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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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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.

 

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A student with debt, synonymous life with debt?

“This is how student loan debt became a $1.7 trillion crisis”

“The Student Loan Crisis Is Worse Than You Think”

“Stories of the student-debt ‘hamster wheel’ borrowers can’t escape”

“I took $20,000 in student loans and now owe $50,000”

These horror headlines are not scarce in the current day and age America. Many university and college students are drowning in debt without any sustainable system in the country to help them through the process. As many students are getting ready to move onto the next step, graduating students are becoming extra concerned regarding all the debt payments to be made for the next years to come. As if deciding the path for after an undergraduate degree is not stressful enough, these debts never reduce in amount – the only thing they do is to continue to accumulate interest over the years. The Education Data Initiative reports a total of $1,620 trillion for the federal loan balance which accounts for 92% of student loan debt.1 For a student attending a public university, $32,880 is the average amount borrowed.1 When academic and financial worries clash on top of unexpected obstacles in life, the stress can manifest itself psychologically, emotionally, and even physically – its effects are exponential.

The problem is multifaceted and lies within a variety of systems that exist in this world. For example, school tuition has significantly increased in the past 30 years. When you compare the tuitions in 1991 to 2021, the average tuition has increased by two holds where it used to be averaging $4,160 and $19,360 in public four-year colleges and private institutions, to $10,740 and $38,070 respectively.2 Another source has even claimed an increase of 68% in the total price of tuition, fees, room and board at a public four-year college.3 On the other hand, not only household income has not doubled in the same 30 years. Due to this major discrepancy between revenue and expenses, more and more houses had started to rely on federal financial aid. Obviously, the student debt crisis is also driven due to fact that the number of people attending colleges and universities have increased.3 However, that does not explain the immense amount of strain and pressure this has on young adults.

Financial stress is overwhelming for grown adults with life experiences. It can become profusely stressful for those that just graduated from a university or college. This immense pressure may play a large role in deciding what one can or should do and don’t irregardless of one’s dreams and goals. When the financial situation has its own path, many are forced to align their goals with it in order to support themselves financially, rather than pursuing their true dream.

How do you avoid student debt? This is a tricky question – it is quite difficult to completely remove the component of receiving federal aid. At the end of the day, it is a useful tool when used with care. One thing a student can do is to have a financial counsellor to discuss their future plans before the debt is ‘suddenly’ due. Having a plan A in addition to a contingency plan can be a useful way to prepare for the future. Financial stress can be an extremely uncomfortable and scary mindset to be in while attending school. We all wish there was one magic thing that can be done to remove the negativity and the strain regards finances; however, there isn’t one. This also means there are multiple right ways of approaching one’s problem. Paying attending to emotions while dealing with finances is a big step in the right direction, despite what some might believe about the level of compatibility between money and emotions.

  • Taking to a professional
  • Always have a plan A, plan B, and plan C if possible
  • Do not shy away from the numbers. Know your financial status.

This advice is most certainly not the only ones nor will it work on everyone. However, it is a general starting point that can potentially help navigate one’s borrowing experience better than expected. No one should have to pick between knowledge and money.

 

  1. Hanson, M. (2022, August 28). Student Loan Debt Statistics [2022]: Average + total debt. Education Data Initiative. Retrieved September 27, 2022, from https://educationdata.org/student-loan-debt-statistics#:~:text=43.0%20million%20borrowers%20have%20federal,financial%20quarter%20(2021%20Q4).
  2. Dickler, J., & Nova, A. (2022, May 6). This is how student loan debt became a $1.7 trillion crisis. CNBC. Retrieved September 28, 2022, from https://www.cnbc.com/2022/05/06/this-is-how-student-loan-debt-became-a-1point7-trillion-crisis.html#:~:text=Americans%20now%20owe%20more%20in,medical%20debt%20or%20payday%20loans.&text=Every%20year%20millions%20of%20new,borrowers%20struggle%20to%20exit%20it.
  3. Whistle, W. (2021, June 28). What is driving the $1.5 trillion student debt crisis. Forbes. Retrieved September 28, 2022, from https://www.forbes.com/sites/wesleywhistle/2020/09/01/what-drives-the-15-trillion-student-debt-crisis/?sh=46d4a1ea7aec

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Is your heart K-Shaped

What is K-Shaped economic recovery and how it relates to our emotional financial journey?

