Giving til It Hurts

Pop quiz: It’s December 15th, have you finished your holiday shopping yet? If you’re anything like me the answer is no. I tend to keep shopping right up until the clock ticks down to Christmas. I’m in good company here. Only 16% of respondents to a National Retail Federation poll had completed their gift-buying by mid-December – this despite the fact that people are starting their shopping earlier and earlier in the year.

I know for a fact why I am still in the throes of the retail maelstrom. It’s not that I procrastinate, or that I enjoy shopping during the busiest time of the year. It’s just that gift-giving is so complicated that I second guess myself right up until the calendar hits December 25th and I am forced to stop the crazy. In almost all areas of my financial life I am the measure of discipline. However gift-giving taps into a deep pool of anxiety – and anxiety makes a terrible shopping partner.

I am not alone in feeling the stress of this practice. According to the American Psychological Association, 42% of respondents polled felt pressured by gift-giving. It’s no wonder, when we have so much emotional investment in the act of gift exchange.

In the 1970’s, social scientist Dr. Theodore Caplow completed a seminal study about the rituals of holiday gift exchange. According to Dr. Caplow, a proper gift must surprise the recipient, demonstrate familiarity with his or her tastes, and its cost should reflect the perceived emotional value of the relationship between the parties.

That’s a daunting combo of conditions and meaning to pack into a simple bottle of cologne or a snowflake sweater.

I would add that its also important for gifts to be proportionate. Giving “too big” or “too small” of a gift can demonstrate inequalities that are definitely not in keeping with the holiday spirit. How awkward is it to give an inexpensive or generic gift to someone who obviously invested more in their gift to you? Or the other way around? When giving is disproportionate both the giver and givee may feel emotionally exposed. It hearkens back to the “I have her my heart and she gave me a pen” moment in the movie Say Anything. Ouch. Not very Christmas-y.

Economic differences between parties exacerbate the difficulty of proportionate giving. In the same APA poll cited earlier, Americans listed “lack of money” (61%) and “credit card debt” (23%) as sources of holiday stress. It’s hard not to dread receiving a nice gift from someone when you feel obligated to incur debt in order to give something proportionate in return.

Sometimes it seems as if all of the stressful aspects of holiday giving threaten to overwhelm the joy and meaning of the season. There is a lot of great advice out there about how to put limits on runaway gifting. Definitely have a budget. In large families or groups, agree to hold a drawing or only give gifts to children.

One strategy I’ve employed in recent years to honor the true meaning of Hanukkah and Christmas – and to simplify things – is to give some charitable donations as gifts. Each year I pick a charity or two and make several modest donations in the names of my friends and co-workers. I put information about the donation in a card, and that’s my gift. This kind of gift actually feels really great to give, plus I feel like it’s creative (I like to try to pick organizations and causes the person I’m giving to would support). It saves time and energy that would otherwise be spent shopping, and let’s be frank, most of us don’t really need to receive more candles or bath salts.

Gift exchange is a complex and nebulous social activity, and I’m certainly not the first person to feel anxious about it. I think as adults we want to idealize how wonderful the holiday season should feel, but the truth is that it’s normal for some parts to feel downright unpleasant. But if we let go of the ideal and accept that the holidays can be wonderful and difficult, I think it at least takes away the pressure of trying to achieve perfection.

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Amanda on MSN: Why Your Money Plans Sink or Swim

I haven't been able to post in awhile because I've had a lot on my plate lately, but that doesn't mean I haven't still been fighting the good fight for financial wellness! Check out my quotes in the MSN Women in Red article Why Your Money Plans Sink or Swim.

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The Jack Sprat Accord

Remember that nursery rhyme about Jack Sprat and his wife? Evidently Mr. Sprat had a predilection for leaner fare while his wife was more of a… gourmand. Between the two of them, so the story goes, they managed to efficiently apportion meals and thus together they would “lick the platter clean.”

Food tastes and food consumption are often a handy metaphor when it comes to material tastes and material consumption. Not that one can use eating behavior to predict what kind of consumer a person will be – in fact, oftentimes sublimated physical hunger is translated into a compulsion to buy – but there are certain areas of overlap. Unconscious eating often accompanies unconscious spending, for example.

