9.4 min read

Financial therapy

Irrational thought patterns  can impact our emotional and financial health; they can creep into our minds and trick us into believing they are real.

This past week, in our first official revamped and newly launched support group (12/12/2021)  we discussed cognitive distortions. These can create personal finance struggles and financial therapy is a way that we can explore and address this.

These are irrational thoughts that can influence our emotions and behaviors. Everyone experiences them to some degree but sometimes there are extreme forms that hold us back- and can be harmful. When I discuss financial therapy, we can see how our money story is infused in these distortions as well.

In the actual support group meeting, I gave a myriad of examples throughout the 90-minutes from my own life and case-study style examples as well -for now, we will take a look at examples. First, let’s get a better handle on cognitive distortions. Remember that you might be triggered if these were always thrown at you by someone or if you realize that you do them. Either way, you can self-heal and improve your quality of thoughts for improved mental health and as a financial therapist, I can tell you that you might also reduce your financial wellness.

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What are cognitive distortions? How do they hinder financial wellness?

A cognitive distortion in the realm of mental health and is actually a thought pattern, an opinion bias that affects our own view of things or our surroundings. The belief has always been unintentionally reinforced throughout our lives because you can uncheck it. They often follow very subtle patterns of thinking. In fact, detecting those people is harder when they occur regularly during your routine. Usually, the error is the result of thinking “as cognitive disturbances do trigger”.

Financial therapists might state something like this

“Think of cognitive distortions, when it comes to money, as either helping or hurting your financial competencies.”

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Magnification and Minimization Before Financial Therapy 

These are exaggerated or minimized ideas over the importance of an event. One might believe that their own achievements are not important or that their mistakes were unforgivable.

These types of cognitive distortion will give your brain an over-inflated perception that may even be a bit dramatic for human nature. The true version of the phrase “making a mountain out of a molehill” rings true here, for magnifying experiences.

On the other end, minimizing [eople experiencing an enormous distorted image and distortion are more likely to experience positive things on the surface, that are not present as well; this will create future conflicts that they feel are “out of the blue”.

You might assume you can afford nothing or assume you have no budget. You have money issues but you either ignore them or you feel like managing money is overwhelming.

financial therapy

Catastrophizing and Financial Stress

Seeing the worst of any situation. Sometimes you can view bad circumstances affecting the person as the worst thing. A person can be catastrophized when they fail to pass tests immediately, believing they probably completed everything. If they don t take the exam already they believe they might fail at whatever happens, unless it is disastrous in some way. They will also look at their bank account today and assume that they will always be poor, forevermore.

You might assume that your budget means the end of your world. It might be time to have some money conversations with yourself if you feel this level of financial anxiety.

Overgeneralizing During Financial Therapy

Making broad interpretations from a single or a few events. Very black and white thinking. “I felt awkward speaking in public. I’m ALWAYS so awkward”. When using overgeneralized assumptions, is too vague in their experiences.  Most statements that are overgeneralized include the words “sometimes”, “never,” “some,” and none.”

This is a common thought pattern when someone has no idea what they actually have to spend or save.

financial therapy

Magical Thinking and Financial Stress

This is the opposite but can be similar. Let me explain. This is where you might believe that acts will influence unrelated situations. “I am a good person so if I don’t get that job, something is wrong” (the job might have a few variables why you may or may not get it, it has no bearing on you being a good person)

This is typical in blaming oneself and blaming someone else for financial difficulty and financial behaviors

financial therapy

Personalization During Financial Therapy

The belief that you are the reason why things happen. You turn everything to you. “My mom was drunk a lot when I was a kid. I wasn’t easy to raise, I should have done more for her so she would not need to drink”

Personalization is when, financially, someone thinks that something out of their control is their fault. and it can cause them great financial stress. For instance, the grocery bill going up during inflation is not your fault, but you might need to budget more.

