Many Americans these days don’t make all that much fuss about seeing a shrink, though seeing a financial specialist who can shrink debt — and the stress surrounding money — is another matter entirely.
A recent report from the American Psychological Association indicates clearly that money is the leading cause of stress for Americans, outpacing work, family and health. In “Stress in America: Paying With Our Health,” the APA surveyed 3,068 adults ages 18 and up and found that “72 percent of adults report feeling stressed about money at least some of the time,” and 22 percent “say that they experienced extreme stress about money” in the past month.
The sources of worry are enough to pack a portfolio full of panic:
- Many baby boomers don’t have enough money put away for retirement. The 2015 Transamerica Retirement survey found that just 14 percent have a written retirement strategy, while 47 percent expect Social Security to be their primary source of income. Where’s that hefty nest egg?
- The average student loan debt is $33,000 for a 2014 graduate, according to Debt.org. Assuming a student pays $380 a month on that debt balance at a 6.8 percent interest, 10 years later the loans will be paid off — along with $12,572 in interest, calculators at FinAid.org show.
- Three in four people have less than $1,000 saved.
- The average debt for a household with credit card debt is close to $16,000.
Maybe a therapist can help you talk through the angst. And keep in mind, a financial advisor can’t replace a licensed medical authority any more than the therapist can replace a certified financial planner. But in many cases, a good financial planner can cut through the monetary stress and turn it into a plan for success. Here are seven reasons the planner can replace the psychologist.
1. Planners Can Help Mediate Money Matters That Strain a Marriage
When money troubles hit a husband and wife, the resulting stress can lead to arguments over how to best address them. Among those who indicate they have relationship stress, finances top the list of reasons, according to a recent SunTrust survey: 35 percent say finances are the primary cause. In many cases, a planner can act as a safe third party who facilitates an important financial starting point: civil conversation.
This service also helps when one partner has a half-baked financial “plan,” while the other is hiding his or her head in the sand. A good planner addresses marital issues that run the gamut from debt and bad spending habits to how best to invest retirement savings.
By the way, the second-leading reason for marital stress is a partner’s annoying habits. Whether that’s binge shopping or simply nonstop snoring, the survey doesn’t say.
2. They Assist Family Members in Developing a Financial Legacy
While married couples commonly experience stress over issues such as living paycheck to paycheck, families with adult children might face friction — or fear — when it comes to larger planning issues. While you might require legal help to complete some tasks such as crafting a will, a first-rate planner can sit at the table and answer questions while suggesting superior approaches.
“Getting family members on the same page will help improve the likelihood of success of a wealth transfer and increase the chance of adoption of the parents’ wishes,” said Rick Arzaga, founder and CEO of Cornerstone Wealth Management in San Ramon, Calif. “Even more important, it reduces the risk of having the process of estate distribution fracture relationships among siblings and other family members.”
3. They Can Convert Emotional Turmoil Into Rational Strategy
Financial planning has much in common with house hunting and even pre-marital counseling. The situations create a lot of short-term pressure that causes couples to boil over into heated arguments that bear little resemblance to the initial objective. And while they’re not marriage counselors to be sure, financial advisors often experience irrational exchanges between couples.
If you’ve ever experienced or witnessed one of these fights, you know it’s not such a large leap from, say, “How should we invest for retirement?” to “Why do you spend so much money on power tools?” The best advisors know that cool heads prevail. They know how to redirect a money planning session back to identifying shared goals, pinpointing challenge areas and crafting a sound game plan for the short and long term.
4. They Help Turn Confusion Into Clarity
Let’s assume the opposite scenario, where a couple or individual wants to make the leap to sound fiscal health but has no idea where to start. Planners can employ survey-based tools to get at your motivations and values.
“We use a financial personality tool called Financial DNA,” Arzaga said. “It’s an online survey that asks our clients to choose terms that are ‘most like’ and ‘least like’ the investor.” The results help Arzaga and his team to benchmark financial goals, measure risk tolerance, spot behavioral biases and determine how clients might behave in a variety of market conditions.
5. Planners Know How to Overcome the ‘Fear Factor’
It’s human nature to resist making a change or back off from a commitment that requires new ways of thinking and acting — even if they are positive ones. Confronting your fears and holding your hand through it all constitutes a key part of any planner’s job.
This to some extent explains these findings of the National Association of Personal Financial Advisors: 56 percent of U.S. adults lack a budget; 40 percent gave themselves a “D” or lower in their knowledge of personal finance; and 50 percent of those with children have no will. After all, who likes to think about death?
Moving into fruitful discussions about these topics might make shampooing the rug sound like a joy by comparison. But who said you have to do it alone? What you might lack in knowledge and courage, the financial planner can supply in step-by-step fashion.
6. A Financial Advisor Can Help You Stop Lying to Yourself
Just as a gifted therapist guides the man or woman on the couch to challenge false assumptions about life, the planner who gets to know you over time has a good shot at spotting your inconsistent or dubious money beliefs. If you try to justify sinking all your dough into a very risky investment, the planner might in turn ask about your stubborn determination to gamble.
If you insist your spending on life’s luxuries should fall outside the monthly budget, then that opens the door for your pro to remind you how you could cheat yourself — and your family. Your planner might or might not double as an accountant, but either way, it’s a safe bet that he specializes in accountability. The more you open up, the harder it gets to check your conscience at the door.
7. You Have a Partner in Converting Bad Beliefs Into Good Plans
Here’s where a planner could especially affect both your financial and mental health. It’s the common goal of therapists to explore how past patterns — especially those learned in your family of origin — influence present behavior. You might not even be aware that you’re doing this, but planners such as Peter Mallouk, president of Creative Planning in Leadwood, Kan., point to a phenomenon known as confirmation bias, which involves how a person uses new evidence to confirm existing beliefs or theories.
“Ultimately it’s our own behavior that does us in,” said Mallouk, rated the No. 1 independent financial advisor in America by Barron’s. “The key to dodging the pitfall is to be aware of what your instincts tell you and recognize behavioral land mines.” Experienced planners will help bring your biases and assumptions to light and replace them with a holistic formula that stresses portfolio planning, patient investing and a sensible level of risk tolerance.
It’s true that many psychologists listen to patients talk about money and their anxieties, stresses, thwarted hopes, and seemingly impossible goals. The therapist, to be sure, can sympathize and empathize. But a therapist can’t strategize about your money habits and investment choices the way a financial planner can. When it comes to improving your financial health, you need the right person for the job.