Financial Therapists: Examine Money Beliefs to Disrupt the Debt Cycle | Business
Many Americans struggle with debt at one time or another. For some, it’s the result of adversity, like losing a job or a medical bill.
For others, however, the debt may be cyclical and not tied to a specific circumstance.
If you’re consistently taking on more debt than you can handle, financial therapists — who examine financial behavior through a mental health lens — say looking within can help solve the problem.
“We have a saying that every financial behavior makes sense when we know the underlying beliefs,” says Rick Kahler, a certified financial therapist based in Rapid City, South Dakota, and one of the founding members. of the Board of Directors of the Financial Therapy Association.
If you’re determined to get out of debt this year, consider these three key lessons from financial therapists.
Lesson 1: Identify the root cause
Do you find yourself constantly making the same mistakes with money? Then there’s a good chance something bigger is at stake.
“I get asked all the time, ‘Who should do financial therapy?'” Kahler says. “And my little answer is anyone stuck around a financial decision. Because usually when we’re stuck, it’s not about the money and it’s not about getting more information. It’s rooted in an emotional wound from the past.”
For example, Kahler says he’s seen clients struggle out of credit card debt only to fall back into it — they’ll rack up $30,000, pay it off, then immediately rack up another $30,000.
What could be driving this?
It varies, he says, but it’s usually because some of that struggle feels familiar or even comforting. For example, this person’s parents may have believed that only the rich don’t have credit card debt, and that the rich only get rich by taking advantage of others.
These beliefs, or “money scenarios,” as Kahler calls them, are usually unconscious, but can influence our behavior in powerful ways.
If you want to question your beliefs about money, you can use a series of questions to uncover those thoughts and, with each question, probe deeper, says Miami-based Certified Financial Therapist Erika Wasserman.
“Start by asking yourself, ‘Why are you in debt?'” she says. “‘Well, I’m in debt because I like shopping at discount stores.’ Alright, why do you like shopping at discount stores? “I want to feel better about myself. But why do you need to feel better about yourself?”
Once you have reached the main problem, you can solve it in an easier way in your bank account.
Lesson 2: Focus on where you want to go
While debt can seem overwhelming, adopting a growth mindset rather than a fixed mindset is crucial, says Wasserman. A growth mindset means believing that things can change and you can be the one to change them.
“Take that statement of ‘I’ll always be in debt’ and change it to ‘I’m $15,000 in debt and I won’t be in debt in the next 24 months,'” she says.
Wasserman also advises identifying your goal and creating a visual, daily reminder of that goal. For example, if you want to get rid of your credit card debt to increase your credit score and possibly buy a nicer car, find a picture of the vehicle, put it in a frame, and hang it near your front door. ‘Entrance.
It can help you stay motivated as you work towards your goal.
Lesson 3: Let go of shame
Few money problems come with as much shame as being in debt. Others will shame you for what they perceive to be poor financial choices, and you will likely shame yourself.
But shaming doesn’t work, Kahler says. In fact, it can completely derail you.
“Shame says, ‘You’re flawed. You’re screwed up. You’re a bad person.’ And none of that will motivate behavior change. It’s just more evidence that you can’t do that,” he says.
Wasserman agrees that shame is particularly damaging. She encourages clients to confide in someone they trust about their money issues.
Not only can it help ease the shame, she says, but another person can hold you accountable for your goals or help you find solutions if you’re stuck.
Other tools to get out of debt
Financial therapy is just one tool that can help you get out of debt this year. Other strategies will help you tackle the tough numbers.
For example, if you have multiple forms of debt, such as credit cards, medical bills, and unsecured loans, a debt consolidation loan can combine these debts into one monthly payment. Not only will this simplify the debt repayment process, but you can also save money if you consolidate at a lower interest rate than your current debts.
If you have good or excellent credit, a balance transfer card with 0% interest can help you save money. However, you’ll need to pay off the debt during the card’s promotional period to avoid interest charges – and be careful not to use your new card to rack up more debt.
For those who don’t want to consolidate, there are other ways to repay the debtlike the avalanche or snowball method, which helps you reduce payments, one debt at a time.