People suffering negative psychological effects from the Great Recession are seeking help in a new branch of psychology called financial therapy, Forbes reports. The Great Depression already demonstrated how financial trauma can leave psychological scars, and the Great Recession has provided enough new case studies to generate a professional publication, the Journal of Financial Therapy. Contributing researchers say that even professional financial planners experienced symptoms of post-traumatic stress disorder during the recent economic crisis. If you’re experiencing mental or emotional anguish as part of the fallout from the Great Recession, economic psychology is a field that has attracted hundreds of specialists since its inception in 2010 and has identified ways to heal your fiscal wounds and improve your overall well-being.
Question Your Financial Assumptions
Drawing from cognitive psychology, financial therapy treats beliefs and attitudes that may be contributing to money management behavior problems. Financial writer Miranda Marquit identified on FreeFromBroke.com several of the most common beliefs fueling financial failure.
One widespread assumption promoting financial dysfunction is the attitude, “I’ll wait until I start making more money to start saving.” This makes saving a low priority, resulting in saving getting delayed until a crisis arrives and the savings that were put off until tomorrow aren’t there today. To counter this, adopt a new attitude: It’s important to begin saving now, even if you have to start small.
Other problematic assumptions involve tolerating excessive debt, procrastinating to address long-term financial issues and equating possessing goods with being rich. Financial therapists and consultants have developed specialized personality quizzes to help you identify some of your own beliefs and attitudes about money.
Learn Better Money Management Strategies
Developing better strategies for money management can also help counter the effects of negative financial beliefs. Learn to pay down credit card debt with one of the most fundamental financial strategies out there: budgeting. Many financial literacy experts encourage people to adopt Elizabeth Warren’s 50/20/30 rule for budgeting:
- Half of your monthly budget gets devoted to necessary expenses
- One-fifth goes to savings and debt repayment
- One-third is left for discretionary spending.
Learning to manage debt and savings is also essential. Here many experts follow Dave Ramsey’s recommendation: Start by setting aside a $1,000 emergency fund. Then, systematically reduce your non-mortgage debt one balance at a time until they’re all paid off. Then tackle other savings goals. You might have other goals in mind as well. Such as owning your very own car. You could easily find a cheap car but what about the insurance? It might be worthwhile checking out someone like Money Expert who can help you save money so that you get one step closer to your goal.
If you receive regular structured settlement payments and carry a high amount of debt, consider selling your future payments for a lump sum of cash now. You could then use this money to help pay down your debt, putting you in a stronger position to pursue other savings goals such as retirement. Visit the J.G. Wentworth Twitter feed for more information about selling your future payments.
Develop Good Financial Habits
Harris Interactive’s 2013 Consumer Financial Literacy Survey found that only two in five American adults have a budget and closely track their spending. Putting improved money management strategies into action requires building better financial habits. Create a budget annually, review it monthly and record all your expenditures as these are basic habits for sustaining financial well-being. Use spreadsheets, apps and automated bill payments to help make these good habits easier to keep. It may also be beneficial seeking advice from financial advisers.
