Financial Psychology Center

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Alex Melkumian

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Introducing ‘Beyond the Numbers’: A Journey to Financial Wellness and Emotional Tranquility

Financial stress is a universal burden that casts a long shadow on our peace of mind. But what if there was a place where you could not only address your financial struggles but also transform your relationship with money? Welcome to ‘Beyond the Numbers,’ a group therapy initiative by the Financial Psychology Center, where we strive to harmonize your financial health with your mental wellness.

Understanding ‘Beyond the Numbers’

We believe that the journey to financial wellbeing can be empowering rather than isolating, and that understanding one’s financial behaviors and emotions can foster a sense of security and emotional tranquility. In our safe and supportive environment, participants gain insights from shared experiences, explore new perspectives, and collectively build effective financial strategies.

‘Beyond the Numbers’ isn’t just about personal transformation; we emphasize communal healing and shared triumphs. Our financial therapists and advisors deliver services that are tailored to your unique requirements, equipping you with the tools and techniques you need to confidently navigate your financial future.

The Benefits of Joining ‘Beyond the Numbers’

The benefits of participating in ‘Beyond the Numbers’ are manifold:

  • Develop a Healthier Relationship with Money: Understand your financial behaviors and attitudes, and how they impact your overall fiscal wellness.
  • Learn from Shared Experiences: Gain insights from others’ journeys and share your own, making the path to financial wellness less solitary and more empowering.
  • Equip Yourself with Financial Skills: From managing debt to fostering healthy spending habits, gain knowledge to navigate your financial landscape confidently.
  • Enhance Your Emotional Well-being: By working on your financial stress, improve not only your fiscal health but also your mental peace.

Ready to Start Your Journey?

We are excited to announce that our next ‘Beyond the Numbers’ group will commence on the 1st of September, 2023. Embark on this journey towards fiscal health and emotional wellness by reaching out to us to schedule a complimentary consultation. Let’s begin your trek towards rewriting your financial narrative. Remember, it’s never too late to alter your financial story.

Welcome to ‘Beyond the Numbers’ – where financial health meets mental wellness. Join us today and let us work together to illuminate your path to financial tranquility.

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Tax Season Tangle: Unraveling Financial Stress and Psychological Hurdles

Tax season is about more than just dollars and cents; it can also have a profound psychological impact on your well-being. To tackle the financial stress that comes with this time of year, it’s crucial to recognize and address psychological barriers like procrastination, tax aversion, and risk-taking behavior.

Procrastination is a notorious tax season nemesis, with countless taxpayers putting off filing until the eleventh hour. This delay only leads to more stress and anxiety as deadlines loom. Similarly, tax aversion – the psychological discomfort or avoidance of taxes – can harm tax compliance and add to financial stress. To conquer procrastination, pinpoint the reasons behind it, like fear of making errors or facing financial repercussions. Crafting a timeline, setting reminders, and breaking tasks into bite-sized pieces can help you stay organized and hit those tax filing deadlines without breaking a sweat. Tackling tax aversion involves understanding its roots – such as audit fears or distrust in the tax system – and taking steps to comply with tax laws. Seeking professional advice, educating yourself on taxes, and reshaping your mindset can help you beat tax aversion and ease financial stress.

Risk-taking behavior can also throw a wrench in tax compliance and add to tax season stress. Some taxpayers might be tempted to minimize their tax liability by underreporting income or overstating deductions, but this can lead to severe consequences like penalties and fines, causing even more financial stress down the line. Knowing the risks of tax evasion and adopting a careful, compliant approach can keep unnecessary stress at bay and ensure tax compliance.

Tax season can also take a toll on financial anxiety and mental health. The pressures of dealing with taxes, especially when you owe money or face uncertainties, can trigger financial anxiety and affect your mental well-being. Recognize the warning signs of financial strain – increased stress, sleep disturbances, mood changes – and seek support if needed. Coping mechanisms like mindfulness techniques, exercise, and professional help can make a world of difference in managing financial anxiety and reducing stress during tax season.

The psychological impact of debt is another significant factor contributing to tax season stress. If you’re weighed down by debts like credit card balances or student loans, the added burden of taxes can amplify your financial stress. Understand the implications of debt on your financial situation and devise a plan to manage and repay debts effectively. Crafting a budget, prioritizing debt payments, and seeking expert guidance can help you handle debt-related stress during tax season.

