Part of my initial assessment with new clients as a psychotherapist in private practice is to examine a client’s current financial security, goals, fears, risks, and rewards. Our finances contribute to how we perceive our external environment, and they affect mood, feelings, behavior, and relationships. Over 24 years in practice, I have observed certain “true-isms” about people who have it together financially – regardless of their income bracket. What is the connection between good financial habits and coping with depression and anxiety? Here are some time-honored tips:
1) Plan your career – No other factor I’ve seen is more important to long-term financial security than your choice of career, and managing that career from the start of your working life until retirement. It’s important to choose work that interests you, but the reality is that some fields just pay better than others. Ask yourself: What you do better than most people you know? That is probably what you will enjoy and make money at. Studying those skills, going to school, getting training, and finding mentors are critical elements. Help from a career counselor or therapist who does career coaching can help you clarify your values, identify your aptitudes, and sharpen your vocational skills to maximize your lifetime earnings. I’ve always said that the best job for you is the intersection of the skills you can do (well enough to compete in a commercial market), what you enjoy (and will make your work life interesting and not a drudge), and what you can get hired to do (this changes over time of where jobs are and what’s paying well). Another way to look at it is think about the 1) skills you want to use; 2) the setting in which you want to use those skills; and 3) who benefits from your daily work?
2) Keep a budget – To avoid the financial anxiety of being deeply in debt, you must know how much you earn and how much you spend, always spending less than you earn. Don’t use credit cards except for an emergency – if you can’t afford something, save up until you have enough money to buy it. Don’t buy it on credit on the hopes that you will “someday” pay it off – many people never do. If you always earn more than you spend, you raise your self-esteem by developing emotional intelligence skills such as delayed gratification, impulse control, and working toward a rewarding goal. You have to accept the cold, hard reality that you can’t afford to buy more than you earn with the “magic money” of credit cards. The pain of accepting that now is better than the pain of huge debt later.
3) Save for your future – Putting a percentage (usually anywhere from 2-15%) of your salary in your employer’s 401-K retirement program can build savings quickly. Albert Einstein called compounding interest one of the wonders of the world. If you don’t know what this is, you need to teach yourself more financial literacy. Look these things up on a search engine. Ask your Human Resources Department at work if you have a 401-k or other retirement plan, and get investment advice from the plan’s adviser if you do. You could also choose a specific amount each month to put into a bank savings account (perhaps via direct deposit of your paychecks). Saving for your future is critical for your retirement years that come sooner than we think. The interest this money will accrue over decades in your working life will really add up, and the sooner you start, the dramatically better off you’ll be. Even if you’re only 18 or 20 years old, it’s critical to try to save a standard 10% of your income. Financial management books as far back as the 1920’s suggest that if you save just 10% of everything you make, you will likely have a comfortable retirement. You can relax knowing that your future is secure, but you have to have the discipline and the maturity to think for the long term. The most successful middle-aged people in their 40’s I know are the ones who really started investing, even a little bit, by their 20’s.
4) Fix money leaks – For one month, make a list of everything you spend. Look at the big expenditures. Are there wasteful “money leaks” that you need to fix? Reduce your monthly fixed costs by finding cheaper ways of getting things, like using coupons at the supermarket, finding stations with cheaper gas, or changing phone companies. Cut back on areas that take more than their fair share of your budget, which are usually in the food, alcohol, drugs, or online purchases areas. Most people know their “weakness” for impulse buying.
5) Be “fiscally fit” – If you have a bad credit score from missing or sending late payments to credit cards or utilities, learn how to fix it. There are books such as The Money Book for the Young, Fabulous and Broke by Suze Orman that can help. Keep your financial commitments by “paying yourself first” each month to your savings, and paying all of your bills on time and in full every month. Fulfilling your commitments and keeping your word are great ways to raise self-esteem. By taking responsibility, you build self-confidence, improve relationships with others, and feel good in the knowledge that you are respected and reliable.
6) Build protections – Getting in trouble with the IRS by not filing your taxes can lead to fines and even jail. Jail is not like the rap songs or the movies; it’s much more difficult, and you really want to avoid that. Protect your assets by carrying insurance – such as car insurance (liability and collision, to protect you from being sued and have a car to drive), renter’s or homeowner’s insurance (in case of a fire, flood, or robbery), health insurance (in case of a sudden illness or accident), and disability insurance in case you can’t work your regular job. Make paying the appropriate insurance premiums a priority in your budget. Many books or even a Certified Financial Planner can advise you on what you need based on your specific life circumstances, and these differ for everyone, depending on being partnered/married versus single, having kids or not, how old you are, what assets you need to protect, and so on. Having insurance against the most common risks for your sex, age, and profession minimize your anxiety, provide reassurance, and restore hope if unfortunate events ever happen to you.
7) Give back to the Universe – Inspirational and motivational author Jack Canfield, in his classic book, The Success Principles, suggests that we “tithe” our income – which is to set aside a certain percentage of your choosing (such as 5-10%) for giving away to charities or causes you care about. This creates a wonderful good feeling of altruism, “karma,” and can give a sense of pride and self-esteem by helping others who are less fortunate. People who do this often report amazing stories of great things happening to them, as if the Universe is taking note of your generosity and taking care of you in return.
Like all financial issues, you should see a professional financial adviser before making any important decisions, and I’m not one of those; I’m a therapist who believes that if we educate ourselves and learn best practices for self-care, including financial self-care, we have a better quality of life. A financial professional can help you with specific financial decisions, whereas working with a therapist can help financial-related topics like any anxiety, depression, impulsivity, entitlement, deprivation, jealousy, overwhelm, hopelessness, or guilt that money issues might evoke in you. Taking care of your financial self is one more way to have the life you want.