How to Approach Your Finances Without Breaking Into a Hot Sweat
In the first episode of the podcast Bad With Money, host Gaby Dunn conducts an experiment. She goes around asking people two questions: their favorite sexual position and how much is in their back account. People are down to rattle off positions ("doggy," "reverse cowgirl"), but when it comes to money, they're much more tight-lipped, refusing to share how much they have. It's a simple idea that illustrates a cultural commonality–our complicated, often shameful, relationship with finances.
But how do you even begin to untangle a taboo that's so deeply embedded in our society and our psyches? Amanda Clayman, a financial therapist and Prudential's financial wellness advocate, tells ELLE.com that whatever is going on inside a person is often expressed in the ways they think about and use money. And this is where financial therapy—yes, that's really a thing—comes in.
“Financial therapy is looking at money from a more holistic context," Clayman says. "I'm really looking at how people's attitudes and beliefs impact how they think about and use money." Below, Clayman helps unpack five common issues people face. Read on, and then prepare to reevaluate your green.
Issue #1: How should I approach money when I'm financially independent for the first time?
You're out of your parent's house, potentially done with college, and starting a job for the first time. So what to do with this new influx of cash and a stack of bills? Clayman says one of the key challenges she sees for women in their 20s and 30s is learning how to balance using money for today and for the future.
"For a lot of newly independent adults, there’s a lot to learn and a steep learning curve in terms of figuring out your finances," she says. "And there’s a lot of set up costs, paying rent for the first time, buying a professional wardrobe, and furnishing a place to live. It can feel really tough to think, ‘Where am I going to sit in my new apartment? I have to buy a couch, otherwise I literally can't sit down. That seems pretty important relative to my student loan debt.'"
If you’re finding yourself in these confusing, I-literally-don’t-know-what-to-do-with-my-paycheck situations, Clayman suggests making time to spend with your money on an ongoing basis. Which brings us to...
Issue #2: How can I look at my bank account without internally freaking out?
Oftentimes, Clayman says, we only engage with our money when we think of it as a problem to be solved, say when you get a student loan bill. But this can end up being the worst timing since you're probably tackling too much too quickly.
Instead, try a more consistent approach. Sit down with your money once a week for half an hour and do three things: Review what's coming in and out, predict any upcoming discretionary expenses or additional income, and make a plan on how to adjust accordingly. This will give you a framework to keep from getting overwhelmed, establish confidence that you’re tackling problems proactively, and also give you the bandwidth to make bigger shifts in your financial life
"If you are doing a bit of a deeper dive once a month, you're going to be much more honest with yourself about what it costs to be you on a weekly and monthly basis," she says.
Issue #3: How can I let go of unhealthy habits I picked up from my family?
This is where having that regular routine becomes important since it will give you a chance to learn about yourself and any potentially unhealthy behaviors.
For example, Clayman says, if you notice that you're the type of person who feels like they emotionally deserve a treat after something bad happens (um, aren't we all?), you might realize that you grew up in a house where you were conditioned around that habit and now don't know another way to make yourself feel better. If you're getting familiar with your own numbers, you can recognize and quantify these behaviors and decide if they're a big deal or something you need to change.
There’s also an element of figuring out what else you could be doing with that money, or as Clayman puts it, using a quantifiable piece of money to make a different value choice. If you're spending $50 a month on small treats for yourself, consider instead what you could be doing with that extra $600 a year.
Issue #4: How do I approach tackling debt?
"I think, honestly, this is where talking to a financial therapist is different than talking to a financial advisor," Clayman says. While a financial advisor might focus on quantifiable consequences (look how much interest you can save by putting as much money toward your loans as quickly as possible!), a financial therapist is aware that debt can be really overwhelming. If you're putting all your money into a debt repayment, that can leave things unbalanced and create even more chaos in your financial life. But if you're not making much progress with your debt, you might interpret that as a personal failure.
"What I recommend that people do is to start really small and then have periodic check-ins with yourself where you can adjust that number, as it makes sense," she says. "Not to think too much about the long term but just hitting the minimums on your debt payments so that you can make sure that your cash flow is stable and you are not going into more debt on things like credit cards."
"It's OK to prioritize your own stability in the here and now... rather than taking too much of a future view and feeling like you lose the ability to control how you take care of present day you. [If] you're sacrificing too much present-day you in service of future-you, that isn't the kind of thing that leads to good habits—that leads to burn out."
Issue #5: How do I go about combining money with my partner for the first time?
As a 20-something who is considering the possibility of moving in with a significant other for the first time, I've recently taken to asking every couple I know that lives together how the hell they handle their money. The answers are vast, but thankfully Clayman was able to lay out three typical solutions: One pot, where you put everything together and have a joint account you both use; two pots, where you keep everything separate; and three pots, where you have an account for joint expenses as well as separate accounts.
She suggests considering all these options, taking into account the pros and cons of each, and deciding which system works best for you and your partner. Things to consider: One pot can be good if you have very different incomes and want to stabilize that. However, a two pot system offers much more privacy and autonomy, while three pots offers flexibility. Whatever way you choose, no judgement. After all, that's not what therapy is for.
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