Are you neglecting your finances?

Piles of unopened bills. A wallet full of receipts and ATM statements. More accounts than you can remember the balances of. Cards you can’t remember the PINs to. Waking up in the middle of the night, heart pounding, thinking of your pension plan, tax return, or credit card statement. Sound familiar?

Certain words – like ‘bank’ and ‘statement’ – can grip us with anxiety. So much so, that Cambridge University researchers have declared ‘financial phobia‘ a bona fide psychological condition, affecting as many as 9 million people in Britain – mostly women and young people.

What makes you a financial phobe?

Chrometophobia (Ancient Greek χρῆμα ‎(khrêma, money) + -phobia) is defined as ‘the fear of money, a chrometophobe may be afraid of dealing with finances in general or of financial difficulties’. Symptoms can often be physical in nature: almost half of suffers experience a racing heart, 15% freeze, 12% feel ill, and 11% become dizzy.

‘Once in a blue moon, I’ll sit on the sofa with the bills on my lap and swiftly tear them all open. Initially my eyes don’t focus’ writes Laura Barton for The Guardian.

‘I never open bills when they arrive. They sit, variously, on my desk, in my briefcase, in the hall, on my draining board, for several weeks at least. Then I get scared and deal with them, which involves putting them all in a pile so I, at least, know how many I have to deal with and therefore can be even more depressed. The thought of this pile then haunts me like a silent rebuke every time I sit in my living room’ says another financial phobic.

Philosopher Daniel Dennett calls this kind of behaviour ‘neglect’, describing his own ‘finances neglect’: ‘So little do I like balancing my checkbook, in fact, that only some truly awful alternative… can force my attention to the topic. This neglect has serious consequences for my welfare’.

Dorothy Rowe, author of the excellent book The Real Meaning of Money explains that if there is a painful area in our early life, we may later decide not to acknowledge that this area exists. Thus, it is unsurprising that those who more frequently experience financial difficulties – earning less, part-time rather than full-time work, greater responsibilities – are more likely to experience a fear of finances, and to prefer to ignore this area.

While it can be tempting to ‘bury your head in the sand’, the consequences can be serious – legal action from unpaid bills, a poor credit rating that prevents you from buying your dream home… But often, as Barton writes, it’s all fine: ‘Financial phobics usually have no more reason to fear their bank statement than anyone else’. In fact, they are generally intelligent people who are well-organised in other aspects of their life, and can learn to apply these skills to their finances too.

Overcoming financial phobia

Like most people, I lapse into periods of finance-avoidance. Particularly when everything else in my life seems complicated, the latest bill is the last thing I want to deal with.

A few of the things that made me more organised:

  • Getting an awesome PAID stamp to make bill-paying fun (and to ensure I know what bills I have already paid!)
  • Changing to electronic bills where possible. Some companies, like Virgin, even send SMS reminders when a bill is due. I wish more did!
  • Using a cute calendar (with fun stickers!) to plot when bills are due.
  • Having a mail holder on the back of the front door, so that any bills I don’t have time to open stare me in the face the next time I go out, and aren’t stacked up elsewhere.
  • Using the Paper Flow method to get my paperwork in order.
  • Making use of my bank’s phone widget so that I don’t have to log in to see my bank balance – it’s always there, just like the time and weather.

When is it good to ignore your finances?

Of course, being obsessed with with your finances is not good either. ‘Other people, having encountered an area of very painful experience, decide the safest way of dealing with it is never to take their eyes off it’ writes Rowe. She gives the example of Catherine de Camp, author of The Money Tree, whose experience whilst young of her family losing their wealth resulted in her taking extreme care of her money, meticulously filing all of her canceled checks, paid bills, receipts, earning vouchers, and brokerage statements in a record box, and keeping track of all of the money she received and how it was spent.

In de Camp’s case, this attention to detail ensured that she was able to easily satisfy the Internal Revenue Service when audited. But keeping too close an eye on your money can lead to negative outcomes too.