Finally, our beliefs about money and their influence on financial behavior can shape how we approach tax season and handle financial stress. Ideas like scarcity mindset, fear of money, or guilt associated with wealth can mold your financial behaviors, including your approach to taxes. Reflect on your money beliefs, understand their impact on your financial decisions, and develop a healthy money mindset to make informed choices during tax season.

In a nutshell, tax season can be a rollercoaster, but with the right financial literacy tools, strategies, and addressing psychological barriers, you can effectively manage financial stress. Understanding tax laws, maintaining proper records, and budgeting and saving are your keys to a smoother tax filing experience.

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Financial Stress: Manage Your Finances & Improve Your Mental Health

Let’s face it, we all experience financial stress at some point in our lives. Whether it’s unemployment, debt, unexpected expenses, or a lack of financial resources, financial stress can take a significant toll on our mental and physical health, relationships, and overall quality of life. But don’t worry, there are ways to manage financial stress and develop financial resilience.

Financial psychology is a powerful tool that can help individuals understand the psychological factors that contribute to financial stress and develop strategies to manage their financial well-being. By identifying your money mindset, which is the set of beliefs and attitudes you hold about money, you can develop strategies to change your beliefs and attitudes about money and reduce financial stress.

In addition, developing healthy financial habits, such as budgeting, saving, and investing, can increase your financial resilience and reduce financial stress. Financial psychology can also help you build resilience, which is the ability to adapt to and overcome financial setbacks.

It’s important to recognize that financial stress can have negative effects on mental and physical health, leading to anxiety, depression, sleep problems, headaches, and other physical symptoms. Financial stress can also lead to self-destructive behaviors such as substance abuse, overspending, or gambling. These behaviors can further exacerbate financial stress and lead to even more significant problems in the long run.

That’s why it’s crucial to manage financial stress and develop financial resilience. Financial psychology is an effective tool that can help you develop strategies to manage financial stress and improve your overall well-being. So if you’re experiencing financial stress, don’t hesitate to seek help and start developing strategies to manage your finances and improve your mental health.

Financial stress can take a significant toll on your mental health. It’s essential to take proactive steps to manage these emotions and reduce the negative effects of financial stress. Here are some strategies that can help you:

  1. Acknowledge Your Feelings: It’s normal to experience a range of emotions when dealing with financial stress. Don’t try to suppress or ignore these feelings. Instead, acknowledge them, and give yourself permission to feel them.
  2. Identify Your Triggers: Understanding what triggers your financial stress can help you develop strategies to manage these emotions. Is it a particular bill, a particular situation, or a specific person? Once you identify these triggers, you can work on ways to manage your reactions to them.
  3. Practice Mindfulness: Mindfulness techniques such as deep breathing, meditation, or yoga can help reduce stress and anxiety associated with financial stress. These practices can also help you stay present and avoid ruminating on past or future financial decisions.
  4. Seek Professional Help: Seeking the help of a mental health professional can provide you with the necessary tools to manage your emotions and reduce the negative effects of financial stress. Therapy can help you gain perspective, identify patterns, and develop healthy coping strategies.
  5. Prioritize Self-Care: Engaging in self-care activities such as exercise, getting enough sleep, eating a healthy diet, and engaging in hobbies can help you manage stress and promote overall well-being. Self-care is essential to maintaining a positive mindset and keeping your stress levels in check.
  6. Develop a Plan: Creating a budget, developing a savings plan, and setting realistic financial goals can help you gain control over your finances and reduce stress. Breaking down larger goals into smaller, more manageable ones, and celebrating your progress along the way can provide a sense of accomplishment and boost your self-confidence.

Incorporating these strategies into your daily routine can help you manage financial stress and improve your mental health. Remember, managing financial stress takes time and effort, but with patience and persistence, you can develop a healthy mindset and build financial resilience.

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What do you do when you want to be in a holiday mode but your wallet doesn’t?

