Financial Psychology Center

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Unemployment and Underemployment

How do you measure your self-worth?

After enduring two brutal, pandemic-filled years, it now seems foolish for the world to have proudly concluded that things are finally going back to ‘normal’. The workforce seems to be a little more complex than that.1 Changes in the workforce have left a lasting impact not only on the work environment, but on the psyche of the individuals who are now dealing with concerns over both unemployment and underemployment. The pandemic saw unemployment and underemployment rise as skilled workers were both forced out of the professional world, and some left voluntarily to pursue income from the gig economy. The ones coming back are demanding new conditions to match their post-COVID perspective.

Unemployment describes a situation where one is not employed while underemployment describes the situation when an employee works fewer hours than usual in their specialty.2 In addition, invisible underemployment touches on people that put in the hours but do not use their skills. In both cases, it is important to look not only at the financial but emotional and behavioural adversities that follow these events in order to fully understand the adverse consequences. This also allows for more personalised solutions to be suggested by professionals for workers to overcome these major life challenges.

Peggy was a principal of a school when COVID started, but through changes in leadership due to the pandemic, her contract was not renewed and she found herself unemployed. Peggy was at a crossroads in her life having been a school principal for the previous seven years but knowing she wasn’t really enjoying. Her finances were in such a state that she couldn’t afford a lower paying job, even though her ideal situation was working less hours and having more time in her garden. Peggy spent the summer talking to a financial therapist and re-evaluating her life, her sense of self, and redefining what she truly needed to feel happy and fulfilled. After a lot of deep psychology work, Peggy was able to restructure her entire financial life, sell some assets to pay off debt. She moved to a reading tutor’s job at a new school and found the more she engaged directly with the children she wanted to teach, the better she felt. This new perspective tied her self-worth to direct childhood education and helping youth from a hands-on angle, rather than the more complex but less rewarding position of school administrator. At first Peggy had to detach from her self-image of being a principal and the esteem she had attached to that role in life. Once she could free her mind, Peggy was able to seek out what truly fed her heart. This led to what some people would consider “underemployment” or a lesser skilled and lesser income position. However, once Peggy had systematically addressed her finances, she right-sized her financial needs to match a lesser paying but more fulfilling role. In this case, Peggy used financial psychology to deal with the fear of unemployment, the stress of debt, and choice of employment to live a fuller, happier life.

It is quite obvious that both unemployment and underemployment lead to financial trouble. If you are not working, earning money becomes a struggle. Behaviors stemming from denial and indifference can surface throughout this process as financial losses can affect one’s view on money in negative ways most of the time. In the realm of financial psychology, the focus is not necessarily on the financial losses, but rather the emotions you attach to financial loss. Not only can it demolish one’s confidence, it can compound negatively, fundamentally altering their life course. When Peggy first found out her contract was not going to be renewed, this through her into abject financial fear and certainty that the only solution was to find another principal’s position. It was only through careful analysis of her situation and staying calm in the face of fear that she was able to discern the choice that best matched her heart’s desire.

Dooley et al., demonstrated that cases of underemployment and unemployment are highly correlated with depression compared to those that are fully employed.3 Furthermore, self-esteem and self-worth are in question during unemployment, which leads to negative emotions, anxious thoughts and self-doubt.4 Although we as a society put up a front of separating money and worth, it is typical to see those two aspects still entangled together. This perpetuates the defeatist view where money defines self-worth. When Peggy analysed what she truly wanted in life, to support youth through education, she realized a reading teacher’s position was the best choice for her personal fulfilment and would still support her self-worth.

One thing many would do in this same situation is lose their positive outlook. This can lead to depression, negativity, victim-outlook and other points of view that would aggravate the situation even more. Peggy dealt with this head-on. She gave herself time to grieve the loss of her job and recognized the trauma she had endured from that experience. By using emotional neutrality, she was able to find the equanimous place within herself to stabilize and centralize her energy around her own self-worth separate from her income.

Financial psychology provided the clarity Peggy needed to see that when one financial avenue closes, another one opens. It is important to remind yourself money is not in the background of self-worth. However, a reflection of yourself can be seen through how you react and deal with financial hardships.

