Paul Brown in the New York Times wrote recently of his 5 stages of grief at the news he had nowhere near enough money saved for retirement. Drawn from the famous 5 stages of grief from psychiatrist Kubler-Ross, it inspired me to think about how we react to money issues and how we can change our financial behaviours for the better.
Stage One: Denial
‘That is NOT how much I owe on my credit card.’
Back in the days of my own massive credit card debt (and painfully small income), my reaction to a credit card statement was along the lines of accusing unknown figures of spending money on my credit card while I slept. The Credit Card Elves, as it were.
The solution: Realising that I spent money on credit differently to how I spent money with cash was crucial to getting my credit card debt under control. Instead of blithely pulling it out every time I needed something, I could instead start to control my spending and invest savings in clearing the debt.
Stage Two: Anger
‘Why does this happen to me? Why does everyone else have more money/ work/ pay raises/ financial prowess’
After denial inevitably gives way in the face of the facts comes anger. This is probably the most annoying phase for everyone around you, where you curse your job, rental payments, big night on Saturday night for making you less financially buff than you would like.
The solution: What is there to say? Accept it and move on. This phase does no-one any favours.
Stage Three: Bargaining
‘Okay, if I save $300 per week, I’ll be back in the black in no time.’ Or, my usual standard, ‘I’m just waiting for my tax return’
Pretending that I will be able to save two-thirds of my income, when currently I can only save enough to eat until pay day, is my third usual response to a financial crisis. I write these ridiculous budgets, where I promise I’ll be able to live off $50 a week and solve all my financial issues within weeks.
The solution: The words ‘never going to happen’ ring in my ears at this point. I’ve learnt through painful, bitter experience that the only way, and I mean only, is to slowly and steadily change the way I deal with money. I didn’t get rid of a credit card debt with tax returns or stimulus packages- though both of those things got swallowed. I got rid of it by paying off $100 a week, sometimes more, for months and months. It’s not glamorous. It’s not easy. But, with time, it does always work.
Stage Four: Depression
‘I am never going to have any money’
Stage Four is obvious for all to see. I’m slumped in my chair, staring moodily out the window. Occasionally, I’ll huff and change positions. This stage can last anywhere from 5 minutes to an hour, but usually something will distract me and I will quite quickly move on to the final stage.
The solution: Again, this stage helps no one, least of all your financial situation. Have a piece of chocolate and move on.
Stage Five: Acceptance
‘So what am I going to do about it?’
Some things we can’t change. We can’t change how much we spent over the weekend. We can’t change the mortgage repayments or rent we have to pay. We can’t change the fact that we have to eat every day of every year.
There are some things we can change. We can change how much we spend this weekend. We can re-write our budgets so we have more space in order to pay housing costs more easily. We can plan our shopping and cut our grocery costs in half. The faster we accept the reality of our financial situation, the faster we can change it for the better.