It’s a week away from thanksgiving. The entire family is planning on getting together at one of the family member’s houses and I already know we are going to talk about how well everyone is doing, especially financially. After thanksgiving, it’s immediately Christmas. It’s about who has the biggest Christmas tree, who has the most decorations. As someone in America’s middle class, Christmas decorations around the house is not my first concern.

Anyone have a similar experience? Turning the holidays into a competition of who can afford more? In moments where family and love is more important, is money what we really want to focus on? In regards to interpersonal relationships with close friends and family members, or intrapersonal relationship, financial standing plays a dangerous role. In addition to these malignant comparisons, this holiday season is also hit with inflation where basic needs have gone up in price. In a time where financial stress could reach its peak, how do we manage our own emotions to prevent being consumed by clash of pride, guilt, and shame – we are about to find out!

In an article by Liz Frazier, a certified financial planner, she mentioned how “between gifts, travel, parties, food, donations and decorations, Americans are spending more than ever to keep up with their holiday traditions.”1 She continues that this is “especially true for parents of young children. ”1 When the entire nation is suffering from an all time high for consumer debt, it is heart wrenching to see the dilemma many people are facing during the holiday season. They also showed that 26% of adults were willing to receive no gifts, 25% of them preferring no gift exchanging, and lastly 15% of them abandoning the travel to go see their family.1 All of these statistics demonstrate the urgency to change the mindset people have towards holidays in order to prevent an enormous amount of financial stress to be piling up on different population groups.

There are a couple of tips that can be employed to prevent being crushed by the additional financial stress this season brings to us. First and foremost, it is important to acknowledge these financial fears, stress, and anxiety that you are feeling. Not only is it natural to feel this way in this day and age, it is important to remind ourselves that we are not alone in this. Lonesome, for some, may be the stem of the struggle – leading to the inability to ask for help. These emotions are entirely valid regardless of one’s socioeconomic status. Furthermore, a willingness to seek professional advice can further advance one’s capacity to overcome these anxious feelings throughout this season. Nonetheless, organization and a clear goal are equally necessary in managing one’s emotional state. Organization can help with understanding what needs to be done, and what doesn’t. On the other hand, our attainable goals can be the landmark to embody our values and beliefs.

Traditions do not need to end. Family gathering do not need to end. What needs to end, the financial self-sabotage during holidays.

  1. Frazier, L. (2020, December 16). Financial stress of the holidays cause many to rethink traditions. Forbes. Retrieved November 15, 2022, from https://www.forbes.com/sites/lizfrazierpeck/2019/11/14/financial-stress-of-the-holidays-cause-many-to-rethink-traditions/?sh=4cc76ef03b1e

 

 

 

 

 

 

 

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Dealing with Post-Pandemic Financial Upheaval

The pandemic’s daunting psychological challenges are largely behind us. Now it’s time to deal with the financial challenges. These are uncertain, upsetting, unprecedented economic times. Savings are being eroded by inflation and stock market losses. Credit card debt is growing more costly due to rising interest rates. Just keeping a roof over one’s head is harder due to skyrocketing rents and home prices. And many businesses still struggle with tight labor markets and troubled supply chains.

Financial advisers are full of advice for weathering today’s challenges, but Bottom Line Personal asked Alex ­Melkumian, PsyD, financial psychologist and founder of the Financial Psychology Center, how to handle the psychological impact of 2022’s economic upheaval…

Inflation

Inflation eats away at the value of our savings, leaving us all worried about whether we’ll be able to pay our bills in the future. It can seem like an unstoppable, invisible force that is robbing us and potentially putting our survival at risk. That’s why inflation causes widespread anxiety and even outright panic.

What to do: Break down your budget into needs and wants. You need to pay your utility bills…you want to take a trip to Europe. If you’re middle class or wealthy, there’s a good chance that even steep inflation won’t truly threaten your ability to pay for your needs. Do some quick calculations to prove to yourself that your needs are safe. Just doing that can help you overcome inflation-driven anxiety and panic. Inflation that forces you to scale back spending on your wants might make you unhappy, but unhappy is very different from anxious and panicked.

