media

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

When it comes to using paid time off, many Americans just don’t do it. In part, that’s because of a major cultural narrative that hard work will allow you to reach your goals.

“That narrative has really ground us into this workaholic sort of mentality,” says Dr. Alex Melkumian, LMFT and Psy. D. “It actually became cool to work 24/7, to be available via email all the time.”

But this lifestyle has plenty of drawbacks and may negatively impact your mental health. Taking a vacation is an important way to practice self care, whether you’re planning a long trip abroad or a three-day staycation.

Here’s a look at how taking paid time off can benefit your mental health and actually make you a better employee.

Why your mental health needs a vacation

Even before the pandemic forced people to stay at home, workers weren’t great about taking time off. A 2019 Bankrate survey found that only 38 percent of Americans with paid vacation days planned on using all of them. And according to the U.S. Travel Association, Americans forfeited 236 million vacation days in 2018, which is equivalent to $65.5 billion in lost benefits.

Work and life can be full of daily struggles, and “chronic stress negatively impacts our physical, emotional and mental health,” says Lindsay Bryan-Podvin, LMSW and a financial therapist.

Unfortunately, the negative impacts of stress increased during the coronavirus pandemic, according to the Kaiser Family Foundation. About 4 in 10 adults in the U.S. reported symptoms of anxiety or depression in 2020 and 2021, up from 1 in 10 in 2019.

A vacation may counteract the effects of stress and potentially help improve your mental health. Here’s why.

Vacations engage your senses

When you’re immersed in a different environment, all of your senses are heightened — especially if you’re experiencing a different culture. Engaging your senses generally helps lower your stress, says Wendy Wright, LMFT and financial therapist.

On vacation, “you are constantly engaging and bombarding your five senses, so it allows new thought loops and you get a different perspective,” Wright says. Breaking out of a repetitive mindset may help you cope with stress or a difficult situation in a healthier way.

This article was written by Kim Porter and first appeared in Bank Rate: https://www.bankrate.com/personal-finance/smart-money/vacation-time-and-mental-health/

“Hearst Magazines and Yahoo may earn commission or revenue on some items through the links below.”

Let’s be honest: No one likes talking about money and they definitely don’t enjoy talking about abuse. Unfortunately, that means many people don’t even realize financial abuse is an issue we need to discuss. It also leaves victims feeling too ashamed to speak up about it. “In a situation of financial abuse, there’s a power imbalance in the relationship and somebody is leveraging money and resources to control the other person,” explains Brad Klontz, Psy.D., C.F.P., financial psychologist and associate professor at Creighton University.

While one study found that 99% of domestic violence (DV) survivors had experienced some form of economic abuse in their relationships, other research shows that violence doesn’t need to be present for a situation to be abusive. Whereas some abusers might use violence to control another person, financial abusers disempower their victims by cutting off their financial freedom. Even when a victim leaves the relationship, Klontz says they often return because they lack money and the financial literacy to support themselves. If your partner seems controlling about money, but you’re not sure if you’re a victim of abuse, look for any of the warning signs below. Keep in mind, all of these red flags don’t have to be present for you to be in an abusive situation — it only takes one.

1. Your partner withholds financial information.

“It’s okay to set up a system where each person has their own accounts and maybe have a joint account, but you want to listen to the underlying tones of why and how they don’t want to share their finances with you or information about that,” says Alex Melkumian, Psy.D., LMFT, founder of the Financial Psychology Center in Los Angeles. Your partner could want to keep you in the dark because they feel ashamed of the financial choices they’ve made, he says, or they could be trying to maintain control of your financial resources and destroy your ability to escape the relationship.

There are different profiles for abusers, according to Klontz, but they often have very fragile egos and they feel terrible about themselves. “We think of them typically as really strong, but it’s actually the opposite,” he says. “They’re so incredibly emotionally weak that they have to try to bring the other person’s self-esteem down so low because they are so afraid the other person is going to leave.” They may even belittle you and insist you don’t know as much as them about money so you don’t need this info, says Blair Dorosh-Walther, program manager of economic empowerment at Safe Horizon, a nonprofit that assists victims of violence in New York City.