But back to Mr. Sprat et famille. The point of the rhyme is to show how differences in partners often lead to greater stability or efficiency in the overall system. Two individuals may have certain extremes that are evened out by the opposite traits in their partners.

In my own work with couples this often seems to be true. Perhaps the two spouses are not as dynamically opposed as the Sprats, but even where there is a high degree of harmony and overlap there are inevitably certain areas where members of a couple find themselves coming from two very different positions (not Mars and Venus necessarily, but you get the drift).

Many times this is the case when it comes to responding to financial crisis. I’m not talking here about day-to-day financial management or long-term planning. In in these areas there is a greater likelihood that the partners have worked out some sort of agreement or at least had a discussion about how such a task will be approached. But in a financial crisis we often revert right back to our core selves, when primitive impulses grab hold and the decision-making process becomes more reactive.

Sometimes these reactions catch a couple off-guard and make it more difficult to negotiate how to respond to the crisis. One partner may want to sell everything in the house and the other may be equally convinced that they need to hold on to every last little item because they won’t be able to buy anything else they may need. Each feels that they are offering up the best and most practical response, yet they cannot understand how the other person sees it so differently.

It would be a mistake for the couple to become mired in trying to convince, coerce, or manipulate each other into simply accepting one person's course over the other. Usually reactive positions are too extreme to provide a truly workable solution. Also, the “solution” may be implemented at a serious cost to the relationship if a partner feels shut down and shut out of so important a decision.

One reason it is difficult for couples to find compromise in this area is because they think they are arguing the merits of their suggested course, but chances are they are really reliving a previous trauma.

Financial crises threaten our most basic sense of security. For someone who experienced distress around money as a child (which includes many if not most of us at one point or another), going through a financial crisis as an adult is likely to re-activate that part of the self that once felt completely vulnerable, afraid, and overwhelmed. When we are children we are powerless to affect the course of action taken by our parents yet we suffer their anxieties and yearn to help resolve the problem.

Often the “solutions” we perceive then are small acts of self-control or strategies for self-protection. We may tell ourselves “I won’t let Mommy know that that’s the doll I want because it’s too expensive and it would upset her not to be able to buy it,” or “If I rip my shirt I will try to pin the hole so I won’t get yelled at for ruining more of my clothes.”

These seemingly minor actions are the germs of adult behavior patterns to come. “Don’t tell Mommy I want” is a way of exerting control by cutting off feelings of desire, and can easily grow into the adult reaction of “sell everything in the house.” Hiding the tear in the shirt is a conservation response that protects against fear that a replacement can’t be had (or is not worth the misery it takes to get it).

Early experiences are the foundation upon which we build our patterns of preference. In a crisis, there is a strong emotional component to the experience that may contend or even defy the part of us that is rational.

Because these early events are often unconscious and do not readily spring to mind in a crisis – who would equate not getting a coveted doll with trying to stave off foreclosure? – couples are often at a loss as to how to find a common course of action AND support each other. Working with a clinician who is competent in financial wellness can help, as can having an idea of one’s own emotional and historical territory around money.

When it comes to financial decision-making, what constitutes a “good” or “bad” choice is only partly about the bottom line. Other concerns are also important. Personal integrity matters, as does trust. Maintaining a nurturing relationship should be included as a priority.

If it does not threaten their security, couples should endeavor to use a financial crisis as an opportunity for exploration and growth. Sometimes when people discover where their preference pattern began they are able to diffuse some of the emotional intensity behind it, allowing them to determine a more balanced and rational course of action. They may also be better able to hear their partner's point of view and elect a solution that takes both positions into account – the Jack Sprat Accord, if you will.

When a solution is emotionally balanced and co-developed, not only is there a better chance for cooperation and success in resolving the problem, but there may be a renewed sense of intimacy in the partnership as well. Licking the crisis together can be the greatest reward of all.

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The Leased Lifestyle

American Express really had our number when they said that “membership has its privileges.” We love to belong, to feel like we’re part of something. Maybe it’s the association that membership has with being cared for (as by a parent) or with the security of the crowd (as with a… herd. Sorry, folks, sometimes the analogies aren’t flattering.). Whatever the reason, as a culture we’ve demonstrated time and time again that consumer goods and experiences are part of how we define who we are to ourselves and each other.

