Financial Psychology Center

facebook
Linkedin
twitter
instragram

Web Support

By

Love and Money or Love and Punishment?

Love and Money or Love and Punishment?

Money is a form of emotional currency in relationships. Disappointment and uncertainty are a normal part of any relationship. However, an inability to communicate your underlying emotions often leads to poor coping strategies such as the need to control, enable or punish your partner. In many cases, the urge to punish comes from a place of fear — the fear of creating intimacy. It is one of the ways to gain control of the situation without being vulnerable but doing so in an unhealthy manner.

While money and wealth are not inherently evil, it can be the source of many immoralities, and expose the dark side of our humanity. Interestingly, financial abuse is seen in 99% of domestic violence cases.1 However, it is not as recognized as a form of abuse or violence, compared to physical, emotional, or verbal abuse. Why is that? Why do we have a hard time recognizing and spotting financial abuse in our relationships? The answers to these questions, often asked by many, can be found through understanding the root of financial abuse. Additionally, we see how our traumas from the past can lead to poor and abusive financial behaviours towards ourselves, and sometimes towards others.

Victim Cycle

Financial abuse is the utilization of money as a tool to control another person.2 It can be seen in many forms: controlling one’s access to money, giving no privacy for financial decisions, giving no social life, or making it impossible for you to leave the relationship with financial stability. By coercing another person into a position where they are not financially stable as an individual, the abuser gains toxic and destructive control in that relationship. Surely, this cycle of abuse is not happening in a vacuum, but rather it is using money as a medium to cause emotional and psychological trauma to another person. Similar to other forms of abuse, the cycle of violence plays a role in perpetuating the hurtful and devastating need for control of the abuser. The four-part cycle consists of: 1. Tension building 2. Abuse or violence 3. Reconciliation and 4. Calm.3 This cycle illuminates certain traits observed in abuse that can be helpful in offering treatment or possible solutions. Though some forms of abuse many not exactly emulate these exact steps, the subtlety of the abuse can also push victims into a corner.

Neuroscience behind it

The perpetuated motion of making it more difficult for the victim to leave the situation behind also lies in the fact that there are neurological changes observed, in addition to the sentiment of fear that the abuser strikes on a variety of occasions. It involves the chemical, oxytocin, normally known as the love drug. Under normal circumstances, it is produced in a brain structure known as amygdala, and it encourages happiness and positive social bonds.4 However, under painful and troublesome conditions, it is produced from the receptors in the lateral septum, triggering a social stress response.4 This stimulates a withdrawing effect of wanting to return to happier times. An example of that could be wanting to go back to times when both people were financially dependent in a healthy way. Although you may think our rational mind can override the decisions made by the neurotransmitters, the emotional effect of this chemical is impactful to the point where it may be very tough to rise up against it.

Such disturbing and traumatic experiences of financial abuse lead to an alteration of our brain pathways and our emotional and decision-making processes. It is utterly crucial to recognize the lasting impact of financial abuse because the solution is not something that is as simple as gluing two pieces back together and pretending that nothing had happened. It is rather a complex situation that requires guidance and support to recover from.

What is Big T and Little T Trauma?

As alluded from above, being financially abused and controlled is a traumatic experience. While one action does not define financial abuse, the characteristics are on a spectrum, similar to how we categorize big T and little T traumas Big T trauma is a reaction towards utterly disturbing or life-threatening incidents, normally associated with PTSD.5,6 Likewise, little T trauma, while these situations may not be life-threatening, is caused by upsetting and distressing situations that do not classify under big T trauma.6 One thing to remember when discussing little T and big T traumas is that it is no math equation. 1 big T trauma does not equal to 3 little T traumas. However, there is a compound effect, also known as the snowball effect, of smaller scale traumas piling up on each other causing extreme emotional and psychological stress and anxiety. An example of that can be how individual money controlling behaviour may not be considered life-threatening; however, the build-up of these experiences and abuses can lead to a much more severe and distressing situation. These lead to the neurological changes in the location of neurotransmitter release and the amount of hormones released.

