Understanding the Connection Between Money and Emotions
Money and emotions often create a complicated relationship for many individuals. For Mary Clements Evans, a certified financial planner, financial therapy serves as the cornerstone of her work with clients. In her book, “Emotionally Invested: Outsmart Your Anxiety for Fearless Retirement Planning,” Evans explores the fear, anxiety, and guilt often associated with financial choices. She provides insights on finding financial happiness, both now and in retirement.
The Significance of Your “Money Why”
I had the opportunity to sit down with Evans to discover how individuals can regain control over their financial lives. One pivotal concept she introduced is understanding your “money why.”
Evans states, “Our money why drives our decisions — the underlying reasons behind our financial actions.” Understanding how you feel about money, or your relationship with money, is crucial for making sound decisions. She likens it to her love for brownies: “I know how many calories are in a brownie, yet I still indulge because it makes me feel good.” This analogy illustrates a crucial point: even the most educated people can make poor financial choices if their money why isn’t in a healthy place.
FOMO vs. FORO: The Two Primary Money Whys
Evans identifies two primary motivators that influence our financial decisions: FOMO (fear of missing out) and FORO (fear of running out).
Individuals driven by FOMO are focused on immediate gratification. They likely prioritize purchases like new cars, vacations, or home renovations. In contrast, those motivated by FORO fixate on future security. They constantly worry about having enough funds for retirement or facing unexpected financial crises.
The Emotional Investment in Financial Decisions
As Evans notes, we delude ourselves into thinking we make rational decisions when, in reality, our choices are often rooted in emotion. We justify emotional decisions with facts, reflecting a fundamental misunderstanding of how we interact with money. “If decisions were purely factual, no one would take on debt they can’t afford,” Evans emphasizes.
Changes in Retirement Savings in America
For decades, Americans relied heavily on pensions, which were managed by corporations to attract and retain employees. However, changes brought by the Employee Retirement Income Security Act (ERISA) in 1974 shifted that responsibility to individual workers. “We were told that saving for retirement was simple, but that’s misleading,” Evans points out. Most people are overwhelmed with day-to-day responsibilities, making it unrealistic to expect them to grasp a complex financial system on their own.
Saving for Survival: More Than Just a Comfortable Retirement
Evans emphasizes the essential need to save for survival rather than solely for pleasure. Many individuals mistakenly view retirement as a distant goal rather than a necessity. “It’s not just about enjoying life in retirement; it’s about ensuring you have enough for the basics—food, shelter, and clothing,” she urges. With increased lifespans, one could be retired for 20 to 30 years, which necessitates comprehensive planning and savings.
The Exercise: Finish the Sentence
To help people confront their relationship with money, Evans suggests an engaging exercise: finish the sentence, “Money is…” Responses often reflect deep-rooted emotions, such as "Money is scary" or "Money is confusing." While the official definition of money is a medium of exchange, the emotional connotations people attach to it reveal their true relationship with finance.
Finding a Financial Adviser: Key Considerations
In her book, Evans also dedicates time to assisting readers in selecting the right financial adviser. A crucial point is that there are no industry standards governing the title of “financial planner.” Individuals with varying degrees of education and experience can share these titles, leading to confusion among consumers.
Evans advocates for certifications like the CFP (Certified Financial Planner) designation, which requires extensive education and ongoing training, as a reliable indicator of competence.
Removing Shame and Blame from Financial Decisions
The essence of Evans’s book is about removing the shame and blame often linked to financial situations. Many people, regardless of their background, feel embarrassed when discussing their financial habits. “Removing shame is essential,” she insists. It’s vital for individuals to realize that it’s never too late to become empowered and improve financial literacy, ultimately paving the way for a secure retirement.
In conclusion, Evans aims to assist clients who feel overwhelmed by their financial circumstances. Understanding the emotional framework governing money is critical to making informed choices. By shedding feelings of shame and developing a clearer understanding of one’s motivations—the money why—individuals can transform their financial landscapes. Financial therapy is not merely about numbers; it is about embracing one’s emotions to achieve security and happiness.