What does it mean to live in a society that uses material goods to make abstract concepts like “identity” and “membership” more tangible? Well first of all, it seems to involve selecting, buying, and displaying a whole lot of stuff. A tremendous amount of energy and attention goes into keeping up with those pesky Joneses, who seem to always be one step ahead of us in getting the latest aspirational hoo-ha.

If this sometimes feels exhausting, stressful, and over-stimulating that’s because it is. It’s tough to keep up with the consumer treadmill. When “new” and “latest model” become the most attractive product attributes, then actual ownership becomes more tedious and the Leased Lifestyle takes on a whole new appeal.

When you own something you are responsible for its care and eventually for its sale or disposal. Depending on the item, ownership has a semi-permanence that comes from the value of that item becoming part of your own net worth.

When items have little or no long-term value, the benefits of ownership are decreased. This is why many financial advisors do not recommend buying new cars or expensive computers, because these items traditionally lose most of their value soon after they are purchased.

Leasing, on the other hand, offers a couple of interesting alternatives to the ownership experience. When you lease something – be it an apartment or a car – you are able to walk away from the item when the term of the lease is over. You are not committed to the item for perpetuity or until you find another buyer. The item will also usually come with some sort of additional service, such as yearly maintenance for a leased car or the on-call superintendent who will fix the pipes when they break. That’s because the owner is the one who has a vested interest in keeping the item in good condition. As the leasor, you’re just there for the use of the item – and isn’t the using the best part?

In some cases, leasing even allows you to procure a more expensive item than you would be able to buy outright. This was certainly the case in the 1990’s when a leasing boom in the luxury vehicle market took hold. Someone who found it prohibitive to pay $60,000 to buy a Lexus might be more than willing to pay no money down and $500 a month for five years to drive one.

Nowadays we’re seeing consumers’ desire to lease as opposed to own creep into some very interesting sectors. Bag, Borrow, or Steal allows members to pay a monthly fee and in effect rent a different designer handbag whenever they are ready to trade in their current selection. With bags in the Couture category starting at $175 a month this is not cheap. But it’s certainly less than paying $2,000 to actually buy a Chloe Paddington bag – especially when what you really want is the bag’s very time-sensitive It Status rather than its last-a-lifetime quality construction.

For the Leased Lifestyle to be profitable and therefore worthwhile, sellers and service provider must make a profit. And in fact, some industries have shaped their entire business model around the consumer’s preference for low-commitment, high-novelty products. In the United States wireless carriers offer cell phones at far below their manufacturing cost in order to sell lengthy service contracts that more than make up for the loss they take on the device.

This can lead to some confusion and therefore disempowerment on the consumer’s part. “Service” is abstract and difficult for consumers to value. For example, I have no idea what it costs Verizon for me to call my mother, and therefore would be hard pressed to know if I’m being gouged.

When we try to apply what we know about product pricing to this Brave New Leased Lifestyle it gets even more convoluted. Debt Hater writes:

I just bought a new cell phone. I bought it because I had a $150 rebate that expires in March. Then the MotoRazr Red was half off with another credit for a new two-year contract. Then, Radio Shack had an additional couple bucks off. So a phone listed as $309.99 became $19.99 and I bought it.

What does this do to the consumer’s idea about the product’s value? She believes any item that sells for $20 must “really be worth about $10.” Her attention is on trying to assess the value of the product rather than the value of the service. (By the way, this kind of scenario just about makes a blood vessel burst in my husband’s head.)

The Leased Lifestyle is growing, moving from traditional areas like vacation time-shares and into whole other facets of our daily lives. Zone Diet meals that are delivered to your home so you don’t have to cook or think about calories. Tie-of-the-Month gift clubs so that your “gift” is, in fact, the ongoing experience of newness and novelty.

So is the Leased Lifestyle bad or good? Well, it’s certainly a useful adaptation to the stresses of an ownership lifestyle that moves too fast. With our love of trends and the continued growth of the service economy, it does seem that the Leased Lifestyle is going to continue to evolve and expand. I think we’re at the beginning of something and time will tell if both consumers and retailers continue to favor it.

