My parents were born and raised on the heels of the Great Depression, and with no familial wealth of their own, they were quite scrappy in a financial sense. As a result of their upbringing, I was raised with a healthy dose of financial survival skills. Layer that with what I learned as an accountant for several years, and one would think that I knew a thing or two about personal finance. While some corporate and personal finance concepts are transferable (e.g. balancing a budget), I was humbled by how much I learned when I started my coursework to be an Accredited Financial Counselor (AFC). The three most profound insights I made focused on the interplay between emotions, behavior, and money and are listed below.
1. Fear hinders success.
This hit home on page eight of my personal finance textbook. Yes, page EIGHT. Day ONE. Several years ago, I had started coursework for my MBA, and I had learned about the phases of a business cycle. [Expansion - Peak - Contraction - Downturn - Trough - Recovery - Expansion...] I knew the cycles, but for the first time, I realized something. My parents, who grew up in poverty, taught us to live as if there would be no economic recovery. Financially speaking, we were advised to always plan and live as if the proverbial “shoe was about to drop” and everything would be taken away from us. I lived in a chronic state of fear.
But economics shows us that there is a cycle, and ignoring half of it doesn’t serve our greater good. As I eventually learned, living in a chronic state of financial fear isn’t really “living.” On a practical level, I realized on that first day of class that my parents' fear of not having enough money on hand not only impacted their quality of life, but also prevented them from creating wealth. They chose safety over investing money in the stock market. Thinking back on the last 50 years, they could have made A LOT of money had they invested just a little bit, but their fears held them back.
I appreciate the bravery of every participant I work with because when you schedule an appointment with us, you are taking the first step to overcoming your fears. And there can be a lot of fear around money and finances. Sometimes it stems from life experience (see above). Sometimes the root cause is simply not understanding finances, so it’s fear of the unknown. Sometimes it’s a combination of both. Regardless, until we take the first steps towards untangling our relationship with money, our fears will hinder our success.
The three most profound insights I made focused on the interplay between emotions, behavior, and money...
2. Those who are most vulnerable are the most taken advantage of.
One of the biggest surprises during my coursework was how much I loved learning about debt—specifically student loans—collections, and bankruptcy. My heart ached when I learned that 60 to 80% of bankruptcies are due to medical debt. Let that sink in. Someone had a medical emergency, accrued bills, was unable to pay them—probably because they had a medical emergency—and ultimately they have to deal with collections and/or bankruptcy. That person does this WHILE processing the emotions that come from dealing with the medical reason the debt was accrued in the first place.
Similarly, students often graduate from college or graduate school with more debt than they will ever be able to repay, and they will be paying for those loans THE REST OF THEIR LIVES. Whereas mortgage lenders have ceilings on what they will lend you based on several financial factors, it appears that federal student loan providers are much more liberal with lending. If you are willing to sign away a portion of your paycheck for the rest of your life, the government (or private companies) will take it. And...student loan debt isn’t dischargeable if you file bankruptcy. And...if push comes to shove, they can garnish your wages to get the money that is owed to them.
Debt is paying for past decisions in the present and future. The part that gets to me is that we all experience hardships in life. Loved ones pass. We lose funding with a degree halfway finished. We have a medical condition we need to tend to. In these moments of vulnerability, when dealing with the day-to-day is overwhelming enough, who is helping us to manage our finances? Studying debt has taught me that when there is a vulnerability, there are also people who are ready, willing, and able to take advantage of it for profit.
3. Simple metrics can lead the way.
Do you know the number your total cholesterol should be under? Do you know the range your blood pressure should read when you go to the doctor?
Now tell me, how much total in student loans should a student take out? What’s a healthy debt to income ratio? What percentage of your pay should go towards housing expenses? How much money should you have in your emergency fund? [That’s a trick question because it depends on several factors, but you get the point.] Part of the reason why people are scared of their finances is that we lack a framework on which to base financial decisions. How do we know how we are doing if we don’t know what’s healthy or not?
I was lucky to have received some financial training from my parents, but I never assume that others have. I don’t know of many middle or high schools that offer a basic financial skills course. If we aren’t finance majors, where are we supposed to learn this critical information? No wonder it all seems mysterious at best and overwhelming at worst!
Honestly, I never thought much about financial ratios until I had to memorize them for my exam. Now I talk about financial metrics all the time, and not just with my participants, but with anyone who will listen, especially if they are about to take out student loans (see #2).
In the coaching world, we often refer to you as the pilot of your plane. You are navigating from Point A (where you are) to Point B (where you want to be). There are course corrections along the way, and the path may be different than anticipated, but eventually you will get to your desired destination (so long as you have patience, reflection, and support). Simple metrics—whether they are health-related or financial—are the lights on the runway that show us where we need to land and help us to land safely. Sure we might get there just fine without them, but if given a choice, take the lights. Learn a few simple metrics and let them guide you.
A participant recently told me that she appreciated how much “hand holding” she was getting as she unpacked her history with money and started learning about financial topics. I loved that image because it’s exactly what needs to happen to one degree or another. Behavioral change is hard. Learning new (healthier) skills is stressful. Trust me, our brains resist it and put up a very good fight. Every. Step. Of. The. Way. There’s enough stress in life, so if we can take you by the hand and walk with you through the journey to explain, explore, and support, then that’s why we are here. We all deserve that level of care and we look forward to providing it to you when you are ready.
Click HERE to learn more about the Wellview services available to you. We can’t wait to work with you!
Tanya Runci, NBC-HWC & AFC Candidate
Health Advisor | Email Tanya