2. Your partner discourages you from having a job.

It’s one thing to have an open and honest discussion with your partner and express your desire not to work or, after reviewing your finances together, conclude that it makes the most sense if you don’t work. It’s an entirely different story if your partner won’t allow you to earn income or tries to sabotage your career. “Money is a resource that avails us so much opportunity, right? So when that is cut out of our lives or somebody is controlling it and not giving us access to our finances or limiting it in some way, it becomes very detrimental and then, of course, abusive,” says Melkumian.

In the beginning, an abuser can make the idea of not working seem enticing and they may act as if they are strong and capable and really want to take care of you. “Everyone wants to be taken care of if we’re real honest in some way,” says Klontz. “So that could be attractive.” However, he adds, it can become pathological and as they cut off your sources of income, they may try to cut off your contact with family and friends. “There’s a desire to cut away your sources of support so that you become dependent,” explains Klontz. In some instances, financial abuse can also affect your sexual life, according to Melkumian. For instance, he says, an abuser may expect you to perform specific sexual acts as if they are owed to them as the breadwinner.

3. Your partner limits your spending.

“Is it good for a couple to sit down and look at their finances and come up with an agreed-upon allowance that they both have?” asks Klontz. “Yes, that’s probably a great idea.” But it’s not okay if your partner decides on their own how much money you’re allowed to spend. “That shows that I have power and you have none and I’m being the authority figure here around money,” says Klontz, “and that’s a huge red flag.” In some cases, if a survivor has public benefits, the abuser will take their benefits card and ensure the survivor has no access to the food stamps, says Dorosh-Walther, and they’ll go out and spend that money so the survivor is left with nothing for basic needs.

4. Your partner gets very heated about money.

If you splurge on expensive home furnishings without talking to your partner first, you can probably expect some annoyance on their part, but if they have an explosive or violent reaction to the purchase or an outsized response to something smaller like spending extra money on organic carrots, those are signs of abuse. “They’ll get really upset, they’ll blow up, and maybe even become violent or verbally abusive — and then they sort of melt down and cry, saying, ‘I’m so sorry. I promise I’ll never do it again,’” says Klontz. The problem is that in time, the cycle will repeat itself. If the abuser is more of a narcissist, they might even blame their victim and say things like, “Look at what you made me do. I blew up because you made me blow up and if you were different, I wouldn’t have done that.”

5. Your partner forces you to bail them out.

This practice is usually called “financial enabling,” meaning one person enables another person to make poor financial decisions. It can happen outside abusive relationships (say, a young adult convinces their parents to pay off a credit card they ran up) or within abusive ones, according to Melkumian. In abusive situations, there’s often an aspect of coercion or threats if you don’t follow through with financial support.

For instance, your partner may come to you saying, “I really messed up and made poor choices, but you still have good credit and could fix everything. I promise I will change my behavior, but I need you to pay this bill and get me out of this bind.” In another situation, a partner might refuse to work or help support your family in some way (say, by watching the kids while you work), but expect you to cover all household expenses and threaten you with violence if you protest this arrangement.

6. You see charges you didn’t authorize.

Carefully review all bank statements every month and note any charges that you weren’t responsible for. Yes, they could have been made by an unknown fraudster, but sometimes they’re made by a financially abusive partner or someone else you’re close to. “Financial abuse rarely happens just with the direct abuser,” says Dorosh-Walther. “It tends to happen with more people involved. Maybe they’re living with the abuser’s family and the family is also taking money or forcing the survivor to pay for everybody’s cell phones or utility bills.” Dorosh-Walther requests a credit report for every domestic violence survivor they work with and says, “I don’t think I’ve pulled a credit report without fraud appearing on it yet.”

