail that problems are going to present themselves in a clear manner where you can distinguish between which language the problem stems from.  Any financial problem couples face may seem like an issue of practicality on the surface; however, when you go past the tip of the iceberg, it can help you identify the primary concern and address it.

One thing about these money languages is that it can be thought of as a four legged chair. With one leg missing, it becomes quite difficult to balance yourself and to sit in; loss of the leg, it becomes more and more odd to sit in it, to the point, it no longer serves its function as a chair anymore. An imbalance in any one of the four aspects can drive a wedge between two people, affecting other aspects of their relationship. In the case where one of them only focuses on the emotional side of money and the other emphasizes the practical, financial conversations might start to feel and sound incomprehensible from both sides; each party is speaking a different language, with no translator to mediate in between. Though it may seem compatible at first, their stances are quite polarised where one’s focal point shows that their financial thoughts stem greatly from their emotions and feelings while the other focuses solely on the pragmatic aspect of money. Normally, people can spot an argument.  The difficulty, however, lies in the ability to pinpoint the core of the problem. In this case, it is important for both parties to recognize the differences and acknowledge the polarity in their approach to money. Both need to understand the place for the logical and the emotional mind without being sucked in by one side.

On the other hand, in cases where both parties approach money through the emotional and spiritual lens, while there may be a fewer number of arguments amongst them, dealing with money problems will become a challenge as they are missing two of the legs. Some of the emotions that could override one’s decision include fear, guilt, and shame.1 The lack of awareness for these emotions can lead you to ignore your rationale despite its importance. While acknowledgement of emotions is crucial in establishing a healthy relationship with money, it cannot stand on its own.

What do we do now?

First and foremost, it is crucial to identify your own tendencies and preferences when dealing with financial issues. It is completely okay to have an inclination towards one aspect of money as none of us are perfectly well-rounded, and that is an unachievable goal. Having said that, it is also important to understand that intentional awareness of the other languages will help minimize the severity and number of conflicts as it allows you to see the issue from a variety of angles and put forward solutions that are in both parties’ interests.

Don’t let money be the problem in the harmony of love.

  1. Gourguechon, P. (2021, December 10). The psychology of money: What you need to know to have a (relatively) Fearless Financial Life. Forbes. Retrieved February 14, 2022, from https://www.forbes.com/sites/prudygourguechon/2019/02/25/the-psychology-of-money-what-you-need-to-know-to-have-a-relatively-fearless-financial-life/?sh=134623d8dfe8

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The 4 Languages of Money

Moisés Naím, a well known journalist, once wrote, “A fast-changing world economy makes financial ignorance more dangerous than ever before”. Our personal psychology in how we perceive our financial situation thereby impacting our ability to make sound financial decisions. Although there is no easy way to distil with each person’s unique financial situation, we have narrowed the areas which help people think, feel, communicate, and behave differently with money to improve overall well-being.

We call it the 4 languages of money: 

Practical | Cultural | Spiritual | Emotional

While the practical language focuses on the what, such as our daily needs of paying rent and bills, or saving for retirement; the emotional language of money speaks to our wants. It is important to highlight, that both the logical and emotional parts of our brain are required to work in unison in order to contribute to the inner money dialogue. An additional language of personal finance is one culture, which becomes a source of many of our beliefs and values about money. You can probably think of a few stories dating back to your childhood that speak to cultural norms around money. Stemming from our culture and compounded with religion, the spiritual language vitally affects our ability to make decisions that are truthful to ourselves. Keeping track of these four dynamic aspects of life can help us navigate to financial health and wellness.

For example, amygdala hijack is an incident where stress takes over your emotions, feeling  like you are no longer in control of them. Neuroanatomically, the amygdala is located in the midbrain and is known to be the emotion center. Most commonly it is known for being responsible for our fight or flight response. In order to execute critical judgements, we need to employ our wise mind, a stable middle ground of practical and rational thinking, also known as the wise mind. The critical analysis of our current state not only aids in making a judgement that is less emotionally driven, it also allows for emotional neutrality throughout the decision making process.

Now, you might be asking yourself, “what is the actual benefit of knowing how to speak all these languages?”. Akin to fluency in multiple languages, the more you understand, the easier it becomes to understand the syntax and learn even more. This can be applied to the language of money as well. 

Let’s do little experiment. Imagine that you were asked to sit down and watch a movie (Wolf of wall street, or Big Short) How soon into the movie would you become bored, or frustrated?

Now Imagine that the same move is dubbed in another language (Russian or Chinese). How soon into the same movie will you become disinterested, bored, or frustrated? 

Let’s say that despite your frustration and angst, you are being asked to continue to watch the movie. How long before you start pulling out your phone or looking out the window and avoiding watching the movie? Let’s suppose that despite you pulling out your phone and looking out the window, you are STILL asked to watch the movie! At what point will you become outright angry, and this will become a conflict?

This is how many people feel having to deal with money on a daily basis without being financially literate. It feels like they don’t speak that language. 

Hence, what is the power of language you may ask?  When we do not understand what is being communicated to us, we become disinterested, we avoid it, and it can also boil over into a conflict. Literacy implies a gradual understanding by initially learning the alphabet, then putting together a word, then sentences, and finally forming full paragraphs. The inevitability of money problems may come at times where you and your family are most vulnerable, produce significant psychological burden but allow you to seek for further clarity. The solution to solving the personal finance puzzle lies in the integration of the 4 languages of money and our fluency in each.