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Fight, Flight, or MasterCard

There is a lot of buzz right now in the mental health field about advances in neural imaging and the growing application of brain scans. It used to be that the only “topography” clinicians cared about was that of the conscious (pre-, sub-, un-, and regular), but now there is a surge in collaboration between those who study the brain and those who study the mind.

Including, it seems, those who study how the mind dictates economic behavior. This brings us the relatively new field of neuroeconomics.

The Economist just published a fascinating article about a Carnegie Mellon study where researchers mapped the brain activity of subjects evaluating a product and deciding whether or not to buy it.

In the experiment, subjects were shown a series of products flashed on a computer screen for four seconds. After each product was shown, its price was displayed for four seconds. Finally, the subject had four seconds to decide whether or not to “purchase” the product out of the $40 fee they were given for participating in the study.

The researchers discovered that different parts of the brain handled different sub-tasks. The nucleus accumbens, which processes potentially rewarding stimuli such as food or monetary gain, was activated when the subject was viewing the product. When the price appeared, activity switched to the insular cortex. The insular cortex is associated with expectation of pain or presentation of upsetting material.

The more attractive the product, the greater the activity in the nucleus accumbens. The more prohibitive the price, the more fired up the insular cortex became.

These reactions were synthesized by the medial prefrontal cortex, the part of the brain involved in rational calculation and predicting outcomes. The prefrontal cortex had to make the “choice” between balancing the desire for the product with the anxiety created by the price.

Here’s what’s interesting about these findings. First of all the evidence contradicts one of the most fundamental tenets of classical economics, namely that when we trade something (i.e., money) we must decide if the value of the trade is worth more than the future value of what is being given up. The Carnegie Mellon study shows that we’re not so much concerned about future utility as we are about the present pain of paying for something.

If you think about this in your own life it makes sense. When you are in a store and really want to buy something, the strong desire to possess the item can often override the more sensible (but abstract) idea of “I should save this money toward my long-term goals.” It’s the same principle when you have to spend a lot of money on something that is necessary (say car repair or health insurance). Even though you know it’s good for you (high utility), the pain of paying a relatively high price causes you to seize up with anxiety.

Let’s go back again to the prefrontal cortex for a moment. In this choice scenario, the prefrontal cortex is charged with being the mediator between the impulse for pleasure and the instinct to avoid pain. But this part of the brain has another vital function. It is one of the most important mood centers as well. Disturbances in the activity of the prefrontal cortex are linked to Major Depressive Disorder, Bipolar Disorder, and all types of mood dysthymia.

It makes one wonder how this part of the brain can execute its dual role. I’m no neurobiologist, but it seems like the “rational” function might be compromised when one is also in an affected mood state. I would venture to bet I’m not the only person on the planet who has ever tried to spend her way out of a bad mood.

The other implication of the study is that it explains why we love our credit cards, despite repeated demonstration that using them can be dangerous or even downright harmful to our economic security.

If when we buy something we’re choosing between pleasure and pain, then the biggest allure of charging something is that it removes pain from the equation. It obscures the anxiety of parting with actual money and makes the experience more abstract. After all, what is “future money?” Of course we will pay that off in the future! We always have the best of intentions about what our future self will do.

It’s only when debt becomes a problem that charging will once again engage the insular cortex in deciding a purchase. And then suddenly there is the desire for the product contending with the pain of parting with money and anxiety about how to manage the debt. Not a pleasant mood state to be in.

Studies like this one are incredibly valuable because they illuminate the process behind our most “irrational” choices. Hopefully as we better understand the fundamental workings of the brain, we can stop seeing ourselves as flawed beings for operating the way we do.

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Actually, You Are a Beautiful and Unique Snowflake

I have a secret for you. This secret is going to change your life. Here is the big news:

Everyone in the world has more or less money than you.

That’s right. There is no sameness. No comforting lie that in America “we’re all middle class.”

I read a great post last week on Getting Green titled Why I Keep Quiet About My Salary. In it, the poster writes about why he does not disclose how much money he makes on his blog (or to anyone but the most intimate people in his life). While I fully support his personal choice, I read with great interest his rationale for privacy:

If I made substantially more than my roommate or other friends, they would probably become jealous of my salary. They might be well-intentioned, good people, but over time they would more than likely become jealous and… resentful. They’re not bad people, but money just has a way of effecting [sic] people.

