To all my creative professional peeps - Credit Reports & Scores seminar this Wednesday!

This Wednesday 12/10 (5-7pm) we conclude our 2014 program calendar with the Financial Wellness version of “party like it’s 1999,” the ever-popular Credit Reports & Scores seminar.

Say it with me: “Whooooo hoooooo, aaawweesooooommee!”

In this seminar I will provide you with a lot of great information about what and how personal information gets compiled into a credit report, the methodology by which your score is tabulated, and what you can do to improve it—but there’s more!

I will:

  • Display the full range of my ability to save internet images and use them in a PowerPoint, with the hope of being slightly amusing;
  • Tell the saga of how the Greatest Generation ushered in modern lending by coming home from WWII and demanding suburban homes in which to raise their multitudes of Baby Boomer children;
  • Pull back the veil of the credit scoring algorithm so you will feel like Neo in the climactic scene of The Matrix.*

If credit is something that stresses you out, come so that you can differentiate fact from fiction. If you worry that a low score will limit your ability to maneuver in our complicated financial world, come so that you can learn where to target your improvement efforts. If you just want to check out our renovated offices and watch me poke at our new SmartBoard like a cro-magnon social worker, there’s that, too.

Something for everyone! I hope you can make it. Please RSVP to if you can.

*This is almost certainly a metaphorical over-reach. But you will learn a lot. 

How can I get my elderly father to admit he needs financial help?

I hope you can help me find a way to talk to my father about his financial situation. Last month his electricity was turned off and my sisters and I helped pay a past-due balance of several months. He says it was just carelessness and he didn't notice the bill was overdue, but my dad is very on top of things and I think he was just covering up for not having the money. Over the last couple years I've noticed a number of little things, like having less food in the house, that make me worry that he's financially stressed. I love my dad so much, and I can't stand the idea of him struggling alone with this. How can I get him to open up to me?

Read more in this week's

Financial Therapy

column at for five ways to open up a conversation with elderly parents and establish a collaborative framework for their care. 

Should you share your income in your online dating profile?

"Six figures is so hot."

I will admit, when Penny Wrenn contacted me about this article for LearnVest the subject came as a total shock. I got married ten-plus years ago just as online dating was really taking off, so that world has largely passed me by. None of my clients have mentioned this aspect of profile management, so I didn't know that listing your income was even a thing. I don't show up much in this article because I was mostly agog at the questions Penny asked, baffled and concerned that this is what finding a match has come to. 

Having one piece of data is not the same as having information. 

Knowing someone's income doesn't tell you as much as you think about his or her actual financial life. Along with income are we going to list whether or not she has student loans? Whether he pays child support? Whether she has nine roommates or he lives with his parents? Who here might have a gambling problem? Raise your hand!

There is a time and place for communicating the financial aspects of our lives, and my feeling is that it should happen when we're able to give it the proper context. Someone reading your stated income is going to make assumptions about you that may be wildly inaccurate. 

Money is not always attractive.

The fact that this seems to mainly favor people who list a high income is also troubling. The survey Penny cites says that men and women who disclose incomes above $150,000 are most likely to be contacted. People who are high earners are not necessarily doing the most interesting work, or very interesting or happy themselves. I know a ton of unhappy lawyers and bankers who should not be foisted on the dating populace. (Case in point: many of them are unhappy with their jobs but feel unable to change professions because they're shackled by the student loans they took out to join said profession.)

I was happy to participate in this piece, but I'm even happier to read the research and other points of view it contains. I learned a lot. I'm struck by the sense that online profile management, the careful curation of those personal details we feel make us look best, is like a modern form of burlesque. Sure, you want to advertise enough to get people in the seats, but let's save something for the show, people. 

Parents: let's put on a (personal finance) show!

Let's talk about my
pin money for the week.
Once upon a time, managing money was something we could see. Mom or Dad would sit at a table surrounded by paper statements and bills, writing checks and balancing the register. Cash was received at a bank branch, maybe even from a teller. 

Many important associations with money were formed by witnessing these activities. We might notice a parent who got very stressed when the checkbook came out, or discussions about expenses that quickly descended into argument. Or we may have seen money management as a normal and neutral (maybe even positive!) aspect of the family's operations. 

Money management activities today can be a bit more mysterious, if not completely invisible to children. We may check balances on our phones (indistinguishable from the other million times a day our kids see us looking at our phones), or pay bills online during a few minutes at lunch (if we directly pay bills at all). We get cash from points of sale or ATMs that we hit during our rush to get somewhere else. 

This can leave kids with a skewed understanding of what it takes to direct and manage finances. Money seems to just happen automatically, without much attention. Often there are systems or institutions who capitalize on this inattention, protecting us from accidental oversight or promising to monitor our accounts and alert us if there's anything we need to know. 

So as parents, one of the most important parts of financially educating our kids involves finding ways to bring money management to life so that it doesn't just happen behind the scenes. 

It might take real effort to make money management more visible in your family. It's easier to use the conveniences of automation and mobile access. This is especially true if money is a stressful trigger. We look for ways to minimize our exposure to things that cause distress.

In a sense, when we make money management visible we're putting on a show. We choose what and how we demonstrate to our children about money. 

Kids pick up on this performance on various levels, and that's why it's important to pay attention to scene, script, roles, and routine. 

Look at the pretty Excel spreadsheet.
What do our kids see when they look at us managing money? Are we shuttered off in a dark corner, muttering angrily to ourselves? Or are we integrated with family life, accessible for curious questions? I understand it can be hard to review an account statement while sticky fingers reach for your keyboard. I used to pay bills after the kids were asleep for this very reason. But you'd be surprised how many young adults come to my practice who've never learned that it's normal to review expenses, plan for cash flow, or read through account statements. 