The world will at some point in 2021 try to recover from the COVID-19 recession of 2020. Already the economic analysts are predicting that this is going to be a K-shaped recovery. This is what happens when different sections of the economy experience different recovery rates, times, or levels. The opposite would be an even recovery across sectors or groups of people. What this means is we are in for more than just “getting back on our feet” together. The K-shaped recovery has an impact on economic structure of the broader society, fundamentally changing how we see ourselves as a society. It depicts the path that some parts of the economy will take, heading up, and then it also predicts different economic sections to experience and even greater downturn.

 

 

Image by Sabrina Jiang © Investopedia 2020

What you can see from this chart is that the recovering industries will create a disparity between those who work for them and those who work for the industries that are still in need of assistance. Friends who once were at the same economic level in different industries may suddenly find themselves at different financial levels than previously equal friends. The lower half of the K represents the decimation of not only entire industries, food and dining, events, hospitality, but the financial security they offered to millions of people.

My client who has worked in the fashion and clothing industry for the past 20+ years is dejected. Even prior to COVID19 that industry was barely surviving. Now with the pandemic, the company is practically on life support. Staff have been laid off, entire orders have been lost, and they are left wondering what will happen next. There is no sense of security a director’s position would normally offer you. Because of this work uncertainty, she has been struggling to keep her perspective and has been experiencing a whirlwind of emotions. On the one hand she considers herself to be lucky that she is still employed. If it wasn’t for a fluke that a major distributor was required to accept an order that then sold in record time, her department would have gone under. In her case, even though she is on the bottom stroke of the K, she has a sense of financial survivors guilt because she still has a job, while struggling with emotions that it may not last until retirement. While she had to take a major pay cut to help the company survive, she understands that she is one of the lucky ones to still have a job. Having conversations with colleagues about still being employed has been extremely difficult. Meanwhile she is grateful her children work in technology and as essential workers.

How is the uneven economic recovery felt at the individual level?

What this example shows us is that just because you are on the bottom of the K in your work area, you can still suffer from survivor’s guilt and celebrate your family’s or friends’ position in the recovering industries but still fear for your own position. In other words:  It is going to create a huge fluctuation in personal emotions.

Originally this pandemic created a fight, flight or freeze stress response and now, with a ½ recovery predicted “just around the corner” many are unfortunately settling into the next phase of financial PTSD, with little sign of a quick fix. Even worse, it will widen the socioeconomic gap all the while increasing the emotional toll of the depressing economy. Managing those difficult emotions will fall to  the individual’s responsibility to process, accept and pivot away from the ones that don’t serve them Being able to be aware of your own feelings and your overall financial psychology will help you in the coming phase keep a more balanced perspective and be less reactionary to the difficult and negative emotions evoked by the K-Shaped recovery.

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How to Survive the Holiday Season with COVID19

From apple pies and turkey to presents and the New Year countdown, the end of the year typically carries its good cheer past the festivities. However, this year’s holiday season might look and feel uncharacteristically different for all of us. Despite the recent uplifting news of a potential vaccine for COVID-19, the unprecedented emotional, physical, and financial toll that the pandemic has caused could possibly persist and even rise in the coming weeks.

Although there are many things to be grateful for during this holiday season, the absence of customary celebrations, gifts, and travel make the financial struggles of the past several months more painfully obvious. According to Simon Restubog (May, 2020), this chaotic year has caused layoffs, downsizing, and involuntary unemployment in vastly different domains of business.1 It is no surprise that people are planning to spend less this year. A recent Deloitte retail survey found a 7% decrease in general holiday spending among households, led by a whopping 34% drop in expenditures on travel.2 Overall, roughly 2 in 5 Americans will likely spend less this year due to the pandemic.