Interestingly, childhood trauma can lead to poor financial decisions. This can be accredited to the fact that as a child, there were some coping mechanisms that were used during distressing times that are manifesting as an adult. Erica Sandberg writes that irrational and compulsive actions such as excessive spending or excessive saving can be rooted in the fact that the brain is now programmed to overreact to situations due to past experiences7

We see that financial abuse stems from the desire to manipulate and gain control in a relationship in order to assert its dominance over the other person. However, the effect of financial abuse is measureless and unquantifiable — it leaves emotional scars on those who have experienced it.

How to Cope:

Financial abuse is in no way, shape or form a manner to show one’s love. It is just a mask for one’s insecurities or a product of one’s past, which in neither case is acceptable. However, for the victims, it is very important to understand that healing is a process. While one’s perspective may have changed drastically in addition to an altered emotion-based decision-making process, this is not the end of the road. Some steps that may be helpful in this process are:8

  1. Recognize triggers
  2. Set boundaries
  3. Understand that healing is a process
  4. Seek professional help
  5. Acceptance

Control and abuse are not tolerated. The importance of recognizing self-worth and signs of financial abuse cannot be stressed enough. While you might dismiss some uncomfortable and unwanted actions as trivial, it is important to recognize certain patterns and realize the depth and severity that financial abuse can reach.

Control or punishment, is not synonymous with love and it never will be.

    1. Barr, A. (2019, January 22). Financial abuse & strategies to stop the cycle. Retrieved February 23, 2021, from https://www.aimeebarrlcsw.com/single-post/2019/01/22/Financial-Abuse-Strategies-To-Stop-The-Cycle
    2. Forms of economic abuse. (2019, October 10). Retrieved February 23, 2021, from https://www.goodtherapy.org/learn-about-therapy/issues/financial-abuse
    3. https://www.healthline.com/health/relationships/cycle-of-abuse#the-cycle
    4. He, J. (2019, November 06). Gray matter: Neuroscience reveals why abuse victims can’t just walk away. Retrieved February 23, 2021, from https://dailytrojan.com/2019/11/05/gray-matter-neuroscience-reveals-why-abuse-victims-cant-just-walk-away/
    5. Monroe, J. (2020, November 13). Young adult trauma: ‘big t’ and ‘little t’. Retrieved February 23, 2021, from https://www.newportacademy.com/resources/treatment/adolescent-trauma/
    6. Clancy, C. (2019, December 20). What’s the difference between big “t” and little “t” trauma? Retrieved February 23, 2021, from https://journeypureriver.com/big-t-little-t-trauma/
    7. Sandberg, E. (2014, November 17). How trauma leads to destructive financial choices. Retrieved February 23, 2021, from https://www.creditcards.com/credit-card-news/trauma-destructive-financial-choices-1264/
    8. Coping with traumatic stress – the snowball effect – kristin cuthriell. (2013, December 16). Retrieved February 23, 2021, from https://thesnowballeffect.com/2013/12/16/coping-with-traumatic-stress/

By

Love and Money

Lilian Yoffe

Love and money. These two seemingly unrelated subjects actually cross path in surprising ways. As February is known as the month of love, it is timely to discuss the role money plays in all relationships. Financial conversations, though can be tricky and cumbersome at times, are essential in establishing a healthy relationship between you and your partner. It is a great way to strengthen your relationship by eliminating a taboo element in a relationship. However, money can also be used to sabotage a relationship in numerous ways – as, a medium for enabling, control, and punishment. Remember, money isn’t our enemy. However it is up to us to decide what kind of relationship we are going to have with our partners in regards to dealing with finances.

Financial enabling can be characterized as the act of a pseudo-helper where you get the sensation of lending a hand to those in need, while in reality perpetuating the deep seeded problem. While this issue can definitely be seen in couples, this dynamic can also be observed in a parent-child relationship. The enabler is unable to say “no” to a financial demand by the one who is financially dependent. It can stem from the good intentions of the enabler and also from the pursuit of the enabler to help their partner.1 However, this is not helpful for the dependent because the main issue is not dealt with, and it is rather a band-aid solution.