What language do we use with money, and how do we dialogue with others? When it comes to money, words matter. I recently changed how I talk about my usual Saturday practice, saying "Mommy's managing our money,' instead of "Mommy's paying bills." I want them to frame what they see as something positive and self-directed, as opposed to reactive and compulsory. Language and tone are especially important when choosing how to communicate with loved ones. Watch out for panicked or accusatory tones when asking your spouse to explain that recent charge at the Apple Store. 

Who takes which responsibilities when it comes to managing the family's money? In two-parent households, does one person do it all, while the other declares him- or herself "hopelessly terrible" with numbers? Ideally children should see a flexible back-and-forth, where both parents treat each other as competent and equally responsible. It's okay to have different jobs, but no grown up should be exempt from money matters. 

Let's work together to fund
our vacation account!
There should be a predictable choreography to our financial management process. Mail gets opened every day, bills are paid weekly, accounts reviewed and reconciled each month, investments quarterly. Children need to see that money exists within a framework of time, and that inattention to time brings a swift consequence of disorder. It shouldn't be, "Crap! Didn't I just pay that?" or "I think I'll jump on today." Without choreography, the actors crash into each other and the audience can tell the scene is a mess. 

If all of this makes you feel a little stilted and self-conscious, don't worry. As with real theater, the more you rehearse the more comfortable you'll feel. And you couldn't be in front of a more receptive audience. 

I hate to be the Feminist Grinch here...

Badass Girls - what's not to love?
I appreciate a good commercial. I do. As a former marketer I admire how GoldieBlox has so successfully tapped into the desire for parents of girls (and, I think for grown women) to see toy manufacturers create products other than dolls or princess crap. 

But before everyone runs away with efforts to get the Girls commercial aired during the Superbowl, I wonder how many people have actually tried the GoldieBlox products? Because it pains me to tell you that we have -- and guys: neither my six-year-old nor I thought they were that great. It was cranks, spools, and some things that spin, all tied together with a somewhat confusing narrative that wasn't terribly compelling. Nor was the building process that engaging. My daughter gave it a half hour a couple times, then she was done.

World of meh.
We should be careful (or at least aware) of when our frustrations and aspirations are being co-opted for the aim of selling a product. Not that I'm saying GoldieBlox has some evil agenda. But they are not in the business of creating girl-power content. They are in the business of selling toys. Girl-power content is just a means to that end.

It's like the great capitalist trifecta when the product, message, and need all sync up to something socially positive. But in this case I feel like the need and message are galloping off into the sunset, while the product sort of limps along behind. 

Rainbow Loom genius at work!
When it comes to providing play opportunities that engage my daughter's interest and help spur her cognitive development, I'll be putting my family's dollars into Rainbow Loom and Legos, and turning down the volume on today's catchy viral commercial. 

So exactly what is "Financial Therapy?"

I work in a very niche field. Ten years ago, after addressing and working though my own troubled relationship with money, I decided I wanted to help others in similar situations. At the time I thought I was the first person who ever made the connection between how attitudes and beliefs impacted financial behavior, and it took me a long time to define my professional path. Early exploration led to social work and getting my MSW, and thereafter I had the good luck to land an amazing partner/employer in The Actors Fund where I was tasked with launching what became our Financial Wellness Program. 

It gives me a great feeling of satisfaction and pride to see how far things have come since those early days. The culture has changed, and I feel like there is an openness and complexity to our post-2008 understanding of money. Wonderful resources like LearnVest and DailyWorth successfully integrate the "softer" elements of financial behavior along with practical advice. 

LearnVest even did a full feature on the field of financial therapy, and I was honored to be interviewed for the piece. This was part of their "10 Questions for..." series. 

So without further ado, "10 Questions for a Financial Therapist!" 

The $19,000 Haircut

When people assume that my passion for financial wellness is the result of a lifetime of good money habits, I tell them the story of The $19,000 Haircut.

I come from a family with solid financial values: work hard, spend less than you earn, save scrupulously and invest wisely. Yet somehow I couldn’t quite reconcile this excellent advice with the very different message I got from credit card companies strategically stationed inside my university bookstore, or with the dilemma of moving to New York City right out of college (read: no savings) and living on an entry-entry-level Marketing salary. Still, debt that began innocently enough spiraled over time into a “what’s $50 more on the Visa?” attitude, accompanied by anxious night sweats about when a deposit would clear, and using convenience checks from one credit card to pay the minimum on the others. A few years into this cycle I was getting farther away from the entry-entry-level pay excuse, yet no matter how much money I made it was never enough to right my course. My money (lack of it) and debt (too much of it) made me feel like I was living a lie, and that anything else I achieved in life meant little in the face of such monumental secret failure.

Enter my dear mother, who came to visit me one spring at my apartment in New York. I asked her to give my hair a trim, something she hadn’t done since I was a child. Perhaps it was my new metropolitan tastes or her lack of recent experience in hair styling, but I ended up with what can only be described as a lopsided mullet. I took one look in the mirror and burst into tears.

My haircut wasn't even this good. And 
ScarJo: this is not good. 
“Don’t cry!” She pleaded, horrified at my reaction. “We’ll call your hairdresser and tell her it’s an emergency. I’m sure she’ll see you right away!”

“I can’t!” I wailed. “I can’t go back there. I bounced a check” —this scenario occurred in 1999, a time when there was such a thing as paying by check instead of the ubiquitous debit card— “I bounced a check there four months ago and I can’t go back.”