If I made substantially less than any of my friends, they would probably naturally feel superior to me. If I made less than them, they would figure that they are worth a lot more than me and work a lot harder than me. If this were to happen I would have the privilege of dealing with a superiority complex.

I find this position really interesting. First of all, the writer chooses to speak only about how he believes others will feel if they find out he makes more or less money than them. Instead of stating his own feelings (he never says, “I feel inferior when others earn more than me”), his primary concern is to avoid others' judgment. In describing what is “natural” to feel in response to this information, he is perhaps revealing something that is true for himself but that he may not be comfortable owning. Comparison judgment can be very disruptive, and this writer has a strong desire to avoid it.

Money is a sensitive topic, especially when it impacts our social selves. One of the reasons people are so anxious about money is because it is often a basis for comparison. While I don’t deny that people rampantly compare, it's unfortunate, because I think money is about the most invalid form of comparative measurement available.

If one person has $20,000 in the bank and another has zero, then is the one with $20,000 that amount… “better” at “money?” If one person earns $50,000 a year and another earns $75,000, is that person getting it 50% more “right” than the first guy?

Of course this example seems ridiculous because it’s not just about the dollars – maybe one person received an inheritance and the other did not, or one is a school teacher and the other works in marketing. With so many ready contextualizers, money immediately proves itself to be a poor standard of personal comparison or worth.

Even if two people both earn exactly the same income they can have widely varying financial lives. Inevitably they have different housing or transportation costs. Maybe one pays a student loan. One may support a family. I will guarantee you that they will have differing values about what they prefer to spend on food, clothing, entertainment, etc.

At the end of the day, money is a resource that empowers a person’s choices. But different responsibilities, liabilities, and opportunities affect the amount of “choice” a certain income is likely to afford. And while there may be similarities or trends, the delicate combination of resources, liabilities, and choices is unique for each individual.

If I may wax rhapsodic for just a moment, it is this uniqueness that makes me love what I do. When I read a person’s budget and talk to them about the role of money in their lives, I get such a strong sense of who they are as a person that I sometimes joke that I can “psychoanalyze a budget.” Where does the person treat himself? Deny himself? What are the boundary issues in this person’s life? What was provided in his early years or what did he have to overcome? It’s all there in black and white if you explore the meaning behind the numbers.

I think most people find this concept of financial uniqueness surprising and terrifying. Surprising, because most of the popular wisdom about money involves certain universal truisms: save a portion of each paycheck, don’t buy a new car, pay off your debt. How can we be unique if we’re all supposed to be doing the same things?

And it’s terrifying, because if there is an area of our lives where we’d appreciate the comfort of the crowd, it’s in our finances. Making choices about money can be anxiety-producing. We would all like our choices to be validated -- or forgiven-- and since we tend to keep our personal information private we measure ourselves against those universal truisms to see how we’re doing.

When I say to clients, “Everyone in the world has more or less money than you,” my words are usually met with a surprised laugh and then a sigh of relief. Inherent in this phrase is permission to be an individual, to have limitations, and to still be okay.

Certainly there are economic realities that must be acknowledged. It is beneficial to spend less than you earn, and it is prudent to save for the future. But it is not a sign of one’s moral superiority to be in a favorable financial position. Nor should it be shameful to have less. (Or, conversely, to feel guilty for having more, or virtuous for having less.)

I feel strongly that it’s important to diffuse some of the isolation that we feel around money, and to not be so emotionally constricted on the topic. When our financial decisions are grounded in personal meaning, there is such freedom to own the whole spectrum of who we are. It doesn’t matter who has more or less, because we are all beautiful and unique snowflakes.