What you can do:

If someone is using money as a means to control you, they’re putting you in a really difficult position. “The longer you’re in it, the harder it is to get out of it,” says Klontz. Fortunately, there are a few things you can do to move forward:

• Prepare to let go of everything. Depending on the specifics of your situation, you may be walking away with less than nothing — as in no cash, destroyed credit and nowhere to live. “Your attempts to become more financially empowered will be met by very strong and fierce resistance from your partner,” says Klontz. “To be quite honest, sometimes it requires you going to a domestic violence shelter to have a shot at getting out of it.” When that happens, survivors often have to give up even more — like childcare if your parent watched your kids during the day and they don’t live near your new housing, Dorosh-Walther points out.
• Pull your credit report. If you don’t pull your credit report (and your children’s credit reports if you have kids), it’s impossible to know how much financial damage has been done — and then how to fix it. When Dorosh-Walther pulls a survivor’s credit report, they review it line by line together to identify which debts might be fraudulent and potentially removed. You are entitled to one free credit report every year from each of the three credit reporting companies, so if you space them out, you could pull one free report every four months. Visit the Consumer Financial Protection Bureau to learn more.
• Put security measures in place. When you think fraud has happened, there are ways to prevent it from continuing. “You can put temporary or permanent freezes on your credit report from each of the three credit bureaus,” says Dorosh-Walther. “You can also put alerts on them. The Social Security Administration also has a DV-specific program, although it’s quite a lengthy process.” Dorosh-Walther notes taxes are another common place for financial abuse and fraud, so you can file identity theft affidavits with the Internal Revenue Service and with the Federal Trade Commission. “All of these protections to me seem really important,” says Dorosh-Walther.
• See a therapist. If your partner will talk to a therapist, too, that’s great. Ultimately, though, you’re going to have to make some big decisions and a mental health professional can provide guidance. “It depends on the level of severity of what’s happening and how much the other person is willing to acknowledge the problem,” says Melkumian. “Maybe it’s giving this a chance and seeing if your partner is willing to work on it, but if you’re not seeing results, then you need to also be willing to end such a toxic relationship as well — and that could be extremely difficult.” No matter what you decide, a therapist can also support you in the aftermath of that choice. Not sure how to find a therapist? Check out this Good Housekeeping tip sheet.
• Repair your support system. If you decide to leave an abusive relationship, you’re likely going to have to start from scratch both financially and emotionally. “You have to start to rebuild back what was taken away from you or what you gave up in the relationship,” says Klontz. “You have to start telling people what’s happening in your relationship because there’s usually a lot of shame for the victim. They don’t want to talk about it because they’ve had a lot of family and friends telling them they need to leave that person.” There’s not one single way to rebuild your community because everyone’s scenario is different, but you can search online for local support groups or, if your situation involves violence, you can call, text or chat with someone on the National Domestic Violence Hotline.
• Strengthen your financial literacy. Nearly everyone could use a refresher on how to manage their finances, but if you haven’t had control of your money for a while, this is crucial. See if your local library or other organizations host free or low-cost courses you can take. Some colleges (including Duke, Brigham Young, Purdue, Illinois, and Missouri State) also offer free online classes about everything from budgeting to building credit to saving for retirement. As you learn more, you’ll be able to get back on your feet. While the emotional aspect of things may take a long time to heal, sometimes you can get fraudulent things taken off your credit report in a month or so. “When we get things removed, it feels really good,” says Dorosh-Walther. Your financial situation may not be perfect, but you’ll be making progress—and that, in itself, is empowering.

Where to turn if you or a loved one are being victimize: Call 911 if physical abuse is happening or imminent. Otherwise, call the National Domestic Violence Hotline at 800-799-7233, or log on to thehotline.org. The hotline is open 24/7, 365 days a year — and all calls are anonymous and confidential. If you need more info about the warning signs of domestic or financial abuse, or the best way to reach out to someone, log on to the National Network to End Domestic Violence (NNEDV) website at womenslaw.org.

U.S. consumers spent 8.4% more in February 2022 than they did a year prior, according to data from Morning Consult.

Some experts are labeling this as “revenge spending,” or the act of trying to make up for two years of not being able to go out by spending more than they typically would on recreational activities. People, more or less, are looking to buy happiness, says Nashira Lynton, a certified financial counselor and the CEO of Breaking Cycles.