My mother was dumbfounded. Bounced a check? Her daughter, who had received the best lessons in financial responsibility that the Midwest could offer? It was true. What’s more, as it became clear over the course of the next three hours, I was late on several bills and had amassed more than $19,000 in credit card debt.

Shockingly, she didn’t pour down any of the blame or censure that I had feared would come if I disclosed the truth. She simply asked, “Don’t you have a budget?”

“A budget?” (Not that I was unclear as to what a budget was, you understand. It was just that I didn’t know how a budget was relevant to me, in all of the unique snowflake-ness of my individual challenges and circumstances.)

“A budget,” she continued. “You make a decent income. How can you not have a plan for where your money goes?”

A-ha, that was the crux of it. I had no budget because I had no plan. No plan for my money, no plan for my career. I reveled in throwing myself at the world with just my talent and my ambition and treating the whole experience like one amazing adventure. Planning? Bleah. I wanted to be fearless and live a big life. I didn’t want to live on a budget.

MacGuyver says, "OMG, girl, your hair is
terrible. You need to get your life together."
And yet... did I want to live a life so financially compromised that I couldn’t undo a lopsided mullet? Was that the life of intrepid adventurer, or was that a deluded young woman with bad hair?

I wiped away my tears and decided to come totally clean. I pulled out the tattered bag in which I kept a stack of old mail. I held back no secrets. I didn’t pretend that I had this under control in any way, shape, or form. My mom dove right in.

“There!” she said, after 30 minutes of rapid-fire questioning and sorting through my bills. She held up a lined notepad that didn’t have more than ten items on it. “Here is your monthly budget.”

This was a monthly budget? It didn’t even take up half of a page: rent; cell phone; cable; electric; credit cards one, two, three, and four (organized by highest to lowest interest rates); and a weekly allotment of cash to use for everything else. The follow-up instruction: when you run out of money, stop spending. I took a deep breath and accepted the notepad.

Oscar Wilde once wrote that “the only thing that can console one for being poor is extravagance.” This had definitely been true for me. I had resisted being on a budget because I was afraid that it would deprive me of freedom, and when gripped by that fear I would try to soothe myself by (paradoxically) going out and spending more money. But in the first weeks and months of following my spending plan, instead of feeling restricted I was shocked to discover that I felt liberated. If I chose carefully, I had enough money in my weekly cash allotment to meet my obligations and even allow a little breathing room after the basics were covered. Being able to take care of my needs safely, without worrying that checks would bounce or that I would regret the purchase later, was a kind of emotional freedom I’d never before experienced. Also, I felt much more attached to the items I did decide were worth parting with money for. Instead of associating purchases with failure and fear, I associated them with confidence and value.

Once I made the “my money choices = me” connection, I felt a flood of meaning in my financial life. It was like I could see clearly for the first time. I went from utterly unconscious to fascinated with everything about the financial process. Thus when I looked at my debt, what I saw was a $19,000 reflection of all of those years of pain, frustration, and shame. Talk about motivating! I wanted that debt gone.

That same spirit of attacking life made me attack my debt and just want to pummel it into the ground. Every freelance job, tax refund, or gift from Grandma went toward my debt. And what’s more, I paid it joyfully. It took me just over a year to pay off the entire amount, and I remember that year as one of the happiest periods in my life. I hosted “clothing swap parties” with friends instead of going shopping (frankly, my friends were thrilled I’d 'fessed up about my money problems because they were all secretly in debt, too). I planned my life better, cutting back on taxis and convenience food, which made me feel calmer since I wasn’t so harried all the time. I learned to cook and lost weight. I even negotiated—successfully—with a retailer or two in order to make a purchase fit within my spending allotment. What was “another $50 of debt” and the resulting dread and shame when compared to the actual freedom that came from financial security and working toward my goals?

The gift of this period was that I learned how to pay attention to money. The debt was the painful wake-up call that I tried to ignore until it was impossible. The budget was the framework for engaging with my own decision-making process and discovering my own values. And the money itself? Money became a language that I learned to speak.

Now I want to be clear that my experience with The $19,000 Haircut and paying off my debt is just that: my experience. After working as a financial therapist and coach for the last decade, I understand that there are several parts of my situation that were extremely lucky. I had a good, steady job and could take on extra freelance work. I received encouragement and support from my family. And just as importantly, this all happened in 1999-2000, the years when credit card companies were tripping over themselves to offer huge credit lines with 0% 12-month introductory rates and no balance transfer fees. It was cheaper for me to get out of debt then than at another time in history.

But the greatest lesson of The $19,000 Haircut was not about financial tactics. The gift of The $19,000 Haircut was the discovery that money can take us on a journey where we learn to do something different (financially) and it makes our lives better (non-financially).

The $19,000 Haircut put me on path whereby I became financially sane, personally empowered, and I found my life’s passion. That’s my story.

The Saddest Money Piece I've Ever Read

I hear and read a lot of sad stories about money. Stories about loss, about desperation, about dealing with frustration and indignity. But this has got to be one of the saddest money stories I've ever read.

Isa Hopkins's parents used to fight about money when she was little. Sure, lots of people's parents fight about money, but I guess Isa's parents fought a lot. Or the quality of their fighting was particularly toxic. I would guess that the financial insecurity itself probably caused distress for little Isa, and when she looked around for a caregiver to reassure her she saw two people too engrossed with their battle against the world and each other to take care of her. She got the message that not having money meant fear and a lack of safety. And then what happened next? At one point in her teens things changed for the better. Her parents got more money, and the fighting stopped. No money, fighting. Enough money, no fighting. So Isa really got the message that money is absolutely, utterly essential to any chance at domestic felicity.