 

  1. Tracking the COVID-19 economy’s effects on food, housing, and employment hardships. Center on Budget and Policy Priorities. (n.d.). Retrieved May 10, 2022, from https://www.cbpp.org/research/poverty-and-inequality/tracking-the-covid-19-economys-effects-on-food-housing-and#:~:text=The%20unemployment%20rate%20jumped%20in,2021%20than%20in%20February%202020.
  2. Hayes, A. (2022, May 3). Unemployment definition and types. Investopedia. Retrieved May 10, 2022, from https://www.investopedia.com/terms/u/unemployment.asp
  3. Dooley D, Prause J, Ham-Rowbottom KA. Underemployment and depression: longitudinal relationships. Journal of Health and Social Behaviour. 2000 Dec; 41(4):421-36.
  4. Goldsmith, A., & Diette, T. (n.d.). Exploring the link between unemployment and mental health outcomes. American Psychological Association. Retrieved May 10, 2022, from https://www.apa.org/pi/ses/resources/indicator/2012/04/unemployment

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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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What Makes our Ship Sail – The intersection between emotional neutrality and mindfulness

Georgia is a person of resilience and determination, both with her dreams and goals, and her emotions. Supporting a family of 5, financial success carried paramount weight for her. Regardless of how much she worked or how tired she was, she kept going. But one thing that seemed to be in her way was letting bad days takeover everything she was doing. Whether it be her behaviour at work or at home, a single unforeseen negative outcome was enough to develop an inner monster that would control everything she felt and did for the rest of the day. But she simply did not have enough time to address this recurring issue. She tried forcing herself to remain happy, ignoring all the negative circumstances.  

That didn’t work either.

Georgia is not alone in her experience. Our emotions can play a substantial role in our behaviour and actions. But only if we let it. Nowadays, positive emotions are considered to be the opposite of negative emotions. Wherever we want to escape reality, we cope by overshadowing the sorrow and pain of reality with an excessive amount of positivity – similar to a drug. It might simply be human nature to have the desire to feel happy in the midst of stress and confusion after all. However, forcing positivity is not the answer to this problem in the case where the problem lies in your strong emotions affecting your behaviours. As simple as balancing an old fashioned scale with two things on both sides, a balance can also be maintained when making decisions between emotions and logic, in addition to preserving emotional stability. The key aspect of this equilibrium can be achieved by practising mindfulness and emotional neutrality.

Mindfulness is an attainable quality of being fully aware of what you are feeling in the moment.1 In this fast-paced lifestyle we live in, it can be difficult acknowledge your emotions without judgement or criticism.2 However, this quality can help establish a link between your emotions and your reason without either of them affecting the other. This provides an outlook in life that is more than surviving, rather for flourishing and growing.3 On the other hand, emotional neutrality is the process of removing polarising emotions from the financial decision making realm. It allows us to use the skill of mindfulness to discern our emotions from our logic in order to prevent our emotions from hijacking the decision making process and turning a blind eye to reality. By getting in touch with our emotions through mindfulness, we can practice emotional neutrality which lets us face our troubles without bias created by a skewed view of reality.

However, this should not be confused with the stigma around money that our emotions are insignificant in any aspect of risk management. Our emotions are a unique dataset that gives us insights on how we perceive our reality. Although it is crucial to distinguish that they are not a reflection of reality, it still is an important indicator of where you are mentally. For some, financial decisions can bring out anxious and stressful thoughts more than others. Rather than brushing them off and ignoring them as something “subjective”, you can use it as a starting point as to why it is demanding and where those emotions are coming from – it allows us to dig down to the roots to identify the original source of the problem. By doing so, the need of creating a false reality diminishes to the point where you don’t have to be scared of feeling something and affecting you uncontrollably.

Going back to Georgia, we see that she tried to compensate her sadness and struggles with false happiness. We now know how that is a Band-Aid solution without a permanent benefit. It is good to feel the ups, but it is important to feel the lows to know where you stand. Because without the ocean full of emotions, the ship won’t sail.

References:

    1. Mayo Foundation for Medical Education and Research. (2020, September 15). Can mindfulness exercises help me? Mayo Clinic. Retrieved March 14, 2022, from https://www.mayoclinic.org/healthy-lifestyle/consumer-health/in-depth/mindfulness-exercises/art-20046356
    2. KOREN, A. D. A. M., & MARKLE, E. L. I. Z. A. B. E. T. H. (2022, January 14). 4 ways to bring mindfulness to your money habits. Mindful. Retrieved March 14, 2022, from https://www.mindful.org/4-ways-to-bring-mindfulness-to-your-money-habits/
    3. Sutton, J. (2021, December 7). The importance of mindfulness: 20+ reasons to practice mindfulness. PositivePsychology.com. Retrieved March 14, 2022, from https://positivepsychology.com/importance-of-mindfulness/

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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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How money can build or break your relationship, according to experts

It’s well known that money is one of the most common subjects for couples to argue about. A 2019 study from the University of Tennessee, Knoxville reported that regardless of the happiness level within the relationship, money is a topic that couples consistently disagree on.