Contrarily to enabling where order and system is not established, control and punishment using money show opposite traits. While the essence of control and punishment are very different, the actions and effect tend to be overlapping. Both can be characterized as financial abuse entailing control of the victim’s ability to use, or acquire money. The need for control can be rooted in different aspects of one’s financial emotions, such as the desire to gain control in the relationship2 or the fear of uncertainty. Money becomes a very accessible medium to cast one’s superiority and dominance over the other as it plays a vital role in everyone’s lives — more simply put, we all need money, so taking that away from someone creates great tension. Unlike physical or verbal abuse, financial abuse in the form of control is less recognized by the public despite its common occurrences in society.2 Similarly, the origin of punishing your partner through money can also be identified as the yearning to gain control in the midst of uncertainty or variability. All our relationships are dynamic; however, the inability to recognize and adapt to changes makes us fear change. It can lead to negative emotions such as pain, hurt, and a sense of isolation.3 More importantly, there is no punishment out of love.

What does this mean?

It means that while money can be used in so many meaningful ways, it can also become a knife that hurts us all. Take a step back and see if what you are doing “out of love” is actually a reflection of your values and beliefs. It is never too late to recognize that what you are doing might be hurting your partner rather than helping. There are three easy steps you can follow to establish a healthy financial relationship with your partner:

1. Recognize that what you might be doing with good intensions, could be hurting your partner.
2. Establish a clear and transparent line of communication.
3. Keep both partners in the loop, and do not avoid money conversations just because it is uncomfortable

Love is beautiful. Don’t let money ruin and destroy the harmony.

1. Kahler, R. (n.d.). When parents can’t say no: Financial enabling. Retrieved February 08, 2021, from https://kahlerfinancial.com/financial-awakenings/money-psychology/when-parents-cant-say-no-financial-enabling
2. Smith, A. (2016, August 10). How money is used as a weapon in relationships. Retrieved February 09, 2021, from https://www.kiplinger.com/article/spending/t065-c023-s002-how-money-is-used-as-a-weapon-in-relationships.html
3. Posted by: Team Tony, T. (2019, March 14). The negative effects of punishing someone in a relationship. Retrieved February 09, 2021, from https://www.tonyrobbins.com/love-relationships/stop-punishing-partner/

By

How to make minding your money feel like an act of self-care

The buzz of self-care may manifest in many ways — a soothing facial mask, a bubble bath or a daily yoga practice. But when it comes to your money, you should be thinking of it as an act of self-care, too. Fixing your finances may help reduce your anxiety overall. Money is stressful for Americans, regardless of income. According to a survey from the American Psychological Association, nearly two-thirds of adults overall cite money as a “significant source of stress,” and that number jumps to 73% for those making less than $50,000 annually.

Money can feel like a difficult, and emotionally draining topic — but it doesn’t have to be. Here are five things you need to know to help ease the mental burden.

1. Identify your relationship with money.

Because we all grew up with different parents in different environments, we will all have different relationships with and emotions around money. Dr. Alex Melkumian, financial therapist and founder of the Financial Psychology Center, recommends thinking about why you behave the way you do around money, as well as asking the people close to you to do the same.


A 5-step plan to help you get out of debt

“In a way, our emotions have gotten a bad rap … as far as our financial behavior is concerned. The reason that’s happened is because when we’re looking at our financial emotions, most people describe the unbearable emotions of either resentment or anger or extreme self-doubt or self-loathing and shame,” Melkumian said. “Really understanding what our emotional lives are and how they impact our financial lives and our mental health is really important.”

2. Treat financial hygiene like physical hygiene.

“In the same way that taking vitamins, getting exercise, and eating right are just part of our daily lives, we should put that same care into our financial health,” said Stephanie Ruhle, NBC News senior business correspondent. “Financial self-care is something to be mindful of every day.”

Try different methods that work with your lifestyle. The important thing is to just do it. “Whether you do your numbers daily, weekly or monthly, figure out what works for you, or try something different,” Melkumian said.