Though she was curious and even enthusiastic about the prospect of having a lot of money as an adult, Isa chose to pursue a path as a writer. I haven't met or treated Isa, but this doesn't surprise me. I'm sure retreating into an inner fantasy world was a great solace to a little girl in scary, shitty circumstances. Also, as someone who reports close family relationships, up-shifting into a different socioeconomic class can be tricky, even threatening, to family bonds. So there must have been something very familiar about choosing a life as a poor artist.

But this leaves Isa in a bind. Having experienced first-hand the stresses that lack of money put on her parents' relationship, she would not -- would not -- get involved with someone if there was a risk that this pattern would repeat. And in the incontrovertible, ipso facto, If-Then logic that can only be borne from the mind of a traumatized child, that meant that as an adult Isa would find herself stuck not being able to grow, become intimate, partner, and have children.

My heart breaks for Isa. I see her piece not as the brittle and tough expression that it tries to be on the surface. She expresses no self-doubt and presents her argument like there's no debate. Yet the very act of publishing this piece is itself an expression of hope that she's wrong. I feel her writing these words and probing them, testing them, examining them for validity. I picture her continuously updating the comments and hoping for a counter-argument.

The associations that we make with money and relationships when we're young are so deep. We have so little understanding of the world that we think that what happened in our family is the world. Poor Isa. It doesn't have to be this way. Lack of money is a terrible stress, but it doesn't always mean that a person is doomed to suffer that stress alone.

Surf the Urge

Just came from an absolutely AMAZING training with Dr. Andrew Tatarsky of the Center for Optimal Living.  He was at The Actors Fund to talk about Harm Reduction techniques and his book, Harm Reduction Psychotherapy. While this was mainly focused on application with substance abuse cases, it is easy to make the connection to a disordered process with money. My favorite part of the training was the technique of urge surfing, where you delay responding to the urge to "use" (splurge, spend, drink, etc.).

In that delay you slowly breathe into the urge and describe the thoughts and sensations that come up. 

The urge becomes the way in to see what is driving the feeling. You "unwrap" the urge and ask:
  • What does the urge want?
  • What happened just before?
  • What does the urge want to change?
  • If it could speak, what would it say?
  • Is there a story it has to tell?
  • What part of you is speaking through the urge?

For so many of us, financial behavior is not strategic, rational, and deliberate -- oh, no. It is reactive, messy, and confusing. It's based on urges that have their basis in deep emotion and profound personal meaning. It touches on our multiple points of our identity, relationships, and social context. Before we can attempt to change or "clean up" our financial behavior we have to come from an initial place of compassionate curiosity and radical acceptance. Once we can perceive and understand the origin of these behaviors and how those behaviors serve us (even as they limit us), only then do we have the chance to make real, purposeful, substantive change. 

Radical acceptance. It's what financial wellness is all about.

The Secret to Financial Change

I appreciate where this article in LearnVest titled The Power of Pessimism: How Negative Thinking Can Improve Your Finance" is trying to go. Working with a client who is overly attached to affirmation and attraction (a la "The Secret") in lieu of an action plan can test my patience sometimes. But I don't know that I'd go so far as to say a dose of pessimism is the answer, either. Maybe it's just the provocative word choice that irks me.

The problem is that all of us have certain cognitive biases that frame how we perceive situations and approach change. As the article points out when discussing the effectiveness of affirmations, people with already high self-esteem respond well to self-directed messages like "I am lovable" and "I am worthy." People with low self-esteem tend to experience a drop in self-regard when they try to direct these messages toward themselves.

The toughest thing about trying to do something new is that we tend to approach this new thing in the same way we always approach things. Actually doing something differently is very, very hard. 

And when it comes to changing your financial life -- oy! People generally seek our financial coaching or counseling when something with their money has become unbearable. Either their debt has climbed to an unacceptable level or they are tired of not being able to afford to visit their nieces across the country. Something has happened to make them say, "I don't want to live like this anymore." They are already dreaming of a life with zero debt or buying plane tickets on Visualizing a desired outcome is not the difficult part.

The difficulty is that changing a financial outcome invariably involves changing your financial process. You have to do something differently than you've been doing it. Your attachment to a desired outcome does not overcome your cognitive and behavioral biases. That's why people usually have better results when they work with a coach or consultant who can offer them another point of view.

This article made me think of how I tend to direct people's focus when approaching financial change. In a nutshell (a very blunt, un-nuanced nutshell) I find that it depends on where you are in the process:

Focus on changing nothing. Gather information about where you are, how your life works and doesn't, examine all options. Learn to pay attention and resist urge to change something -- anything! -- just to relieve stress. Practice being a "neutral observer." This can soften up our cognitive biases because we get out of the feel -> react cycle.

Early Middle
Focus on experimenting with change. Immediate and near-term focus only. No thought for the future, or you'll lose the ability to pay attention to the present. Purposefully resist the urge to prematurely commit. Try out, "fail," discard. Play!

Late Middle
Start to practice with what has worked in the Early Middle stage. Now you begin to focus on the future. Now there is a combination of optimism with what LearnVest might be calling "the right way" of "doing pessimism."

Final Stage
Now focus on progress toward your desired outcome. When you start to get off track, go back to the beginning and go through the gather info -> analyze info -> decide and follow through steps again. Revel in your vision for the future and attach to it, love it, and let it infuse your efforts.

