“The past year has taken a toll on our finances, and while the worst of the squeeze is over, we’ll still be feeling the pain well into 2023.
The newest edition of the Hargreaves Lansdown (HL) Savings & Resilience Barometer found that relentlessly rising inflation left millions of people running on empty by the end of 2022, and that there’s still a long way to go.
For those on lower incomes, young people and singletons, it could do enormous damage to their financial resilience — both today and for the long term too.”
~Sarah Coles·Personal Finance Columnist
Whether you’re personally feeling the financial squeeze at the moment or not, it’s likely that you’re familiar with the stress that is often sparked at the very thought of money. No matter how much or little we earn, managing our money and making wise decisions with it is often a huge cause of our collective angst.
And that stress comes with its own cost, creating negative outcomes in our health and well-being which in turn can make it harder to make clear and rational decisions.
A report in 2003 by the World Bank found that people who are struggling financially are more likely to make bad decisions. They borrow too much and don’t save enough. But the interesting part is that the report doesn’t lay blame on people themselves, but rather explains that the day-to-day hard choices that people face causes a drain on their psychological and social resources and actually turns them into bad decision makers.
This quickly becomes a vicious circle. When people are unhappy and stressed out they tend to look for comfort, to self-soothe in the same way as a baby might with a dummy or thumb sucking. So, we feel stressed about money, we feel the impact of that stress in our ability to make good choices, and we reach out for comfort, which usually costs money in some form or fashion. And so the circle continues.
Anyone who loves shopping is familiar with this…that deep satisfaction you feel when you find something you love to buy is nothing short of a primitive response to having an emotional or physical need met…it just feels GOOD. We feel momentarily soothed, able to ignore the other difficult parts of our life for a moment, distracted from our stress until it creeps back in again.
I am as guilty of this as the next person…yesterday was my birthday, and the thing I wanted to do MOST was go shopping. Not to spend a lot of money, but just to experience the dopamine rush of browsing, trying things on, finding the perfect items, returning home with my loot. It is likely that we have been primed by evolution to enjoy activities that mimic our hunter/gathering past, and once upon a time I might have got the same satisfaction from browsing for berries in the forest or selecting the best maggots from under my local tree stump. These things were free for the taking, however, while my armful of clothes will end up costing more of my actual energy (in the form of the work I have to do to earn the money to purchase them) than simply walking around a bit, bending down a lot and stopping now and then for a good natter and a handful of grubs.
(Actual photo of me in the forest yesterday)
This is an important distinction, but because we don’t often think about this as we’re spending money - the true cost of things in terms of our energy spent to acquire them - and as a result many of us have developed spending habits during our adult lives that are actually costing too much of our energy. As a result we can end up struggling, in debt or living beyond our means even as we try to find comfort. And of course, the more in debt we get, the more comfort we need…the more fluffy sweaters (in my case) or indulgent meals, new gadgets, trips and THINGS.
In addition, studies have shown that people make poorer money decisions with issues that are further away in the future, like saving or investing. The more distant and abstract it is, the less we focus on it…it’s likely another evolutionary adaptation. We are primed to pay the most attention to the thing that is happening RIGHT NOW, or in the near future. (Fascinatingly, in cultures where there is less of a distinction placed on present and future, people tend to make better long term money choices.) So we might be making poor money decisions based not only on a deficit of psychological resources, but on a very natural tendency to prioritise what is nearest to us.
So then it’s not ALL our fault, this tendency to not plan our finances well, to seek comfort, and to make poor decisions around money. We are not necessarily malfunctioning when we enter the spiral of financial stress/comfort/stress and can’t find our way out.
No, we are apparently just being very human.
Does that feel like a relief to realise? I hope so, because more stress and self judgement is NOT the way out of this pattern of behaviour, it doesn’t help us and it doesn’t help our financial wellbeing.
What DOES help is starting to pay attention in a new way, with no judgement and no self recrimination…just choosing to break the cycle of stress and comfort seeking by first REDUCING THE STRESS.
You may believe that you would feel less stressed if you had more money, and that might be true, but why wait for that mythical future outcome? Why not pick a different point in the circle to start at? If you know that you have a tendency to spend money unwisely when you’re seeking comfort, you will be doing yourself a huge favour if you find other ways to self-soothe. And the more you can do to REDUCE your stress around finances, the more likely you are to make better decisions and thus enter a totally DIFFERENT circle. A much less vicious one, for sure…one where you self-soothe in a healthy (inexpensive way) and thus feel comforted and able to make calm decisions around your spending, and better, more rational, long-term choices. That circle might start off small, but the longer you go around like that, the more incremental changes you can make that set you on a very different trajectory financially.
Luckily the wonderful people at Clear Minds have your back here, as they have a ton of self hypnosis sessions for stress and anxiety relief, and one that is particularly geared towards reducing stress around finances. It can help you finally reprogram that negative voice in your head and the entrenched beliefs you have about your finances that cause you to head off into the forest with your credit card burning a hole in your pocket in the first place. Have a listen and please come back and let us know how your spending habits change as a result!