“I am hearing a lot from people who are recovering from the pandemic and are in search of all the things that bring them joy,” she says. “They are feeling a part of them that has been suppressed for a long time.”

While not all nonessential spending is bad, too much of it can lead to bigger problems, such as going into debt or depleting your emergency fund. “When it’s all said and done, many are overspending again, which we know causes more financial stress in the long run,” she says.

To avoid these financial stressors, there are some pretty straightforward steps you can take, says Alex Melkumian, a financial psychologist who works with clients who have impulse control and overspending habits.

You can de-link your credit card from your payments method on your phone and laptop. Or you can automate a transfer of money out of your checking account and into a savings account on payday, so it’s out of reach before you have a chance to spend it.

Another effective way to cut down is spending is to use some mental tricks that can “fool” your brain into being more responsible.

1. Make a line item for ‘mandatory splurging’

When Melkumian coaches his clients, he has them create budgets and label line items in nontraditional ways. For those who overspend, a line item that simply states “discretionary spending” or even “fun spending” might still feel restrictive and therefore hard to adhere to. Instead, he has them label a line item “mandatory splurging.”

“We thought ‘mandatory splurging’ is something that sounds really fun and really inviting and motivating,” he says. “Now, even though our clients are saving like they should, or, from their perspective, a lot compared to what they used to save, they are not necessarily anxious or stressed about being able to buy something they want.”

Changing the name of the line items, he’s noticed, can slowly change the behavior. Initially, his clients spend the amount allotted to “mandatory splurge” quickly, but after about three months, many struggle to find a use for it.

“Little by little they have fooled themselves into better thinking, a better mindset, and the behavior then follows,” he says. “Language plays a huge part in how we perceive things.”

2. Don’t use the words ‘needs’ or ‘wants’

Certain words hold negative connotations. Even the word budget triggers the same brain response as the word “diet,” which makes people feel like they are depriving themselves when they create one.

That’s why Saundra Davis, founder and executive director of Sage Financial Solutions, and a financial behavioral specialist, doesn’t use the words “needs” and “wants.” The latter holds judgement, and when you judge yourself for purchasing something, you might deprive yourself of it then overspend later.

Instead, she says, “recognize that there is a difference between a living expense and a lifestyle expense.” By changing the word “want” to “lifestyle expense,” you are acknowledging there is value in a purchase that improves your life, even if you don’t absolutely need it.

When thinking about making a purchase, ask yourself which category it would fall into. Even within spending categories like “food,” there is a difference between a purchase you need to live, like groceries, and a purchase that improves your life, like a nice dinner out.

3. Consider: What are you saying ‘no’ to if you say ‘yes’ to this purchase?

Budgets can help curb spending, but overspenders often find that their best-laid money plans go out the window once they are in the store or at the restaurant.

So while you’re putting items in your cart, think about what you’re saying “no” to if you say “yes” to this purchase, Davis says.

Let’s says you come across a purse you like, she says. “I can stop and say, ‘Okay, Saundra, you’re buying this purse because it’s pretty,’” she says. ”‘You love this color and it gives you a warm, fuzzy feeling to think about putting this purse with one of your new outfits.’ Then I might say, ‘If I buy this purse for $200, what am I saying no to?’”

Then it becomes a trade-off: “I’m saying no to adding $200 to my emergency fund,” says Davis. “I’m saying no to adding $200 to my retirement account. I’m saying no to four meals out this month.”

These sacrifices might be okay with you, but laying them out like that might shift your perspective on whether you still want to buy the purse.

4. Sub in a ‘stress-free’ account for an emergency fund

Having an emergency fund is smart, but contributing to an account whose label insinuates you might have to cope with a crisis can backfire, Melkumian says, because who wants to plan for bad things?

He suggests labeling accounts with phrases that appeal to your positive emotions instead.

“With a lot of our clients, our suggestion is a ‘Sleep Well’ account or a ‘Stress-Free’ account,” he says. “You want to fool you brain into is thinking of these accounts in a different way so you’re not stressed, thinking of an emergency, but you’re thinking about being stress-free or sleeping well.”