Not sure where this road leads, but
it smells delicious!
Every Stage
Behavioral change is a slow, many-step process. I find it helps to try to enjoy yourself along the way. Stop and smell the roses of each little thing you try out or discover. This is the gift, this is where you truly learn to live your life and make conscious, purposeful choices. This is what is more important than zero balances and even visits with family. If you can learn to change your financial behavior you have the power to change anything in your life. Simply focusing on an outcome (positive or negative) leaves out all that good stuff along the way.

But Seriously, People

I love to laugh with my clients. There are times when I'm a little embarrassed, worried that we are making so much noise that we'll disturb people in offices nearby. What are we laughing about? You name it. Sometimes the more critical the situation the more you need a good belly laugh. 

One of the funniest things in the world, and certainly a subject that comes up a lot in coaching work, is how utterly terrible we are when it comes to change. We are absurd. We are failures waiting to happen. We make endless mistakes and a million wrong calls. If you don't have a sense of humor about this, then you'll never persevere long enough to get it right. 

Learning to do something new takes a light touch. Have fun with it. 

Knock, knock.
Who's there?
Control freak.
--Now you say, "Control freak, who?"!!

Don't be the control freak. 

The Good-Enough Budget

"You have excellent math skills and
you deserve good things!"
I have a half-developed pet concept I keep turning over called the "good-enough budget." The term is a take-off on that classic Winnicott term, the good-enough mother. Without getting into a whole history of Object Relations, the basic idea of the good-enough mother is a departure from the Freudian and Kleinian "good mother/bad mother" dichotomy. The good-enough mother is less of an abstract, but is seen as a real person dealing with the real world, doing the best she can to respond to the developing needs of her infant, and for her efforts and responses to be sufficient to the child's needs. (The history of modern psychotherapy is basically written on the backs of "bad mothers," so the idea that something short of perfect parenting is still considered "good enough" should be met with cheers.)

The good-enough mother does a few crucial things consistently well:
- She sees her child for who he is and doesn't project her own fantasy;
- She accepts and responds to her child's needs without shaming or rejecting;
- She provides a "holding environment" with her attention, love, and physical care that supports her child's development from a dependent infant to a mature, authentic adult.

So how does this relate to money? How can a budget be good-enough?

First of all, the good-enough budget is concerned with boots-on-the-ground financial management (meeting your real life, day-to-day financial needs) and not an abstract concept of financial perfection. Do you account for every penny? Do you religiously reconcile your accounts every month? Probably not. And the good-enough budget doesn't require you to. As long as you have a basic framework for what you earn and spend, you're still in better shape than "failing" at the ideal.

The good-enough budget reflects who you really are. Do you eat take-out for every single meal? Then your good-enough budget shows a higher number in Take Out than in Groceries. Same thing for all of those other "naughty" financial behaviors that people consistently omit or under-report in their budgets: buying clothes, liquor, taking taxis, etc.

Not quite ready to accurately account for those expenditures? The good-enough budget doesn't judge. Figure out all of those committed expenses -- things like housing payment, car payment, student loan, cell phone, internet, insurance -- and everything else can be "discretionary" for now. Practice simply staying within your means (so that "committed" plus "discretionary" is still less than "income) and the good-enough budget will accept that for now.

The good-enough budget gives you room to work on your financial awareness and behavior without requiring perfection. It is a low-pressure but consistent connection with your money where you give yourself structure, but still enough wiggle room for this to be a work in progress.

Because you, my darling, are a beautiful snowflake and you deserve to have your money be a source of happiness instead of shame. Mama loves you.

Women and Money: The Sky Is Falling

Hey, girl. I know that money and investing topics are "intimidating" and "boring" to you, so you "tune out" when your advisor tries in vain to show you a PowerPoint on market returns. But you need to get it together, because according to USA Today, "Women's financial responsibility grows faster than knowledge."

And ladies, we all need to care about this "lack of knowledge" because everyone, not just women, "will have to bear the burden" of the repercussions of our ignorance. Don't believe me? This warning comes straight from "personal finance experts." Says one:

I can't even understand Post-Its! How
can I possibly read a quarterly statement?
"If we find ourselves in a position 15 years from now where the husbands start to pass away and the wife doesn't know what to do in terms of managing money, there's going to be a lot of bad decisions made, a lot of economic waste and a lot of scared people," says Justin Reckers, a certified financial planner who runs weath management and divorce management practices in San Diego.

We'd better get on this, before we collectively crash the economy.

Just a couple of things to consider, though, before you run sobbing to your husband and beg his forgiveness for not rushing to open the brokerage statement every month:

1) Women are not bad investors. When it comes to making decisions about investment holdings, women consistently outperform men* over the long term. Some experts think this is because we are more risk-averse, others think it's our understanding of our own emotions that allow us to process feelings before acting on them. Whichever the case, we generally have a much more critical assessment of our skills than the results would bear out.

2) Every article of this type that I read laments the fact that women feel intimidated by jargon. We feel concerned about being bag ladies in our old age. We want to feel confident in meetings with our financial planner. We have got to stop being so distracted by how we feel about situations and pay more attention to the facts. How much are you saving, where are you investing it, how are those investments performing, and what future considerations do you need to keep in mind? Period. You can have all kinds of feelings about it, but don't make those feelings your focus.

3) That said, there is something valuable in what your gut is telling you -- as long as you turn that feeling into action instead of a whole narrative about how terrible you are with money. If you don't have a good rapport with your financial planner, find a better one. If you can't read the latest personal finance best seller without slipping into a coma, join an investment group or take a class. We have got to stop complaining that we don't like the way the financial services industry is currently set up, and start supporting -- with our attention, dollars, and voices -- those types of financial services that do work for us.

