Money is the dirty little secret of American society. The unspoken social contract is that, like Voldemort, it shall not be named. We may joke about winning the lottery, but we don’t reveal the strained financial circumstances that underlie that pipe dream. Modern life is not cheap. Unfortunately, many workplaces and professions do not reflect this reality. Could we be making more money? Who knows? Many companies forbid their employees to discuss salaries with co-workers.
Meanwhile, our consumerist culture makes it easy for money to fly out of our wallets and onto our credit cards. Financial experts (some of whom sound a bit like scolds) urge us to maximize our contributions to our retirement plans and have savings sufficient to sustain us for six months or more of unemployment. These are worthy goals, but most Americans find them challenging to achieve.
A 2019 survey by the personal finance company Bankrate found that approximately 28% of Americans had no emergency savings and only 18% had enough to live on for six months. And a 2019 report by the U.S. Federal Reserve revealed that 25% of nonretired workers possessed no retirement savings at all. Surveys show that a large share of Americans — including those who earn higher salaries — live paycheck to paycheck. Many people get by with the help of a credit card — or three or four. A recent poll by CreditCards.com showed that almost half of Americans (47%) currently carry credit card debt. And even though being in hock to credit card companies is so common, carrying that kind of debt is still associated with a lack of financial responsibility.
Just set a budget! Track your spending! Stop buying that daily Starbucks latte!
It’s not the latte. And the one-size-fits-all financial advice on offer by cable talking heads and in best-selling books doesn’t typically work. Not just because people’s financial obligations are different, but because managing money isn’t only about the numbers. The way we spend — and save — is tightly entwined with emotion and driven by learned behaviors and beliefs whose existence we are frequently unaware of, according to experts who study neuroeconomics. These factors can prevent us from effectively managing our money.
The mental health consequences of financial difficulties can be significant. Even before the recession caused by the COVID-19 pandemic, Americans frequently rated financial worries as one of their top sources of stress. This past October, the fourth in a special pandemic-oriented series of “Stress in America” surveys from the American Psychological Association revealed that nearly 2 in 3 adults (64%) said money was a significant source of stress in their lives.
Financial difficulties can cause stress and depression. Stress and depression make it harder to tackle money problems. It becomes a vicious cycle — particularly for those who are already living with mental health problems.
Enter financial therapy, which the Financial Therapy Association (FTA) defines as “a process informed by both therapeutic and financial competencies that helps people think, feel, communicate and behave differently with money to improve overall well-being through evidence-based practice and interventions.”
Financial therapists primarily come from the mental health, coaching and financial fields. Some of them are mental health professionals who realized that money plays an important role in overall well-being and decided to become trained to offer financial therapy in addition to their regular practice. Others are financial professionals who realized that they needed to be able to handle the emotional aspects of money and received additional behavioral training or, in some cases, became licensed mental health practitioners.
All of the sources Counseling Today spoke to for this article are licensed counselors who offer financial therapy to existing clients who express interest or as a stand-alone service. They use a variety of tools to help clients understand their internal money narratives, identify behavioral patterns, and process the emotions that are getting in the way of setting and working toward their financial goals.
The field developed out of a body of research on neuroeconomics. Psychologists Ted Klontz and Brad Klontz and financial planner Rick Kahler are widely considered the “grandfathers” of financial therapy.
Early lessons learned
Research by Klontz, Kahler and Klontz suggests that people begin developing money beliefs — and potential future problems — in childhood. These attitudes are often developed through experience and observation rather than parental instruction.
That’s because many families don’t talk about money, notes American Counseling Association member Elaine Korngold, a licensed professional counselor in Portland, Oregon. Children grow up in families not knowing how much money their parents make, how much (or how little) different jobs pay, and what level of income is necessary to cover basics such as rent/mortgage, utilities and food — let alone how to set up and follow a budget, she says.
Although parents usually talk about and teach their children essential life skills such as driving, anything to do with money is often kept secret, says Korngold, who worked in the financial sector before she became a counselor. This not only leaves children uninformed and unprepared but also reinforces the societal perception of money as a taboo topic. As a result, many adults who struggle to manage their finances simply don’t know how to seek help or are too ashamed to ask for it, she says.