There are lots of ways you can check in on your finances, whether through an app, a note on your phone, or even old-fashioned pen and paper. The important thing is to keep doing it consistently.


What to do in your 20s, 30s, 40s and 50s to retire with enough money

3. Saving is taking care of your future self — not depriving your current one.

“Managing your money is a form of self-care. The future you is as important as the present you. Your dividends will be paid and emotional wellness,” Melkumian explained. “In the end, we are going to help ourselves be less emotional and have a more positive mindset.”

Saving for a rainy day can help ease the stress of financial anxiety, even if it’s tough to do in the moment.

“Having that financial cushion gives you the foundation to make better decisions,” explained Ruhle. “Think about people who are in unhealthy relationships, who are in a toxic work environment — the people most likely to stay in those unhealthy situations are people who are financially trapped. Having some sense of financial security gives people the ability to make decisions more freely in their life.”


The 3-step plan this woman used to build a COVID-19 emergency fund

4. Let yourself splurge regularly — even if it’s just a few dollars.

“Part of the self-care … strategy is to include what I will call mandatory splurging as a line item in your spending plan,” Melkumian said. “You’re not depriving yourself, and that you’re able to have money to spend on yourself, even if it’s a little bit.”

If your budgeting style is too restrictive, you may end up going overboard. That’s why having some built-in fun money, even if it’s only a few dollars a month, is important to maintaining your money mindset and keeping yourself from feeling deprived.

 Emily Pandise

Emily Pandise is a producer and reporter for NBC News, covering business, tech and media since 2017. In her early 20s, she realized she had no idea how to manage her money. She set out to change her financial habits, and she did. Now, she wants to help others do the same. You can find her on Twitter and Instagram @emilypandise.

By

How a mix of psychotherapy and financial advice could solve your money issues once and for all

(Wall Street Journal) – When Sheri Reid Grant inherited millions of dollars from her parents, she went into a downward spiral. Six years later, she still gets teary talking about it.

“Everybody thinks money is the answer, and here I had all this money, and all I could think about was not getting it right,” she said.

Grant, 53, was a middle-school teacher in Michigan when she inherited the money.

Paralyzed with fear, she became convinced that any move she made would not only destroy her father’s legacy but ruin her children’s and grandchildren’s future. She suffered through stomach pains, couldn’t get herself out of bed and lost interest in daily activities. The money weighed on her every thought.

Help finally came, not from a financial adviser or a psychologist, but a combination of the two: a financial therapist. The treatment helped her uncover the root of her turmoil: Her father had raised her to believe she didn’t know how to handle money, so the inheritance felt like a trap, something she would never be able to manage.

“If I didn’t have a financial therapist to help me manage the inner chaos and stress, I would have imploded,” Grant said.

And though her circumstances are unusual — few Americans attain her wealth — Grant believes financial therapy can help anyone. Because it isn’t just about how much you have; it’s about your beliefs and feelings toward money. And, boy, do we have a lot of them. Money is, after all, the thing that stresses out Americans more than anything else, according to a 2018 survey — as it has been every year since the American Psychological Association started posing the question in 2007.

‘Only about 20% of financial planning clients respond to logic and education.’

Rick Kahler, financial adviser

In Grant’s case, financial therapy helped her overcome her paralysis and escape self-defeating behaviors such as refusing to look at credit-card statements or avoiding asking her bookkeeper to pay bills.

“Financial therapy helps me with the emotional and the behavioral side of making decisions around money,” she said.

What is financial therapy?

Financial therapy sits at the intersection of financial advice and psychoanalysis. It’s therapy that helps people uncover the source of emotions guiding their money decisions and, in the process, end self-destructive behaviors related to money.

“A person can benefit from financial therapy when their behaviors are not in line with their values,” said Rick Kahler, a Rapid City, S.D.–based financial adviser whose firm, Kahler Financial Group, has employed for the past eight years a financial therapist who is both a certified financial planner (CFP) and a clinical mental-health counselor. “Another way to say that is when someone is stuck or when someone knows I should be doing this — I should be saving, I should be spending less, I should be paying attention to my retirement — but it doesn’t happen.”