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The Post Pandemic Big Burnout

“You should take care of yourself more!”

“Stressed? I guess you’re not doing enough to prioritize your mental health. You should do that!”

“Burnout isn’t a thing”

While some are lucky enough to have never been told things like mentioned above, the others have heard it too many times. Since the World Health Organization (WHO) started to recognize “burnout” as an occupational phenomenon, the word has been passed around between many workers and companies.1

While the term “burnout” was attributed to “helping” professionals working in high stress environments, it is now more commonly used among many, ranging from celebrities to 9 to 5 employees.2 Despite its prevalence, it is difficult to have a set of symptoms to diagnose someone with burnout. WHO describes burnout as “syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed”1, while The Centre for Addition and Mental Health (CAMH) defines it as, “Burnout is a state of emotional, physical and mental exhaustion caused by excessive and prolonged stress. Burnout in the course of employment can make one feel emotionally drained and unable to function in the context of work and other aspects of life.”3 When everyone experiences stress differently, it is hard to have a set definition and identify specific symptoms that describe the phenomenon while encompassing its essence. Typical symptoms include feeling drained, exhausted, hopeless, and increased mental distance from the job.3,4 The pandemic did not make this situation any better – in 2019 fall, a group of researchers found that 62% of people were more frequently experiencing burnout.5 Some companies try to help their employees, but sadly, other companies do not and try to hide it. And we cannot forget, money comes in the picture.

One common misconception about work burnout is that it is always about the people and is surmountable by doing to yoda, meditating, and establishing a good mindset. However, applying these bandaid solutions without any change in the core problem may aggravate the situation.6 A survey by Gallup found that the top 5 reasons for burnout are7:

1) unfair treatment are work

2) unmanageable workload

3) Lack of role clarity

4) Lack of communication an support from manager

5) Unreasonable time pressure

This shows that it is not on the individual, but rather the culture and the environment of the workplace that cultivates the atmosphere that could lead to burnout of the employees. Some employees try to solve this issue by resigning from the company. After an unprecedented time like the pandemic, it would not be surprising to see a group of workers leaving their job due to countless changes that lead to stress, uncertainty, and even anxiety. The Anderson Clayton Professor of Business Administration, Anthony Klonz, mentions how we should all except to see a “great resignation”  by the workers after this year.9

Burnout culture not only affects one’s mental health but also their financial health as well. Everyone has a different relationship with money; however, it is important for all of us to establish one that is healthy and maintainable. For some, the motivation for work might stem from the monetary gain that they receive while for others, money might not cross their mind. However, when their job has taken a toll on their mental health, it can jeopardize their relationship with money by extracting all the energy needed to deal with money towards work.8 Whether it be not having enough energy to check their bank account or mindlessly shopping as a form of “recharge” and “de-stress”, it will hurt the bank account and create a vicious cycle of worsening mental and financial health.8

As mentioned above, workplace burnout should not be dealt with on a solely individual basis. But rather, seek for the root of the problem in order to solve the issue from the bottom. In the meantime, there are certain techniques that can be implemented to mitigate the financial burden through burnout.

  • Give yourself a budget that is not too strict
  • Be open about your financial concerns with a professional
  • Make a plan for installing safety nets in order to spend money intentionally

Burnout is real. Burnout is not entirely on you.

 

  1. World Health Organization. (2019, May 28). Burn-out an “Occupational phenomenon”: International Classification of Diseases. World Health Organization. Retrieved November 29, 2021, from https://www.who.int/news/item/28-05-2019-burn-out-an-occupational-phenomenon-international-classification-of-diseases.
  2. InformedHealth.org [Internet]. Cologne, Germany: Institute for Quality and Efficiency in Health Care (IQWiG); 2006-. Depression: What is burnout? [Updated 2020 Jun 18]. Available from: https://www.ncbi.nlm.nih.gov/books/NBK279286/
  3. Career Burnout. CAMH. (n.d.). Retrieved November 29, 2021, from https://www.camh.ca/en/camh-news-and-stories/career-burnout.
  4. Fraga, J. (2019, June 5). Why the who’s change in definition of burnout is so important. Healthline. Retrieved November 29, 2021, from https://www.healthline.com/health/mental-health/burnout-definition-world-health-organization.
  5. Moss, J. (2021, March 31). Beyond burned out. American Association for Physician Leadership. Retrieved November 29, 2021, from https://www.physicianleaders.org/news/beyond-burned-out.
  6. Moss, J. (2021, August 27). Burnout is about your workplace, not your people. Harvard Business Review. Retrieved November 29, 2021, from https://hbr.org/2019/12/burnout-is-about-your-workplace-not-your-people.
  7. Agrawal, S., & Wigert, B. (2021, November 22). Employee burnout, part 1: The 5 main causes. Gallup.com. Retrieved November 29, 2021, from https://www.gallup.com/workplace/237059/employee-burnout-part-main-causes.aspx.
  8. Ellevest Team. (n.d.). Burnout culture impacts your financial wellness, too. Ellevest. Retrieved November 29, 2021, from https://www.ellevest.com/magazine/personal-finance/burnout-budgeting-mental-health-awareness.
  1. Stahl, A. (2021, July 22). Post-pandemic Burnout Spurs the “great resignation” among workers. Forbes. Retrieved November 30, 2021, from https://www.forbes.com/sites/ashleystahl/2021/07/22/post-pandemic-burnout-spurs-the-great-resignation-among-workers/?sh=6a7e34ec58b9.