10 Therapeutic Steps To Change The Direction Of Your Financial Journey

1. Have patience with yourself and do not blame yourself for your lack of financial knowledge or even for your current financial situation. Blaming yourself will stir up feelings of guilt, shame, and embarrassment, and it is truly not your fault that you never received a formal personal finance education. It is also not your fault that you may have experienced financial trauma or intergenerational financial trauma. In fact, humans are adaptive and resourceful, and you may have developed your current financial behaviors out of necessity, as a coping mechanism, or in response to past experiences. Be gentle with yourself and give yourself the benefit of the doubt.

2. Explore your feelings about finances. Ask yourself - how is my overall wellbeing? How do I feel when I spend? How do I feel when I save? How do I change my financial habits when I feel stressed and overwhelmed? How do I change my financial habits when I feel safe and secure? While these questions may be difficult to answer, there are no correct or incorrect answers. Rather, not asking the questions entirely will inhibit you from making sustainable behavioral change. Exploring your feelings about finances will give you insight into your motivations as well as your fears and insecurities.

3. Focus on your financial strengths and areas of confidence - yes, you do have financial strengths. Everyone is doing something well financially. “I pay my rent on time every month.” “I feel confident that I am qualified for other jobs.” “I spend money in ways that align with my values.” “I recognize that I frequently worry about money, and I am motivated to make changes.” Keep your strengths at the forefront of your journey to reduce feelings of self-blame, helplessness, and frustration.

4. Start small, taking incremental steps towards acquiring financial knowledge. You can not and will not learn all about personal finance today or this week or this month. Instead of allowing that to dissuade you from pursuing financial knowledge, allow it to free you of the weight of believing you can or should learn it all. Every little bit of information adds up over time, and you will know more each day than you knew yesterday. 

• Access free financial education resources, including podcasts, YouTube videos, blogs, and the Consumer Federal Protection Bureau. 

• Decide one area of finance (high yield savings accounts, Roth IRAs, 529 plans, etc.) that you would like to learn a little bit more about. 

• Focus on this one area of finance until you feel more competent and confident, before moving on to another area.

• Notice how you feel (relief, confusion, worry) as you learn more and more, and remember that what you are learning is new and deeply, deeply emotional - it is only natural to have an array of feelings.

5. Let go of perfection, as it can lead to decision paralysis. The more you learn about personal finance, the more decisions you will be making for your own personal finances. These decisions may feel scary and overwhelming and bring up thoughts such as “I don’t want to make the wrong decision, so I won’t make a decision at all.” If you are having these thoughts, commit to a decision and continue learning more - you can always change course later. For example, there are several methods to paying down debt (snowball, avalanche, volcano, hybrid, etc.). In this situation, it is more important that you are paying down debt than the specific method you are using.

6. DO NOT create a budget. Many people have a visceral reaction when they hear the word budget let alone think about creating a budget. If that applies to you, do not create a budget! A budget is simply an estimation of what you think you will spend in the month ahead. Budgets do not typically account for the many unexpecteds of life and are, more often than not, completely arbitrary, ultimately setting people up for feelings of failure, inadequacy, and shame. Instead…

7. Track your expenditures. You can track all of your fixed and variable expenditures manually or with a free online tool, such as Mint, Rocket Money, You Need A Budget (YNAB). While manually tracking your expenditures may take more time than with an app, you will learn more throughout the process as you can truly customize a spreadsheet to meet your specific needs. Tracking your expenditures for two to three months will give you actual data and insight into your habits. You can use this data to modify your spending and saving habits and to determine approximately how much you need in an emergency or maintenance fund.

8. Calculate your net worth. Your net worth is simply all of your assets (positives) minus all of your liabilities (negatives). Add up savings accounts, retirement accounts, etc. and subtract credit card debt, student loan debt, etc. Calculating your net worth the first time may be scary. You may have a negative net worth - that is okay! Remember - net worth does not equal self worth. Calculating your net worth the first time gives you a baseline. Continue to calculate your net worth every six months (forever!), so over time, you can see the progress you are making. Again, you can manually track your net worth in a spreadsheet or use a free online tool, such as Empower or Ramsey.

9. Celebrate! As you track your net worth, find little ways to celebrate yourself and your progress. Create a new, exciting relationship with paying down debt or saving for retirement.

10. Remember - you are not alone. If you have hundreds of thousands of dollars in debt and feel helpless, you are not alone. If you have a million dollar net worth and still feel anxious about money, you are not alone. If you are fifty years old and have not started saving for retirement and feel ashamed, you are not alone. If you think your friends have more money than you and feel jealous of their frequent vacations, new car, and nice home, you are not alone. When you do not know how to change the direction of your financial journey and you feel alone, you are not alone.