However, talking finances aren’t always a negative, especially if you’re single and actively dating. A recent study from eToro suggests owning cryptocurrency and placing that in your online dating profile makes you more desirable.

So regardless if you’re married, casually dating or somewhere in the middle, how can Americans continue to maintain and build healthy relationships while also continuing to work towards their financial goals? Select talked to two experts about what people can do to improve their money and intimate relationships.

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How dating and money intersects

It’s not a secret that people in committed relationships tend to perform well financially. A Pew Research study found that in 2019, men and women both earned more and were more financially sound in a committed relationship. However, that doesn’t mean someone should date solely for financial security.

But if you’re actively dating, it’s normal to be curious of a potential partner’s financial situation, regardless of where you’re at in the dating process. Damona Hoffman, OkCupid Dating Coach and Host of The Dates & Mates Podcast, suggests “daters who get better with their money will naturally attract better dating prospects because it is still one of the primary attractors in our society.”

In fact, the likelihood of a single saying wealth is important in a match nearly doubled on OkCupid during the pandemic. Hoffman said this was likely because financial security was low for many as unemployment rates skyrocketed in the early months of the Covid-19 induced shutdowns.

So having more money than less is definitely a “plus” on the dating market.

Unfortunately, the exact thing that can be attractive to so many can also cause the end of a relationship. According to a survey from the Institute for Divorce Financial Analysts, “money issues” is the third leading cause of divorce — behind “basic incompatibility” and “infidelity”. One respondent of the survey stated, “many couples lack the communication skills necessary to navigate financial disagreements in their marriage.”

So how can something that is a “plus” be the end to so many relationships?

The psychology of money and relationships

There is no one key to success in any relationship, but common themes among strong relationships are shared values and common goals. And when the subject of personal finance arises, Hoffman suggests you’ll naturally begin to reveal your goals and values.

She said, “you’re unlikely to be perfectly aligned on those [goals and values], but discussing them offers you an opportunity to understand your partner and find compromise on those important choices.”

And these values are formed much before you earn your first dollar.

Dr. Alex Melkumian, founder of the Financial Psychology Center in Los Angeles, CA, told Select how everyone’s “money story” starts at childhood. “The foundation of anyone’s understanding and relationship with money is based with their family of origin coupled with any financial literacy education they receive throughout their life,” he said.

Because we’re all raised differently and come from varying socioeconomic backgrounds, how we think about and understand money can vary significantly from person to person. Dr. Melkumian added, “It’s rare that in a romantic relationship both partners come to it with the same, or similar, money story.”

So regardless of what your upbringing is, and how difficult discussing money can be, it’s imperative to have the conversation with your significant other.

How to talk about money while dating, or with an established partner

Talking about money can be difficult in any setting, whether its dating, asking for a raise at work or even among friends.

If you’re money situation is less than ideal, it can bring fears of judgement or embarrassment. If you’re financially savvy and enjoy talking about subjects like your Roth IRA or the latest meme stock, it can bring up resentment from others.

So before you have your next money conversation, keep in mind a few do’s and don’ts:

  • Take time to understand each other’s values: If one person loves spending money on going out to eat, while the other prefers to avoid eating out to save money, this could present a difference in values. Make sure you discuss with one another how and why you value certain things.
  • Be clear about who pays for what: It should never be a guessing game of who is paying for something. The right time to figure that out isn’t when the bill comes or when you are standing in front of a register, but before the issue arises altogether.
  • Don’t impose on someone else: Like Dr. Melkumian said, everyone has a different money story. And that journey can impact how someone acts towards money and acts towards someone else. But regardless of the situation, don’t impose your money story or strategies on a significant other. It can lead towards resentment and other issues.
  • If you’re considering marriage, get ’financially naked’: Did you know one-third of Americans admit they financially cheat on a partner? While it may not be sexual infidelity, financial infidelity can be just as destructive. So if you’re considering taking the next step in your relationship, it’s extremely important to make sure you talk about potentially difficult subjects like credit card debt or student loans.

Bottom line

Talking about money is difficult, especially while dating or in a relationship. In fact, a Wells Fargo survey showed people feel that discussing politics or religion is easier than talking about personal finance. But both Dr. Melkumian and Hoffman are adamant about the importance of discussing money at any stage of an intimate relationship.

Whether it’s casually talking about the next up-and-coming cryptocurrency coin on a date, or discussing investing goals with a soon-to-be spouse, an open-and-honest conversation can do wonders for your current or future relationship.