The bottom line is that women are great with money. What we do poorly is interface with a system that wasn't originally set up to engage us. But that doesn't give us a bye to just sit on the sidelines and complain about it, or wait for some man to show up and serve as our liaison to money world. Stop thinking the problem is you, your inability, and your ignorance. And by all means, don't take articles like this too seriously.

* This finding only relates when comparing decision-to-decision, not balance-to-balance. According to the Employee Benefit Research Institute, though roughly the same number of full-time employed men and women participate in retirement plans, men on average have a balance of $31,388 where women on average have a balance of $20,877. Men contribute more to their plans.

ETA: For a much more helpful take on this topic, check out Geraldine Sealey's article in the September issue of Real Simple titled, "Women & Money: Why You Need to Take Control Now." I can't find a digital version, but it's on newsstands now, and I am quoted in it along with Amanda Steinberg of DailyWorth, Galia Gichon of Down-to-Earth Finance, and Laura Vanderkam, author of All the Money in the World: What the Happiest People Know About Getting and Spending.

"The Talk" About Money

I will admit that when I first saw a post about this PSA campaign from The National Financial Educators Council, I just about blew a gasket. But since this campaign is supposed to "elicit an emotional response that encourages parents to talk with their kids about money," I guess that's sort of the point. My reaction was less about the appropriateness of the images, though, and more utter amazement that financial literacy is being pitched as "a talk," emphasis on the "a."

Teaching your kids about money is not a one time event. It's not a conversation, a booklet, or even an all-day seminar where you play Tony Robbins and motivate your kids to unleash the power of their bank account. Teaching your kids about money involves being a full-time, round-the-clock role model for financial behavior. And if you think your kids aren't paying attention, think again.

Children, especially young children, are incredibly sensitive to parents' emotions. When your entire security depends on the stability of the two (or one) central adults in your life, it pays to pick up on cues as to whether mom is overwhelmed or dad is prone to lash out. So what children are constantly picking up with their little kid antennae are the emotional signals you send out when you handle money tasks.

When you get agitated watching the cash register number creep up at the grocery store, little Suzy registers your stress level creeping up, too. Or when you go on a spending spree only to collapse later in guilt (or get in an argument with your spouse), little Billy might choose to play outside and stay out of the way. Of course, one or two or a few instances of these behaviors isn't a big deal -- it's the overall pattern that makes an indelible imprint on your child.

Which is not to say that I don't think you should talk about money with your kids. You should. You should do it often. By all means talk to them about compound interest and how to open a 401(k) and warn them about high-interest debt. But in my experience it's not a lack of information that gets people in serious trouble, it's a lack of emotional regulation. It's difficulty paying attention to stressful tasks. It's putting money in the place of love, or self-esteem, or self-care.

As a parent and role model, you don't have to be perfect. Even your money mistakes can be constructive, if you communicate about your struggles in an age-appropriate way and demonstrate sincere efforts to improve your behavior. It's healthy for children to see adults dealing with the consequences of their mistakes.

I appreciate that this PSA campaign is trying to get parents to associate financial literacy with other forms of keeping their kids safe. But I wish there were more tools to help parents deal with the truly hard parts of "The Talk," like why it's hard to keep on a budget, how to talk finances with a partner without arguing, and how to translate personal values into financial goals. Sigh, if I only had the money to create my own PSA campaign (or was even remotely savvy with Photoshop).

It's Hard Out Here for the Rich

I settled down this morning with U.S. Trust's 2012 Insights on Wealth and Worth as a little light beach reading (sigh... if only. I'm still at the office). Some of the findings knocked me out of my chair. Among them: 
  • Six in 10 HNW parents are not fully confident their children will be well-prepared to handle a financial inheritance.
  • The younger generation is more likely to have full confidence in their children's preparedness.
  • Nearly four in 10 parents strongly agree their children would benefit from discussions with a financial professional.
  • Just over one-third of wealthy parents have fully disclosed their wealth to children, while half report having disclosed just a little regarding their financial status.
  • Nearly half (48 percent) of people over age 67 said, "I was taught never to discuss wealth."
Are you kidding me? Read between the lines here. Parents (and "parents" here can be any age between 18 and 67+, so we're talking in most cases about parents of adult children) don't think that their children are prepared to handle the wealth that will be coming their way. But the majority of them don't disclose the facts of the situation, and almost half of the older cohort don't seem comfortable discussing it at all. The younger generation thinks, "Of course I will handle this better than my parents did and will make sure my own kids are prepared," but these are the same people the older genation thinks are not well-prepared to begin with. Finally there is the wish that some financial services professional will just step in and set it all to right. Give Junior the Facts of Wealth talk and suddenly he'll morph into an upright steward of the family fortune. Oy.

Responsibly handling money (whether it's a thousand dollars or a hundred million) has a good deal to do with information, but even more to do with intangibles like maturity, the ability to moderate impulses, and the formulation of meaningful goals. To successfully pass wealth from one generation to the next the tasks of money management must be imbued with positive associations, but these bullet points indicate strife, discord, and intergenerational blame.

I know that it's not a popular past-time to bemoan how hard it is to cultivate new generations of rich people, but it always makes me sad to see money as a source of emotional constipation in families. In all of the wealthy families that I know and have worked with, money is the dark matter that exerts a gravitational pull on all involved. The healthiest way to deal with this is to bring it out of the darkness and acknowledge it's influence on relationships and behavior. Money can do great good in the world and can be a source of positive family identity. But unhealthy families create unhealthy financial behavior again and again and again.