Next, consider whether there’s anything you could do to boost your earnings until inflation eases. If you’re retired, maybe you could take a part-time job…if you’re still working, maybe you could apply for better-paying jobs—hiring remains strong in many sectors—or earn some extra money on the side. Remind yourself regularly that you’re earning this money to offset inflation’s erosion of your savings. This should give you a sense that you’re taking control of the situation—a lack of control is a big part of the reason inflation can trigger such powerful anxiety and panic.

Rising Interest Rates and Credit Card Debt

The Federal Reserve has increased interest rates repeatedly in 2022 as it attempts to confront inflation. Rapidly rising rates can be a big financial blow to anyone who has significant amounts of credit card and other variable-rate debt. Just one year ago, you could find credit cards with rates below 15%, but these days many charge 20% or more.

The financial solution to rising interest rates is obvious—pay off variable-rate debt quickly. But the psychological solution requires greater nuance.

Aggressively paying down credit card debt can be like going on a crash diet—most people who attempt it make progress for a while, then backslide and end up right where they started or worse. The crash-diet approach to paying down debt often fails because most people who are deep in credit card debt got there due to a long-term overspending habit. Shifting suddenly from this chronic overspending to extreme frugality triggers a sense of deprivation…and that only increases the drive to overspend.

What to do: If you’re a chronic overspender trying to pay down debt, include a “mandatory splurge” in your monthly budget. In other words, require yourself to spend some predetermined amount, perhaps 2% to 5% of your budget, on something that you want but don’t need. This monthly splurge can prevent the deprivation mindset, similar to how a “cheat day” is helpful for many dieters. Potential exception: Avoid mandatory splurges if you have credit card debt not due to chronic overspending, but because of a single unexpected event, such as uncovered medical bills.

Stock Market—and Maybe Real Estate—Losses

The S&P 500 lost nearly 20% of its value in the first half of 2022, and many analysts are predicting further declines ahead. Like inflation, a bear market is a force that threatens our savings. Unlike inflation, there’s an obvious option for investors who want to take control of these losses—they can sell their stocks and leave the market. Trouble is, that can be a costly mistake—investors who flee the market often miss the subsequent rebound.

Meanwhile, home values are showing signs of weakness and could fall in value in many parts of the country as well.

What to do: Take psychological control of declining stock values by deciding to not take your money out of the markets until stocks rebound. When you’re tempted to abandon stocks, remind yourself that selling locks in recent losses…while not selling means short-term losses can’t affect you. Since World War II, the average bear market has lasted less than 12 months, so patient investors usually can simply wait it out.

If you’re retired or unemployed and must tap your investments to pay your bills, trim your budget so that you don’t have to sell more stock than absolutely necessary. Tell yourself you’re making a choice to live frugally for a year or two as a way to contain your stock market losses—framing frugality as a personal choice helps avoid the deprivation mindset mentioned above.

If falling real estate values are a major worry, tackle a relatively inexpensive DIY home-improvement project that will make your house a more pleasant place for you to spend time. This can provide a useful reminder that our homes are, first and foremost, a place for us to spend our lives with the people we love. Their resale value is secondary.

Unfair Division of Economic Winners and Losers

There are winners and losers in any economy, but the line between those groups has seemed especially stark lately. Some sectors and businesses that could easily transition to remote work flourished during the pandemic and its aftermath…others floundered because they were forced to shut down during the worst days and/or they couldn’t obtain the employees or supplies they needed in the aftermath. It’s perfectly understandable if people who find themselves on the wrong side of that divide look at their neighbors who prospered and think, This isn’t fair. Interacting with people who are doing well financially adds to the pain of those who are struggling. There’s a saying in the world of financial psychology—“compare and despair.”

What to do: When you catch yourself thinking, It isn’t fair, tell yourself, No, it isn’t fair…but it also isn’t over. The pandemic didn’t create winners and losers…it created winners and people still fighting for their wins. This isn’t a football game where the clock has hit 0:00—you haven’t lost until you decide to leave the game.

Tap into your feisty side to combat the defeatism that unfair setbacks can foster. In the business world, people sometimes speak of “peacetime CEOs” and “wartime CEOs.” Many executives are effective peacetime CEOs—they can run their businesses well when seas are calm and things are normal. But we’re not living in calm, normal times. Right now, your career—and your business, if you’re an entrepreneur—require you to be a wartime CEO. The pandemic and the post-pandemic economy have gotten some hits in—how will you hit back? Framing the current economy this way can break the victim mentality and help you fight for the win that still might be within your reach.