But even when parents don’t explicitly teach their children about money, they are still imparting lessons, says Kathy Haines, an LPC in Marietta, Georgia, who is training to become a certified financial therapist through FTA.
An integral part of Haines’ financial therapy process is exploring the financial beliefs held by a client’s family of origin. Haines, an ACA member, asks questions regarding whether money was ever discussed, who managed finances in the family and how. “Were there fights about money?” Haines asks. “Spoken or unspoken messages such as don’t have credit debt? Work hard so that you can take care of yourself?”
Similarly, Korngold asks clients about the spending behaviors they observed growing up. Did it seem like the family was always just making it until payday, or was there any financial cushion? If the family found itself with more money than usual, what did they do with it? Put it in the bank? Take a vacation? Buy a TV?
Jennifer Dunkle, an LPC in Fort Collins, Colorado, whose specialties include financial therapy, asks her clients to write their “money story” by answering a variety of questions: What are your earliest memories concerning money? What did you learn from your family about money? Specifically, what did you learn from your father? From your mother? What experiences did you have with money as a young adult?
These messages and experiences contribute to what Klontz, Kahler and Klontz call “money scripts” — unconscious beliefs that shape our financial behavior.
Dunkle, like many financial therapists, also gives clients the Klontz Money Script Inventory (KMSI) assessment.
“Most adult money scripts are based on earlier life experiences,” she says. “In order to make lasting changes to budgeting, spending, savings and investing plans, it is very helpful to learn more about our underlying beliefs and values in regard to money.”
The most common money scripts include beliefs such as:
- More money will make things better.
- Money is bad.
- I don’t deserve money.
- I deserve to spend money.
- There will never be enough money.
- There will always be enough money.
- Money is unimportant.
- Money will give my life meaning.
- It’s not nice or necessary to talk about money.
- If you are good, the universe will supply all your needs.
Dunkle explains that Klontz, Kahler and Klontz group money scripts into the following types:
- Money avoidance: Avoiding dealing with money and rejecting personal responsibility for one’s financial health.
- Money worship: Believing that a financial windfall or increased income will be the solution to all of one’s problems; being focused on the inward value of the accumulation of money.
- Money status: Being overly concerned with the idea that self-worth equals net worth; believing that money conveys status; wanting to always have the next new, big-ticket item; and being interested in the outward display of one’s wealth to others.
- Money vigilance: Being watchful, alert and concerned about one’s finances. Those who are money vigilant are much less likely to avoid their financial matters, overspend, gamble and engage in financial enabling.
Klontz, Kahler and Klontz say that the scripts themselves are not “good” or “bad.” Rather, they are simply indicators of behavioral influences.
“For example, someone who has the belief that ‘I deserve to spend money’ might run up a lot of credit card debt despite not being able to actually afford their purchases,” Dunkle explains. “The script, ‘It is not nice or necessary to talk about money’ could lead to money secrets between spouses. Believing that ‘If you are good, the universe will supply all of your needs” may result in not doing adequate planning and saving for retirement.’”
Working toward change
Dunkle uses motivational interviewing to help clients recognize the adverse effects their financial habits are having on their lives.
“The goal of motivational interviewing in financial therapy is to elicit ‘change talk’ by using the skills of open-ended questions, affirming, reflective listening and summarizing,” she explains. “When clients hear themselves talk about potential changes, they start to believe that change is indeed possible. For example: ‘Getting my finances under control would help me sleep so much better at night.’”
To facilitate the process, Dunkle might ask someone who is money avoidant an open-ended question such as, “What is that like for you, seeing those unopened credit card statements pile up on your desk?”
For someone whose script is money worship, she might make an affirming observation such as, “It sounds as though working 70 hours a week in order to earn more income is really starting to get to you. It’s no wonder that you feel worn out.”
With a money status case, Dunkle says she could listen and reflect back by stating, “What I hear you saying is that you believe that your value in the family comes from showing your relatives how much you earn and how much you own, not from who you are as a person.”
For a client whose script is money vigilance, she might observe and summarize with a statement such as, “Wow, it sounds as though you feel exhausted, thinking that you need to check your accounts every night before you can relax and go to sleep.”