Just as burying your head in the sand and ignoring bills and bank statements can lead to stress every time you hear the post arrive or see your bank’s logo, obsessing over, for example, a stock portfolio, can be very stressful also, and lead to poor decisions.

There’s a reason the risk/return tradeoff in investing is also called the ‘ability-to-sleep-at-night‘ test.

One of the most unique books I read while learning about shares was How I Made $2,000,000 in the Stock Market by Nicholas Darvas. Darvas discovered he needed to adopt ‘a cold, unemotional attitude toward stocks; that I must not fall in love with them when they rose and I must not get angry when they fell’.

Because of Darvas’ globetrotting career, back in the days before global roaming and high-speed wifi, he was able to cultivate a ‘hands-off’ approach that enabled him to be more detached. Four days behind on news from Wall Street, Darvas could not have knee-jerk reactions, and having to pay around $15 per day for cables to request stock quotations also dissuaded him from making rash decisions.

Even though we’re surrounded by more information than ever, we can all do this by forbidding ourselves access to news when it is not helpful. When I was actively buying shares, for example, I had the Money app permanently on my desktop, flashing up the prices of shares I was interested in. Now that I’ve constructed a portfolio, I don’t. Of course, I still check my shares occasionally (racing heart and sweaty palms notwithstanding) and make sure to read company updates, but I don’t need to know the price every second of the day, any more than I need to know the value of my apartment.

More importantly, I don’t want to be exposed to the constant doom-and-gloom articles about the economy as a whole which the app would also promote- issues I have no control over, and which often turn out to be little more than scaremongering in any case. After all, the media has an interest in keeping us scared – we’re much more likely to click on a news item that says ‘Why a global recession is inevitable’ than one which says ‘Economy continues pretty much as normal’.

Darvas also warns against seemingly ‘free’ information with ulterior motives. Lots of magazines, mailing lists, free seminars, expensive courses, and websites that make specific stock recommendations are for what Darvas calls ‘the sucker trade’. While much of how Darvas looks at shares is too patterns-based for my liking (for example, he says ‘If one horse is going to win, it will win, even if thousands of onlookers are cheering for another on’ – This is somewhat true of stocks, but of course the onlookers aren’t just cheering – they are actively affecting the stock’s prices also) his book is well worth reading.

Mr. Money Mustache, too, recommends a ‘low information diet‘, arguing that ‘News programs are, with the exception of a few non-profit or publicly funded ones, commercial enterprises designed to turn and maximize profit’. He goes even further, naming email, Facebook, and most workplace communication as distractions from advancing your goals.

Managing your money info

To finesse my money info diet, here are a few of the things I do:

  • Read books and blogs on general financial principles rather than looking for specific hot tips. By the time you’re hearing about them, they’re not all that ‘hot’. It’s much better to learn the classic rules than try to find a ‘secret’ amongst the noise.
  • Disengage from social media that isn’t working for you.
  • Stop checking your work email outside of work hours. This is the single best action I ever implemented when working.
  • Don’t watch TV. Watch the programs you enjoy on catchup TV online – you’ll save lots of time and can be far more selective about what you view as well as avoiding ads.
  • Try some alternative media. The Young Turks are a favourite of mine.
  • Delete any financial or news apps that are serving you a constant diet of anxiety. The apps I most use are those that are specific to my situation (see the account balance widget above), not those that are designed to get clicks from a mass audience.

Financial NeglectIn short, decrease your exposure to news and info that is not tailored to your needs and goals, and increase your focus on the little tasks that will further your interests.

Here are some ideas on how to overcome specific financial fears

Are you a financial phobic? Or do you need to step back from your finances?
What are your best finance tips?
Let me know in the comments below.

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Today’s featured image is a collection of mail we recently received – unopened, in this case, as it belongs to the owner of our AirBnB!

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