Public health guidelines—of which we are all painfully aware by now—strongly recommend keeping holiday gatherings to a minimum, reinforcing a pervasive sense of melancholy and loneliness. In addition to the effect of quarantine and isolation on mental health, the ongoing uncertainty of income aggravates anxious and apprehensive thoughts regarding the future. Whether it be anger, confusion, loneliness, or depression, people of all ages have suffered unmatched emotional struggle on top of the everyday challenges of COVID-19.

These emotions exert a major influence on our financial decisions. The Wall Street Journal’s Benartzi and Payne emphasized that even ambient emotions—easily disregarded under normal circumstances—play a dramatic role in financial decision making.3 On one hand, our financial stability has been severely tested over the past couple of months; and issues of financial security and responsibility may restrict many of us from holiday spending on gifts and special food. On the other hand, such conscious, sorrowful decisions to hunker down and tighten our belts during a formerly exuberant season can create considerable internal turmoil. Counterintuitive to preserving financial security, such stress sometimes translates into the sudden urge to indulge in palliative shopping.

So, what do we do now?

One key skill for preventing our emotions from overpowering us is to clearly identify them.

“Am I worried that we are not going to have enough money?”

“Am I sad that I cannot travel this year?”

Flagging these key emotions helps us digest our feelings in a non-destructive manner. And conscious awareness helps us to manage difficult mindsets through seeking positive, alternative ways to ease strong, unpleasant feelings.

Although spending on quality gifts and celebratory travels may not be possible this year, why not shift our focus to spending quality time closer to home? Because as painful as it may have been for many of us, it is in these challenging times that we realize the value and significance of family and friends.

Happy Holidays!

  1. Restubog, S., Ocampo, A., & Wang, L. (2020, May 08). Taking control amidst the chaos: Emotion regulation during the COVID-19 pandemic. Retrieved November 19, 2020, from https://www.sciencedirect.com/science/article/pii/S0001879120300658?casa_token=4mdrB4qjMYMAAAAA%3AM_TdljHzF34HHZyv_Qxb0vHZe3muH02DJ2yUwS0nLyThZJ2Vg2lmRMskjpzITygYocUrMVrOBAE
  2. 2020 Deloitte holiday retail survey: Reimagining traditions. (n.d.). Retrieved November 19, 2020, from https://www2.deloitte.com/us/en/insights/industry/retail-distribution/holiday-retail-sales-consumer-survey.html?id=us%3A2el%3A3pr%3A4di6890%3A5awa%3A6di%3A102020%3A
  3. Benartzi, S., & Payne, J. (2020, October 19). How Covid-19 May Be Unconsciously Affecting Your Financial Decisions. Retrieved November 19, 2020, from https://www.wsj.com/articles/how-covid-19-may-be-unconsciously-affecting-your-financial-decisions-11603065600

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Thanks to Covid-19, some folks are broke and some are flush. Here’s how to talk about it

(CNN) – As the pandemic rages on, millions of Americans are suffering financially while millions of others are doing just fine — some even better than ever. But how do you talk about money with friends or your own family, without feeling ashamed or offending anyone?

America was already economically divided and a “don’t-talk-about-it” money culture, said Alex Melkumian, a licensed marriage and family therapist and founder of the Financial Psychology Center in Los Angeles. Now, with people finding newly exposed sensitivities and dividing lines, gaps are widening and conversations have become even more difficult.

We’re already in a period of financial trauma for people, said Melkumian. Conversations, which leave people feeling judged or insulted, don’t help. Here’s how to talk about money while being sensitive to those around you.

Listen more, spout advice less

Jake Morris was starting a financial advisory business and his wife Whitney was a verbatim hearing recorder for the Social Security Administration in New York’s Hudson Valley when the pandemic struck. Very quickly, Whitney’s work dried up as hearings were put on hold then went to a telephone format and the launch of Jake’s business was delayed.

Then he got a text from someone in his inner circle: “Do you both still have jobs?”

Morris said it was so insensitive that he had to laugh.

“To me, that was so stark. It was almost funny,” Morris said. “But so harsh.”