Thank You to My Parents, for Letting Me Be Stupidly Naive with Money (Seriously)

For two years, I lived in a Brooklyn building built illegally on a commercially zoned block, wedged between two factories. Four of us lived in an apartment designed for two, with railroad-style bedrooms. We often barged in on each other while sleeping, reading, having sex. The post office refused to recognize our address or deliver mail. Crack deals sometimes took place on our stoop.

Ah, the glamor of New York City for the young, ambitious, and broke. For Lilit Marcus it was a crack-tastic Brooklyn share where she couldn't even get her mail. For me, it was a sixth-floor walk-up with no windows in the living room. But at least mine was in Chelsea.

I love this article about How I Made it in New York City Without Parental Help. I especially love how this is now a thing, I guess, in the era of Boomerang Kids and whole employment sectors dependent on unpaid interns. When I moved to New York in 1996 it wouldn't have occurred to either my parents or me that they should be financially supporting my choice of where to live. They didn't especially like that I wanted to move here after I graduated (like this writer, it was a wonderfully impulsive, capricious choice to be sure), but I was an adult and therefore I don't think that they considered it to be much of their business.

Lilit was much more conscious and disciplined about money than I was. For years I was baffled by my ever-growing credit card debt. It seemed like everyone here was effortlessly fabulous, and even though I was by no means extravagant I certainly spent more than I should have just trying to go with the economic flow.

When I eventually "hit bottom" financially, I actually did get crucial help from my parents. Some of that was monetary (they caught me up with my past-due bills totalling just under $2,000 as I recall), but the most important forms of help I received from them were instruction and support. My mother sat down with me and together we drew up a monthly budget, and over the next two years as I attacked and paid off $19,000 in credit card debt, my parents cheered me every step of the way.

We are all on a journey with our money. I don't regret a single step of mine, because each peak and valley has taught me something meaningful. In fact, the valleys have been -- if you'll pardon the pun -- the richest experiences of all. I was amazed to discover how safe and secure it felt to know where my money was going, and that I could say no to a purchase or proposed adventure without self-combusting.

I give my folks huge kudos for the constructive way in which they helped me. They did a parent's ultimate job: helping their child develop the skills and capacities to be a competent, independent adult. That's more valuable than paying my rent for a lifetime.

How to Spend Your Savings

It's time for Katie to liquidate her Moving Fund and head to her new place. The only problem? She fell in love:

This is not Katie.
Over the past few months, my aggressive savings has become a source of pride. I've watched the balance grow and I feel accomplished. Responsible. Safe.

But soon, I'll be back to zero. And even though that's way better than, you know, not having the cash at all, my inner Scrooge McDuck doesn't want to let go of all those pretty green bills. Ever.

Katie, I hear you. (Sidebar: I'm not stalking you. I know I blogged about your last piece, too, but that's because you have such great insight about this topic!)

People are well acquainted with the challenges of saving money, but we give short shrift to how hard it can be to appropriately use that savings. In other words, to spend it! In my Managing Cash Flow for Artists workshop (now in its sixth year), we have a whole session on operating a cushion, or Contingency Fund. This workshop is designed especially for people who have variable income and who often use credit cards for "lifestyle continuity" (also known as "eating and having a roof over your head even in months when your cash flow is negative"). Having a financial cushion is necessary for all of us, but for those who have particularly... dynamic... financial lives, being able to draw upon that Contingency Fund is a critical step toward breaking the cycle of debt.

But my advice on the topic has more to do with the difficulty of the behaviors associated with operating a Contingency Fund than with the concrete aspects of how much to put aside, when to take it out, and how to replenish it. Because the biggest obstacle to appropriately utilizing your Contingency Fund (or in Katie's case, her Moving Fund) is emotional.

We have a tendency to fall in looooooove with our money. The harder we've worked to put it aside, the longer we've held it and the bigger the balance, the more attached we get (the same is true for investments, by the way). It is always easier to spend someone else's money (i.e., credit), which is why we override our own natural aversion to debt in order to hold on to our precious saved pennies.

So in Cash Flow, I teach Contingency Fund 101 as a behavior instead of a desired balance. And it helps to learn to walk before you run. My advice is to start with $1,000 -- a significant amount but not enough to get head-over-heels about -- and practice using it to cover expenses that are not part of your regular monthly budget or to plug holes when your income dips. The more confident you get about your ability to take out money and replace it, the less bereft and anxious you'll feel when you part with it for its intended uses. In the mental health profession, we would say you'd developed a secure attachment to your Contingency Fund. You learned that "Mommy always comes back," (or in this case, Money always comes back). Once you get the hang of properly operating that $1,000, it becomes easier to build a more robust Contingency Fund, as well as saving for other meaningful short-term goals.

Katie is doing a great job of coaching herself through the tough goodbye to her Moving Fund. In this similar article today on LearnVest, Sadia does the same with her Vacation Fund. Today is a good day for ladies rocking the Save-to-Spend technique. Yay!

Yes to the Dress! (No to the Entrees, Flowers, and Fireworks.)

Weddings are wonderful, but not if they create a financial burden and start your married life out on the wrong track.

Even the most financially sane people can sway to the pressure of outside expectations and the desire to make everything perfect. Add to that the challenges inherent to the tasks of planning (How often do you spend thousands on a party? Negotiate with vendors?). Unfamiliar budget plus unfamiliar tasks, turned up to an emotional simmer... the whole thing can get very out of control.

Read this inspiring story of one couple who kept their focus on what was important: sharing an important milestone with the people they loved, and being financially authentic in the process. What a great way to express love and a commitment to a happy life together. I have a great feeling about Abigail and her DH!

