Do You Have a Money Disorder?

October 2, 2019
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Last week on the Illumination Wealth Blog, we talked about the concept of money scripts. It’s an interesting take on financial psychology, which is not a subject that’s talked about enough in the financial planning world (at least not out loud). However, one’s ingrained personal beliefs and habits really impact how they manage their money. With that in mind, we want to continue this topic of financial therapy in this and our next few articles.

Money can be a very emotionally charged topic and being a financial planner may often branch into the world of financial therapy (more on that soon). Some people are already very smart with their money. Hiring a financial planner can help make them even smarter with how they manage cash flow while also saving and investing for the future. Then, there are many people on the opposite end of the spectrum who really struggle with money. These are individuals that some researchers would say actually have a “money disorder.”

What is a Money Disorder?

The term money disorder might be reserved for some of the most extreme cases. Almost everyone has some point in their life when they face financial challenges and hardships. People with money disorders can be rich or poor, but they have an unhealthy relationship with money that negatively affects their lives. Again, we might refer back to the money scripts as described in last week’s article.

Brad Klontz, Ted Klontz and Rick Kahler wrote the book Facilitating Financial Health: Tools for Financial Planners, Coaches, and Therapists. In it, they define money disorders as “maladaptive patterns of financial beliefs and behaviors that lead to clinically significant distress, impairment in social or occupational functioning, undue financial strain, or an inability to appropriately enjoy one’s financial resources.”

The Negative Effects of Money Disorders

Money disorders lead to really bad habits, compulsive decisions and bad money management. Sometimes, financial struggles actually result in other more recognizable mental disorders like anxiety and stress. This typically leads to even worse decisions and more unhappiness. It’s a vicious cycle.

Gambling, compulsive spending, hoarding and workaholism are some widely accepted forms of money disorders in the psychology world. Then, there are others that are more informally diagnosed like financial denial, financial dependence and financial enabling.

Signs You Might Have a Money Disorder

There are some signs that you might have a money disorder:

  • Building up consumer debt
  • Being overly secretive about money with your loved ones
  • Being overly frugal and not spending money at all
  • You can’t define what “enough” money is
  • Compulsive spending on things you don’t need
  • Viewing money as a status symbol
  • Being a workaholic
  • Gambling addiction
  • Feeling guilty for having money
  • Not being able to say “no” when others ask for money
  • Being in denial about your bad financial habits

Odds are, just about everyone reading this can identify with at least one description on this list. Just like a lot of mental disorders, our money disorders can fall on a spectrum. The more extreme you are with any one of these habits or the more you have on the list, the more of a money disorder you might be dealing with.

How a Financial Advisor Can Help

Many people with bad financial habits avoid working with financial planners. Whether it’s a matter of feeling embarrassed about your financial situation, thinking you already know it all because you make a lot of money or you think you can’t afford to hire one, there are many excuses why someone decides not to seek financial guidance from a professional.

The truth is a good financial planner should essentially pay for themselves by providing sound financial guidance and advice. No matter how much money you make or what your financial goals are, a financial planner will be able to provide support with an objective perspective. Whether you want to call it financial planning or work with a financial therapist, it’s all done with the same goal in mind: improving your financial health.

To learn more about Illumination Wealth and how our financial planning services can help you, contact us today for a no-obligation introductory consultation.