With their job situations turned upside down in a matter of days, they still weren’t over the shock. They have each found work in their own ways, but it is not at the level it was before.

“Anyone who has had a job loss or gone into retirement knows there is a loss of identity,” he said. “We need a little sensitivity training, I think. It isn’t helpful to say, ‘How does it feel to have your whole life torn out from under you?'”

Jake Morris found listening to be the most helpful way to hear about other people’s financial situations.

Based on his experience, he now asks people he meets, “How has this impacted you?”

“I let them talk about it the way they want to,” he said.

If you’re the person who has remained employed and is financially unscathed, do more listening, Melkumian advised.

“The most important thing we can do is listen and resist the urge to jump in and fix it, because much of this can’t be easily changed.”

Suggesting that someone ‘pivot and do something else,’ for example, can be good advice, Melkumian said. But your friend or loved one needs to be ready to hear it.

“You may have connections to offer them, but it is your connection with them that is most important,” he said.

Pick up the phone

These serious conversations are best had in person. If social distancing is preventing that, a phone call works best.

Nothing on the topic of personal livelihood and well-being is better conveyed by a text, said Ashlee deSteiger, a certified financial planner with Gunder Wealth Management in Michigan.

“With friends and family, I don’t want a text,” she said. “There is just too much tone to be lost in a text.”

She suggests setting boundaries like not texting in frustration or sharing things in which tone can be misinterpreted.

“Those conversations need to happen over the phone or face-to-face,” she said.

If you’re the one receiving the insensitive texts or messages, avoid getting defensive and try to consider where the other person is coming from.

“I suggest reframing the situation to, ‘I know my friend or family member is doing the best that they can for themselves and their family.'”

That, she said, may help you see beyond the posts and conversations that you think lack empathy.

Be direct

If you are having financial difficulties, now is the time to speak up about it, Melkumian says, because you’re not alone.

“If you are really struggling and feel you can’t say to your friend, ‘I don’t know where my next rent payment is coming from’ — then when can you say that?”

When Ed Hart was able to reopen his hair salon in Hermosa Beach, California, he noticed many of his clients experienced the shutdown much differently than he had.

While Hart was struggling after a major loss of income, his customers were working from home, earning the same income, some even more than before.

“People that I know who retired well are fine,” he said. “Younger people I know that work for large companies are working out of their homes, they are okay. But the people who are consistently struggling and having trouble are business owners, entrepreneurs.”

So he decided to address this awkward disparity directly.

“I made a sign and put it by my station,” he said. “It says that there is no secret that we are going through a financial hardship. I understand that they may be going through a hardship, too, so we won’t raise prices. However, if you are financially strong, pay more if you can.”

And they have. After one client received a $200 treatment, he said, she included a tip and left.

“It was a $1,000 tip,” he said. “I called her right away to thank her. I didn’t know what to say. It was overwhelming. ‘Don’t worry,’ she told me.”

Don’t be tone deaf

Some people who have celebrated things like buying a house, taking a trip or getting a new job, have been met with anger by hurt friends and family who say it smacks of being tone-deaf to the moment. Just look at the public reaction to Kim Kardashian’s post about her 40th birthday celebrations on a private island earlier this month.

The response was largely not enthusiastic.

“Congrats on this nomination for most tone deaf tweet of the year,” Twitter user @beyondbrighton replied to Kardashian. “You want normal? Try people unemployed, at food banks, teaching kids at home, or worse in the hospital by the tens of THOUSANDS! Oh the plight of the wealthy & their struggle to an escape to a private island.”

The context matters when sharing good news, said Melkumian.

“If you post your celebration in a way that says, ‘I’ve been struggling and in order to overcome something and I did this, this and this,’ documenting and chronicling your fight, it isn’t out of context,” he said.

But in this moment, there are other things to keep in mind, he said.

“There are political factors, sounding tone deaf, other people being broke,” he said. “How do you tell your truth without coming off as insensitive?”

It may be that there isn’t a way to do that, he said, and it is better right now to keep it to yourself and just to listen.