It’s been almost 14 very long months and we are finally starting to gradually emerge from the pandemic.
Before you charge back into life as it once was, consider for a moment how the past year has impacted your attitude (and actions) toward your finances. Has it helped you get a handle on them? Or has it triggered impulsive spending? Are you on track with your goals? Or have you gotten sidetracked all together?
If you’re feeling off track or out of control, you may be suffering from one of the seven “financial dysfunctions” that teacher, mentor and financial advisor Bert Whitehead discusses in his book, “Why Smart People Do Stupid Things with Money.”
Have a look at these symptoms and see whether any of them apply to you. I haven’t changed his descriptions because he sums them up so perfectly.
1. Mortgage aversion
People with mortgage aversion strongly believe that owning their homes free and clear provides a safety net, even though it’s actually riskier than having a mortgage. Their attitude is: The sooner my house is paid off, the more interest I save.
2. Inappropriate risk reactions
Inappropriate risk reactions come in two forms: risk aversion (reluctance to invest in the stock market or sabotaging your finances by lack of diversification) or excessive risk exposure (putting money into unsuitable, high-risk ventures).
3. Compulsive spending or excessive debt
High and increasing credit card debt is one of the most common financial dysfunctions in the US today. Often, a certain level of denial accompanies it, so you delay seeking help until the problem is overwhelming. You may have no idea how much you owe on your cards and be amazed when confronted with the reality.
4. Poverty mentality
You may suffer from poverty mentality if you earn substantially below your capability and you are always broke. People often give the excuse, “this is all the market will pay in my area” or “my company only gives 3% raises.”
5. Miser mentality
This is the flip side of the poverty mentality. You may have more money that you will ever spend in your lifetime and yet find that you are unable to give yourself permission to spend. This problem is not a function of how much money you have; it’s a function of how much you spend in relation to what you have.
6. Acute financial paranoia
We see acute financial paranoia either on a personal level (e.g., people who are always afraid that they will be sued) or on a global level (e.g., doomsday preppers). If you suffer from acute financial paranoia, you may believe that in order to survive you should transfer your assets to your spouse (or offshore) or build and live in a bunker.
7. Windfall woes
The source of a windfall may be stock options that paid off big, a large divorce settlement, or a substantial lawsuit settlement. The symptoms can take many forms, depending on the source of the windfall. When the source is an inheritance, you may experience feelings of guilt, a fear of death, and increased sibling rivalry. When people win the lottery, they fear becoming the target (potential victim) or victim of exploitation.
Do you see yourself in any of these symptoms Bert Whitehead describes?
If so, what will you do to change?
Here’s an idea. Call us. We are always here to help.