Haines also uses the KMSI as one of her tools for uncovering the narratives that drive clients’ financial behaviors. She breaks down narratives into thoughts about skills or situations and core beliefs about worth.
“Step one for both is to become aware of those narratives,” Haines says. “This can be difficult because they run so quickly in the background that we often don’t even know they are informing our behavior. Slowing down and becoming curious about our own thoughts and beliefs can be difficult, but [it] is a necessary first step.”
Haines asks clients to write down their thoughts — which she reminds them are not facts. When reviewing their collection of thoughts and beliefs with them, she asks clients to consider the following questions:
- “What leads me to believe this is true? Is it from my own personal experience or maybe from some other influential person in my life who has told me this?”
- “Is it always true? Is there evidence to the contrary?”
- “If I can’t see evidence of it being true, can I hold the possibility that it’s not true?”
- “If there is evidence of it not being true, how are those instances different, and how can I intentionally bring more of that?”
For example, many clients believe that they will never be able to manage money, Haines says. “I would ask, ‘What leads you to believe this is true? Are there instances where you have made good financial decisions that align with your values and what you want? What was different about those times? What prevents you from doing more of that? Are there skills that you need to learn? Do you need to ask for help? Is there fear involved?’”
“Once we go deep into the genesis and meaning of the narrative, it can go in any direction,” Haines says.
When a client’s narrative is about worthiness or “deserving” something (such as money or a higher paying job), Haines uses a similar, but less structured, process. “I usually ask those clients to slow down, take a few breaths, close their eyes and ask internally, ‘Whose voice is this?’ Is it yours, or is it someone else’s?” Haines notes that it is almost always someone else’s voice, such as a parent or caregiver or another figure who holds meaning for the client into adulthood.
“We then will unpack whatever comes up,” she says. “I might suggest that those who gave [the client] the message of unworthiness around something — either directly or indirectly — were struggling with their own sense of self and meaning in the world and [it] has absolutely nothing to do with my client.”
“I often will use the visual of newborns in a hospital nursery,” Haines continues. “Are some of those newborns born worthy and others unworthy? This helps them to see that feeling unworthy of something is just an internal narrative, not an absolute truth. I might ask, ‘What will it take for you to feel worthy? How will you know when you are worthy? Think of someone you care deeply about. Now decide when and what they are worthy of.’ That usually feels really uncomfortable for them [the client]. Then I reflect back that’s exactly what they are doing to themselves.”
Haines adds another common belief about money and success is that people who are rich are greedy and achieved that higher position because they didn’t care what they had to do to get there. “In essence, not having integrity,” she continues. “I have seen this a lot. An individual feels strongly about honesty, integrity and not being greedy. They want to succeed, but the people in the positions they want don’t seem to personify integrity. So, the position is out of alignment with their values, and their behavior will not support moving up. We then work on how they can create their own visual of how to be in that position from a place that aligns with their own values.”
Where does the money go?
Overspending is a problem that financial therapists see frequently. Clients show up at Haines’ office wondering why they are always in debt despite making an adequate salary. She helps clients identify what kinds of things they are purchasing and why.
“I’ve had clients who wanted to participate in getting together with friends, perhaps for dinner and drinks, concerts, plays, etc.,” Haines says. “They couldn’t really afford to do these things, but as humans, our need for belonging is so strong that we will do almost anything to fit in. I try to help my clients identify what they get out of these activities. It may be good conversation, advice, laughing together, intellectual stimulation or just not feeling lonely. We then brainstorm other ways to get these needs met, but without having to spend money they don’t have.”
“For instance,” she continues, “instead of expensive dinners, they could meet for coffee and have the same connection and conversation without the cost. If it’s intellectual conversation, maybe starting a book club. One idea that came up was to meet at a park and bring a lunch. The atmosphere is better than a restaurant, and it doesn’t cost anything.”
A possible downside is if the clients’ friends don’t want to make those changes. Then comes the difficult decision of whether the client will commit to living within their means and risk losing the relationship(s) or continue to overspend and remain in the safety of the relationship. This adds another layer of exploration about whether those relationships are, in fact, healthy and reciprocal, Haines says, but the overarching theme remains identifying what those dinners or other expensive activities are providing to clients and how some of those needs might be met in other ways.