Fixing Education Debt: Too Much of a "Good" Thing

I work with a lot of artists and freelancers, which makes me particularly sensitive to people's issues with educational debt. Unless you can afford to attend college without borrowing, it is increasingly difficult to pursue any field that doesn't offer immediate and sustained financial success. A writer or designer whose income swings wildly from month to month and year to year is going to be crippled trying to come up with $500/month to send to Sallie Mae. And with no hope of restructuring the loan or having it discharged in bankruptcy, for many folks there's a good chance they'll be paying until they die.

Listen, I get it. I totally understand the argument about fraud and why there should be a high bar preventing people from getting the education and then sticking taxpayers with the bill. But I also see how broken the system is. While I do want to talk solutions, I find it impossible to get to that without two minutes of diatribe first. Here, in no particular order, are the issues that make me get a little mouth-foamy when talking about student loans:

Available money today errodes value sensitivity.
You visit a campus and it's beautiful. All the students look so happy, and they're talking about such interesting things. You think, "This is where I belong." To a teenager about to leave his/her parents' house for the first time, that feeling of fit is supremely seductive. Or maybe the allure is a particular program (I hope it's Engineering) or the status and cache of the school. But whatever it is, on some level you think that if you just get there then the rest of it will all work out.  And because lenders are generally tripping over themselves to lend to you (there's very little risk to them, since discharge is difficult), it's just so easy to get the money to go to school. So you go with your gut. After all, repayment is so very far in the future...

It also obscures the skyrocketing price of education.
Depending on which data you use, the cost of a four-year college is going up somewhere between 7% and 8.3% a year. There are a number of contributing factors, as federal and state funding gets cut and institutions fight to attract students by offering more amenities, but the fact is that costs are going up like crazy and until recently nobody seemed to be too concerned about it.

Loans are given each semester, and not seen in their aggregated total until all the money has been borrowed.
Here $7,000, there $7,000, everywhere a $6- or $7,0000, so grows $100,000 of debt before you even know it. I have heard terrible stories of graduates having panic attacks when they FINALLY get presented with the entire amount of their debt right before graduation. To say nothing of the shock of seeing how fast that debt can grow when you put it in forbearance for a few years while you're trying to find your feet professionally. Oh, and remember: the private loan you took out the first semester has also been growing for the three and a half years you've been in school, too. Interest on interest on interest.

"Good debt."
This makes me insane. Yes, it's better to borrow money to get a Bachelor of Arts vs. spending the same amount on shoes and handbags -- no doubt about it. But for crying out loud, as if that's a real comparison! All debt should be considered carefully, deliberately, even gravely. To give it a blanket "good" moniker belies the seriousness of the situation. Getting a university degree can increase your earning power by a million dollars over the course of your lifetime. But saying that educational debt is "good" side-steps our natural conservativism about borrowing and errodes our ability to think critically about value. 

You're not playing with a full deck, so to speak.
Sorry, 18-year-olds. I know you're a National Merit Scholar and all, but the truth is that your brain isn't quite done forming yet. In fact, the "executive suite" that is your prefrontal cortex, whose functions include "calibration of risk and reward, problem-solving, prioritizing, thinking ahead, self-evaluation, long-term planning, and regulation of emotion" isn't fully formed until your mid-20s. You are an expert on Chaucer and you can recite Pi to 50 digits, I grant you, but you're making a permanent financial commitment that your future self is going to have to deliver on, and you don't even have the part of your brain that can do that yet!

Education debt has a ripple effect over the entire economy.
Young adults can't save for a down payment because that money is going toward their student loans, which means the housing market is slower to recover. Retirement savings starts later for the same reason. People delay having children, and struggle to save for their children's education, and the cycle is in danger of repeating ad infinitum.

Okay, now I'm freaking out and totally mad. What's next?
For the forseeable future, college is going to cost money -- a lot of money. We can spend forever gnashing our teeth and tearing out our hair about it, but at some point we need to take a deep breath and deal with the most important consequences, namely the pressure on borrowers and the drag on the economy.

There are several  groups working on constructive solutions from various angles. Some focus on making repayment more affordable, others on blanket forgiveness for a nation of debtors. I really liked this article that I saw today via LearnVest on Why Student Loan Forgiveness May Not Be as Helpful as You Think. The author suggests a compromise that would act as an economic stimulus: subsidizing existing student loan debt by paying the interest, combined with creating an economic incentive to universities to lower tuition and make school more affordable. This could conceivably enable young people past and future to pump money into the broader economy instead of to the banks.

I think this is a coherent and well-reasoned argument that doesn't get lost in emotion, moral outrage, or good-vs.-evil debates -- which I totally respect, since I had to get on a 500-word soapbox before I was even ready to talk about the article that was ostensibly my reason for this post! Oy vey...

Anxiety calling! Do you pick up?

I was giving a presentation with my colleague, Annette Lieberman, yesterday when she said the most amazing thing:

"The way people manage their anxiety usually reflects how they manage their money, and vice versa."

Can this be true? We often think about how money gets managed, but we don't often think of emotions the same way. Feelings are assumed to be automatic, almost as if they happen to us. Saying that we "manage" an emotion implies that we're somehow responsible for it.

Whether or not you believe we're responsible for creating our own emotional state, the truth is that we are always responsible for how we respond to it.

Anxiety is the herald that demands our attention. It's purpose is to get us to wake up and pay attention to something. If it feels uncomfortable that's because it's supposed to! We need to be motivated to take action to remove those circumstances that make us anxious.

So think about it: when you feel anxious, do you mobilize to address the cause of your anxiety? Or do you withdraw, ruminate, fret, and get depressed? Can you see a parallel with your money? When financial problems arise, how do you respond -- with action or avoidance?