Kahler considers a team that includes both therapists and financial planners to be the gold standard for financial-advisory services.

Certifiable

Though it’s been around in various forms since the 1990s, financial therapy is now poised to become more standardized and more prevalent. Until now, the occupation has been loosely defined, and anyone could call themselves a financial therapist.

The field encompasses a range of professionals — from psychotherapists to marriage counselors to social workers to certified financial planners — all looking to help clients understand the emotional underpinnings of their behaviors around money. Starting this year, practitioners will be able to be certified by the Princeton Junction, N.J.–based Financial Therapy Association as a financial therapist after taking a 100-question exam and meeting requirements including logging 500 hours of experience.

Demand for financial therapy is poised to grow, said Debra Kaplan, a Tucson, Ariz.–based licensed mental-health therapist, speaker and author of “For Love and Money: Exploring Sexual & Financial Betrayal in Relationships.” Kaplan has an MBA and first got interested in the psychology of money while working as a commodity options trader on Wall Street. This past decade of stock-market prosperity has coincided with the rise of a generation that is open to self-reflection, she’s observed.

“This is a generation that is introspective by nature because of wanting a work trajectory that is self-gratifying and satisfying, not just a paycheck,” Kaplan said. “Therefore, financial therapy is perhaps coming into its own at a time that has a demographic that would benefit from what it has to offer: delving into money and work and what it means.”

And as traditional financial planning becomes increasingly automated, with investors relying on robo-advisers and index funds, and talk of artificial intelligence helping clients make asset allocations, Kahler sees a bright future for financial therapy.

“The financial-planning profession gives lip service to the fact that it’s about the relationship,” he said. “I don’t think emotional issues are going away. To be relevant, the financial-planning profession needs to embrace financial therapy.”

The case for financial therapy

After nearly 40 years in the financial-advisory business, Kahler, 64, has come to the conclusion that only about 20% of financial-planning clients respond to logic and education. That small minority will, for example, stop overspending if an adviser tells them to. But, for most people, “it goes way deeper,” he said, and they need more than monthly budgets to change their behavior.

Kahler sees a parallel with dieting. We’re bombarded with information about calorie counts and daily walking steps to stay fit, but most Americans are still overweight. “It’s not about the money,” Kahler said. “The money is a symptom of a deeper problem. Until we get down to that emotional issue, the behavior isn’t going to change. You’re just putting a Band-Aid on it.”

Traditional financial planning is not equipped to address that reality. In fact, financial planners call clients who don’t do what they’re told “noncompliant,” Kahler noted.

A financial therapist, on the other hand, will help someone uncover why they can’t seem to get around to opening those 401(k) statements; why they continually overspend on their credit card, even when they’ve promised themselves they wouldn’t do it again; why they have plenty of money and yet won’t spend any of it to repair their dilapidated house or car; why every fight with their spouse seems to be about the household budget; why they’re losing sleep about money and can’t seem to focus; or why they have a secret bank account they’ve never told their spouse about.

How it works

Tackling people’s issues around money with a financial therapist is different in every case, but it often involves examining a client’s core beliefs about money and how they came to hold them. Do they chase money? Are they terrified of running out of money? Is their sense of self-worth tied up in how many figures are in their salary? Do they avoid thinking and talking about money at all costs? Do they think money is irrelevant? Often the discussion will lead back to childhood, when our parents taught us, either consciously or unconsciously, what and how to think about money.

Those “stories” about money are sometimes called “money scripts,” a term coined by Brad and Ted Klontz, a father-and-son team of financial psychologists. Ted Klontz is Sheri Reid Grant’s financial therapist. One of her money scripts — that women don’t know how to manage money — was reinforced every Christmas when she was growing up in Michigan. Her father, an industrial engineer by training, made his fortune after buying a manufacturing company outside Detroit that made automotive parts. Her three brothers worked for the business, but Grant didn’t. At Christmas, the family would gather to open presents, an event that culminated with her dad opening a box of envelopes and handing out distribution checks to her brothers.