“I will add that knowing and having a visual of the ‘why’ [the necessity] of changing financial behavior is always present,” Haines says. “Coming back to that assists with getting over the hurdles of change.”
“Keeping up with the Joneses” is another common spending impetus. Society encourages competition, such as having a nice car just because “everyone else” drives a nice car. But Haines asks clients if that really fits their core values.
“If you value a nice car and if you have one, that’s great, but if you buy a nice car because everyone in the neighborhood has a nice car, that’s going to create turmoil,” she says. For Haines, financial therapy is all about helping clients achieve what they want, not what other people think they should want.
ACA member Edward Kizer, an LPC whose specialties include financial therapy, says many of his clients are aware that they are engaging in compulsive shopping as a method of self-soothing or self-care. He teaches them simple techniques such as belly breathing to reduce their anxiety and also asks clients to think about what shopping gives them.
“If I’m expressing a need through retail therapy, what is that, and how can I feed that?” he asks. “What feeds you? Is it being creative? Is it the outdoors? How do [you] get back to nurturing yourself?”
Impulsivity is a significant driving factor in compulsive spending, says licensed professional clinical counselor Denise Kautzer, who is also a certified public accountant and specializes in financial therapy. She has clients track their spending and encourages them to follow the “24-hour rule,” which involves waiting for 24 hours after seeing something that they want to buy. In the end, they may still end up purchasing the item after giving it more consideration, but adopting this approach cuts down on impulse buys, she says. In addition, because spending often makes people feel good, at least temporarily, Kautzer helps clients identify other things that bring them joy.
Seeing the whole picture
Clients can’t manage their money if they don’t know where it’s going — or where it’s needed. Part of the financial therapy process is identifying expenses and assets: money in and money out.
Brian Farr, an LPC in Portland, Oregon, whose specialties include financial therapy, introduces what he calls a “snapshot” in the first session. “It’s a simple expenses and income and debt worksheet, not a budget or spending plan. Just a snapshot of what a typical month looks like,” he says. “It’s to help introduce them to the reality of their household finances.” Farr’s clients tell him this exercise helps give them clarity and motivation.
Like the other financial therapists Counseling Today spoke to for this article, Farr does not see himself or offer himself to clients as a financial planner. Instead, he helps clients understand their finances and develop a system to help them meet their goals.
“The freedom around money is coming up with some method that makes it visible,” Farr says. Once clients have that picture, he helps them be realistic about what they can and cannot do. That involves identifying how much money comes in and then giving each dollar a “job.”
He finds the youneedabudget.com website useful because it offers helpful videos and allows people to categorize not just their everyday expenses, but also infrequent but large expenses such as holiday gifts, a pet’s yearly checkup at the vet or car maintenance. Clients can then look at the money coming in and evaluate where it needs to go.
“If 60% already has a job to do, stop thinking that it’s yours to do with what you want,” Farr tells clients. He advises them that when they know how much of their money is discretionary, then they can make more realistic choices.
Asking clients about financial health
Many counselors don’t like asking about money. In fact, several of the professionals interviewed for this article noted that counselors often fall under the “avoidant” category when it comes to money scripts. But financial therapists say that it’s essential for counselors to be aware of money stress.
“We all have money stress,” Haines says. “I don’t know a person who doesn’t have money stress at some point in their lives. … It affects everybody.”
Counselors need not create an elaborate process to uncover a client’s money worries, Haines says. “It could be as simple as putting a question on your intake form such as: Are there financial concerns that are impacting you?”
Haines also urges counselors to listen for nuggets of information, such as clients mentioning that they hate opening their mailbox because it’s always full of bills. “You can just ask the question, ‘What impact does that have on you?’” she says. Money troubles are something that most people don’t talk about, even with their friends, so counselors can serve as that trusted person clients share those fears with, Haines emphasizes.
Haines and Kautzer both say that one of the most critical parts of their work as financial therapists is giving people hope.
Laurie Meyers is a senior writer for Counseling Today. Contact her at firstname.lastname@example.org.
Opinions expressed and statements made in articles appearing on CT Online should not be assumed to represent the opinions of the editors or policies of the American Counseling Association.