Mind over Money? Discussing Financial Roadblocks With Dr. Alec Baker
So many money decisions are not about what we think, but how we feel. To that end, I’ve enlisted the help of a guest blogger to address some questions around emotions and finances. Today I present the first of 3 questions I posed to Dr. Alec Baker.
Dr. Alec Baker owns and operates Peak Living Psychology – a full service psychological services practice located in South Denver. Peak Living Psychology offers financial therapy, traditional psychotherapy, and psychological assessment services to the Denver metro area with a focus on helping individuals and families cultivate the best things in life. More information can be found at alecbakerpsyd.com
KS: What are examples of psychological road blocks to financial success? Is it lack of education? Fear from a past mistake? Things our parents did or didn’t teach us about money?
AB: Psychological roadblocks come in all sorts of shapes and sizes. Basically, they are unconscious beliefs that lead to habits and choices that prevent us from reaching our goals. Generally speaking they are NOT a lack of education, but rather feelings that stem from core beliefs about money that get in the way of putting good information to use. What I’m getting at here is that we all have core beliefs about money (e.g. spending is bad, saving is good) and that we have emotional responses to either living those core beliefs (e.g. pride, calm, self-esteem) or living contrary to them (e.g. shame, embarrassment, anxiety, fear) that lead us to make the choices that we make.
Here’s an example
Imagine that I’m someone with a core belief that spending money is undisciplined and frivolous while earning and saving are the only virtuous choices a person can make. One day a tree falls on my roof and I have the option to pay my $2000 deductible and repair the whole roof or pay $1000 to patch it. First, I have that high of a deductible because I always choose the lowest premiums possible– yay low spending! Second, I would obviously choose the patch option because I’m spending as little as possible and living my core belief that spending is undisciplined. The trouble is that the patch job ends up being less effective and I get a series of leaks over the next few years that a) end up costing well more than the extra $1000 to repair the whole roof, and b) cannot be covered by insurance because I did not submit a claim.
The insistence on spending as little as possible due to a faulty belief that all spending is undisciplined can lead to choices that bring me higher costs and more spending in the long run. People may have all of the education they need here to see the most effective long-term, but they are so anxious about doing it that they ignore your advice and do it their way. In those cases that also might be your last conversation with them.
These core beliefs can be the result of lessons learned from personal experience (e.g. I spent too much on going out and leisure activities and then didn’t have enough for an ER bill) or from family cultures (e.g. depression era parents who never spent any money and made it forbidden because you never know when the next “big one” will hit).
KS: Stay tuned in April and May for more insight from Dr. Alec Baker.