Our guest blogger is Eric Dammann, clinical psychologist and financial coach in NYC.
Financial denial can be so harmful to my clients. It works in the background, and often goes unnoticed until it's too late. What is denial? It’s a defense mechanism we use to protect ourselves from unpleasant emotions and thoughts. Defense mechanisms are not only important to our emotional survival, but necessary. With all of the disturbing news coming at us every day (climate change, global economic crises, terrorism), we need a defense to fight the overwhelming chaos of the world. The challenge is when defense mechanisms become the only means we have to deal with difficulties; and when it comes to our finances denial is a ticking time bomb.
What We Don't Know CAN Hurt UsFor example, millions of Americans are afraid to learn what their credit score is. They expect the truth to be uncomfortable, so they avoid knowledge. And what we don't know CAN hurt us - badly, in the form of thousands of dollars wasted on a higher interest rate for a mortgage or car loan. A credit score represents financially stable behaviors, like paying bills on time and also simple things like living in the same place for a long time. Tackling the behaviors one at a time can lead to a much healthier score, can feel really gratifying, and save money easily.
Are You in Denial?
Denial is sneaky and not easily detected. Here is what to look for;
- The "ostrich effect"—not opening credit card or bank statements when they come. If you've got a pile that hasn't been touched in months, this means you.
- Using the fact that disaster has yet to strike as evidence that you're OK. Like not going to the doctor for 30 years, and justifying it because "nothing's happened yet."
- Hiding money issues from your partner or family. If you're hiding your financial information, you've likely got a problem.
- Magical thinking, or belief that tomorrow will be better without any rational reason to believe so This also covers "it won't happen to me" thinking.
- Lengthy rationalizations for spending. When we are spending wisely and with purpose, the reasoning behind it is crystal clear.
- Increasing debt over the past few years for no clear reason.
- Exhibiting anger or blaming others when confronted is another tell-tale sign that we're caught in the web of denial.
Tackle Denial to the Ground
The hardest first step is admitting the issue. What comes next is much less painful than most people imagine. In fact, the feeling of empowerment and control that results from addressing rather than denying these issues is well worth the effort. Relief sets in. The burden lightens and success seems possible. Denial is a formidable foe, but with the right tools and support, it's a river that you can cross and never have to look back.
Related Topic: Willful Money Blindness & Social Pressures
Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Behavioral Cents, LLC and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.
Carrie Rattle is Founder of BehavioralCents.com and a veteran executive of financial services. She works with women to build money confidence and change their money behaviors for the better - without deprivation. She works side by side with them to fight the tide of daily temptation and reach their dreams. Women gain control and feel comfortable making their own wise money decisions. Thoughts always welcome: email@example.com.