Jumping to Conclusions in Financial Therapy

This is common, where a person might assume the meaning of something with no evidence. “They didn’t text back, they hate me”. When it comes to financial therapy, this might look like assuming that there’s money in the bank without checking on it. I have heard other financial therapists talk about this very topic over and over; it’s extremely common.

Mind Reading While Processing Financial Struggles

Interpreting the thoughts of others without evidence. “He didn’t call me after the date. He thinks I’m ugly”.

Such an observant person can act like a psychic and they can see someone else thinking and feeling. If they believe they understand what someone’s reasoning is but haven’t verified their assertion, they may have distorted perception.

In the scope of financial therapy, that person might assume the other person does not value their time or energy or that people will not pay your rates if you are self-employed.

Fortune Telling and The Financial Therapist

A financial therapist might outline the expectation is that a situation will turn out badly without evidence.

“I”m not going on a date, what’s the point, he will think I’m too fat”.

In the past, when I have had clients who did this, there would behave differently based upon their negative emotions, even if the reality in front of them was contradictory to how they felt.

A fortuneteller typically predicts the future and prepares itself for bad consequences. As an example, such thought processes automatically forecast problems and predictions. In the first few days or weeks leading up to a holiday, you might have heard this person say: “I better buy that hot toy or it is going to sell out” when the toy is not selling out, is not “hot” nor shows no signs of being price-increased.

When it comes to financial therapy, this might look like saying that you won’t be able to save because your spouse doesn’t care if you go broke.

clients process money and finances

Emotional Reasoning During Financial Difficulty

The assumption that your feelings are the way things are. “I feel like a bad wife, therefore I am a bad wife”. This might look like, in financial therapy, that you are “bad with money”. This is cutting into your overall well-being, and you will not feel deeply connected to your true self. It might be time for family therapy, informal therapy, or a traditional therapist to help you process your finances and stress.

financial therapists working with clients

Disqualifying the Positive When Self-Sabotaging in Financial Therapy

Recognizing only the negative aspects of a situation. Maybe you get a compliment on a dress, and they were in jeans, and all you can think of is that they felt it was too dressy.

All things considered in one extreme form can happen in which a person ignores negative aspects of a particular activity, but focuses on negative aspects for reasons other than negative aspects.

It is possible that people whose behavior strays from the norm ignore positive reinforcement they receive besides complimenting or acknowledging themselves. These thoughts patterns can change by a phenomenon called the cognitive restructuring of cognitive behavior.

This focuses on the way automatic thought affects emotions, thereby changing our behavior. In financial therapy, this might be expressed as not giving yourself credit for what you have saved or how you view your self-value.

therapeutic and financial competencies

Should Statements

Don’t should on yourself! Should statements be beliefs that things must be a certain way. This is highly inflexible thinking. The term “should”, ” needs ” is nearly always related to brain distortion. This remark may trigger a feeling of denial. The “Should” expression also carries widespread meaning in our lives.

This attitude is often indicative of anger when the other individual is not achieving the desired results. Despite our best efforts we rarely control others’ behaviors, which means that the thought that we should do it does nothing for us.

Financially speaking, this person might be hard on themselves, saying that they should have saved when younger, or should not have lent someone money, and so on.

financial health and financial self-care

All or Nothing Thinking

Thinking in black and white to extremes, with judgment on yourself or others. For instance, you hear yourself say “never” or “always” or “every” often.. you might be in All/Nothing distortion. In this type of distortion, the person has rigid views about money or their relationship with money. When you hear people say that the rich get richer and the poor get poorer, this is an example of all-or-nothing thinking and dysfunctional thought patterns

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What’s Next?

Below, you’ll see a sign-up to get a healing planner. This will help you to decipher which one of these you tend to use most, and help you to address it by developing a plan. You can use this with my virtual support group, your own healing journey, or your any self-help and support that you curate for yourself.  It’s free and you’ll get updates and inspiration on your healing journey.

It is never too late to make a financial resolution – read more here

Is financial therapy covered under insurance?

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