This article first appeared on BottomLineInc. https://bottomlineinc.com/money/financial-planning/dealing-with-post-pandemic-financial-upheaval

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Earning and Inflation

People hear the word inflation and their shoulders drop – no one celebrates when their economy is suffering from inflation. It is a word thrown around quite often in the media as well as our daily conversation sometimes. We know it hurts our wallets and can also influence our mental state; however, that is the extend of what people. Maybe it is a reflection of the lack of financial education that is offered to the public or rather just the fear that is ingrained in people towards finances. Regardless of the reason, it does not stop inflation from affecting our relationship with money, others, and ourselves. But it is definitely possible to maintain a strong and sustainable relationship with all the key factors in having a healthy lifestyle all around – we’re talking mentally, physically, financially, psychologically, etc. Let’s get right into it.

The international monetary fund defined inflation as something that “measures how much more expensive a set of goods and services has become over a certain period, usually a year”.1 In other words, inflation shows how much the prices have increased compared to the previous year. Compared to last year, the U.S. Labor Department published data marking an 8.3% increase since last October.2 But it’s not just in the States, inflation is seen worldwide in 2022.3 Given this information, it is obvious that most, if not all, of us have to deal with the hurdle of inflation. The difficulty surrounding this whole topic is that despite the increase in prices for basic goods, one’s earning rarely increases. John M. Bremen in an article by WTW explain this is because of several reasons. One of them being how wages are sticky.4 This implies the difficulty in increasing and decreasing wages despite societal changes and therefore the lack of changes when it comes to inflation. The mismatch between workload / income and good prices can foster a toxic and unhealthy relationship with money, potentially leading to behaviors such as hoarding.

On the other hand, mismanaging of finances and emotions especially during a financially tight time can affect the relationship with the loved ones such as family members, and partners. The financial underlying reason can vary from case to case, a common one stems from the inability to acknowledge and respect each other’s emotions associated with money. Some may claim that finances and emotions should be completely separated and should not interact. Not only is it ignorant to the nature of humanity, it is rather impossible. Feeling a certain type of emotion is inevitable, especially in times of stress. The problem does not lie in the mere fact that we feel those things, but rather the way people go about it.

This is easily applied to one’s relationship with oneself as well. Unlike relationships with others, a relationship with yourself is a unique one where it acts as a foundation for many other relationships. The distinctive understanding and realisation about ourselves stem from this unique relationship and it is crucial to not let money be in the middle of that. Many struggle with detaching self-worth from money as the social hierarchy is comprised of systems where money plays a large role in. The mismatch between earning and what one can afford can lead to chronic stress and anxiety, on top of other physiological symptoms.

When people say not to stress about money but there’s so much to stress about, what is there to do? Although there isn’t one magical solution to have stress disappear, managing one’s emotions can promote financial behavior that is aligned with your values and beliefs. By doing so, it creates a neutral outlook on money while negating the hostility that it potentially can bring.

References:

 

  1. Fernando, J. (2022, October 21). Inflation: What it is, how it can be controlled, and extreme examples. Investopedia. Retrieved October 25, 2022, from https://www.investopedia.com/terms/i/inflation.asp
  2. Current US inflation rates: 2000-2022: US inflation calculator. US Inflation Calculator |. (2022, October 13). Retrieved October 25, 2022, from https://www.usinflationcalculator.com/inflation/current-inflation-rates/#:~:text=The%20annual%20inflation%20rate%20for,at%208%3A30%20a.m.%20ET.
  3. Buchholz, K., & Richter, F. (2022, October 20). Infographic: The global inflation outlook. Statista Infographics. Retrieved October 25, 2022, from https://www.statista.com/chart/27480/projected-annual-inflation-by-country/
  4. Bremen, J. M. (2022, April 12). Why salary increases do not keep pace with inflation. Willis Towers Watson. Retrieved October 25, 2022, from https://www.wtwco.com/en-CA/Insights/2022/04/why-salary-increases-do-not-keep-pace-with-inflation#:~:text=Wages%20are%20sticky,before%20determining%20long%2Dterm%20implications.