The message — that she didn’t know how to handle money — later fueled her “money avoidance,” which manifested in Grant refusing to look at, for example, credit-card statements. Money scripts may seem irrational to an outsider, but for the person living them they are completely logical. Identifying them helps clients recognize the roots of their money-related anxieties, and eventually, it’s hoped, end their harmful financial behaviors.

There’s no exact formula for helping a client change behavior; financial therapy is more art than science, Kaplan said. But as the saying goes, “If you can name it, you can tame it,” so Kaplan will sometimes have clients make an inventory, in writing, of exactly what they feel when they take money-related actions that they want to change.

A client who was going into debt to lend his friends money because he felt it was his duty to rescue them might write down that when he gives a specific friend money, he feels he’s a good friend; when he doesn’t, he feels sad and guilty. In therapy, that client may come to realize his lending habit is more about his own self-esteem, and Kaplan would help him find healthier ways to foster self-esteem. “I’m not going to reprimand them, but I want them to notice what comes up when they engage in that behavior,” Kaplan said.

‘They thought we were a cult’

The origins of financial therapy date to the mid-1990s, when a leaderless group of financial planners — they came from across the country and first met as a group in Colorado — called the Nazrudin Project began gathering once a year to discuss the intersection of emotions and money. The rest of the financial-planning field balked. “They thought we were a cult,” Kahler remembers. “Planners just did not feel that the financial-planning profession had any business mucking around with emotion.”

Compared with the country’s 85,000 CFPs, the Financial Therapy Association’s 300-plus members, including 32 outside the U.S., form a small, but rapidly growing, group of practitioners.

There is still some debate about the best way to bridge therapy and financial planning. Financial therapists now come from one of two “home disciplines” — either the financial-planning field or mental-health counseling. But a certified financial planner who offers financial therapy is not equipped to treat people coping with serious mental-health problems, and a psychotherapist shouldn’t give investment advice, said Alex Melkumian, a Los Angeles–based licensed marriage and family therapist who offers financial therapy.

“For your money, you want a fiduciary,” Dr. Melkumian said. “For your emotional health, you want a licensed psychologist or therapist who knows how to treat the diagnoses you have and respects confidentiality.”

Therapists should not be handing out financial-planning advice or telling clients what investments to buy, he said. Clients can idealize their therapists and try to please them. “Imagine if I’m saying you have to invest in this particular fund, or this is a strategy that will work for you 110%, and then it doesn’t work,” Melkumian said. “There would be resentment between them and me as the therapist, and it would cloud the treatment and make it ineffective.”

Some financial therapists post disclaimers explaining they can’t treat acute mental-health disorders; others say upfront that they won’t give investment advice. One possible solution to this conundrum is to have therapists and financial planners work side-by-side with the same clients, a strategy that Melkumian and Kahler, among others, advocate.

“When you start playing in the area of mental health, ethics and transparency and intention is so important,” Kahler said. “People are more vulnerable about money than anything else, so it absolutely screams for integrity from the providers.”

Under the Financial Therapy Association’s new certification program, certified financial therapists will be fiduciaries and must adhere to an ethical code that includes avoiding “controlling financial elements of the client’s life that may interfere with doing what is in the client’s best interest.” They won’t be allowed to sell financial products.

Does financial therapy work?

The field is so new that there hasn’t been a lot of research on its effectiveness. One 2018 study by professors at Kansas State University found that 13 couples who were taught a “love and money” curriculum — techniques similar to what they might encounter in financial therapy — felt happier and less stressed about money afterward, and reported significant reductions in money-related stress when they were interviewed three months later.

But true-believer clients like Sheri Reid Grant don’t need research to convince them of the benefits.

“The financial issues I struggle with are universal,” Grant said. “The only difference is a few zeros at the end of my net worth.”

She said therapy can be emotionally taxing, but she sticks with it in part because of her children: “I feel a huge responsibility to break the chains of family dysfunction around money instead of passing them on to my kids.”

***

MarketWatch Article by Leslie Albrecht