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Fees and Loathing

A "sucker punch" is an act of violence where the one being punched is either caught completely off guard by a landed fist, or a punch which is thrown to disable another in a place which is not normally a target in a "fair fight”…. Although it is commonly known to be embarrassing and painful to be upon the receiving end of the punch, the act often belies the character of the one throwing the punch, which is often attributed as a cowardly act. (Wikipedia.org)

Hidden fees are the economic equivalent of the unfair and cowardly sucker punch. Unfair, because they comprise important information that is either withheld or obscured from the buyer’s consideration set. Cowardly, because they imply that a seller does not feel confident that his product or service can simultaneously satisfy the conditions of competition (meaning a buyer will choose it over other alternatives), and profitability (meaning it is in the seller’s interest to offer that product at that price).

I’m working hard here to resist the urge to editorialize and rail against hidden fees for their sheer perniciousness. I am a consumer, and any act that leaves me feeling manipulated and injured is of course going to inspire anger. Anger is a natural response that helps motivate a person to avoid future injury.

But anger is only helpful when avoiding the injury is a possibility. Undisclosed administrative fees, “paper ticket fees,” or even “minibar restocking fees” (because the $5 Snickers bar does not cover its own overhead) are often charged after the consumer has already checked in to the hotel or booked their flight. Also, we live in a world where the hidden fee is becoming more and more widespread. This is not a case of a few shady sellers, but rather a culture of manipulation that is based on behavioral economics, the psychology of what consumers “are likely to do.”

People are busy, and most of us do not have an infinite amount of time to research every economic decision we’re going to make. We depend on heuristics, short cuts, and even on basic gut reactions. This is why brands are important, because brands are the ideas and associations that wrap around the products we buy. Brands take on human characteristics such as traditional, trustworthy, or cool. So we may choose a Volvo in part because we’ve done some research, but also because we believe that “Volvos are safe and dependable cars.” Trusting a belief about Volvo’s general dependability saves time that would otherwise need to be spent gathering and analyzing the facts.

How does this relate to the issue of hidden fees? Hidden fees are an act of deception that threatens trust. Mistrust negates the value of brands, and forces the buyer back into the odious task of having to look at all the minutia of the choice. The buyer is hardly going to thank the seller for this additional responsibility.

Unfortunately, there’s no easy market solution for this one. In their Quarterly Journal of Economics article this past May, David Laibson of Harvard and Xavier Gabaix of M.I.T. argue that there is no incentive for another seller to blow the whistle on their competitor’s hidden fees.

Think about it. Let’s say this alternative seller runs an ad that says, “Hey, we don’t have hidden fees like those other guys. We charge you the fair rate for the product instead of sneaking in all those other charges in order to make a profit.”

According to Laibson and Gabaix it’s unlikely that this message will attract new customers to the alternative seller’s product. Instead, the message is more likely to educate potential buyers to still choose his lower-cost/higher fee competitor, but to be much more savvy about how to avoid the fees.

So sellers decide if you can’t beat ‘em, join ‘em. Thus every seller gets in on the fee game and we consumers lose in terms of both trust and choice.

This is one of the reasons I think we have so much consumer anger in our society. We feel abused by the sellers and powerless to select an alternative, so we go on a sort of passive aggressive rampage.

We do everything from stripping anything that’s not nailed down out of our hotel room to fighting tooth and nail to get the entire can of soda (not just the 4 oz. glass) from the flight attendant. And when even these tiny battlegrounds are denied us, it is the desk clerks, customer service reps, and floor managers who must suffer our wrath.

I don’t know if hidden fees will ever go away. So far we consumers have demonstrated time and time again that we love a bargain – even if it’s just the illusion of a bargain. At present the only alternative is to do your homework ahead of time, or be prepared to make a fuss and try to get some of the fees removed.

Or savor the small victories in that extra bag of peanuts and handful of shampoo bottles.

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Debt, It's Not Me, It's You.

“I’ve kept up with the debt payments as long as I can. I mean, I charged the stuff and I agree that it should be my responsibility to pay it off. But in 6 months my rate has gone from 0% to 12 to 23 and now it's at 33%. Credit card companies have become worse than loan sharks. I don’t think it’s right that they can charge so much interest that you can never pay off your debt. And when you’re struggling they call your house night and day and treat you like some deadbeat! I’ve tried and tried, but if I pay them what they ask I won’t even be able to afford to feed myself. So forget it. They’re not getting a penny more of my money.”

Most people agree that if they borrow money they should pay it back. They will even agree that it is acceptable for a lender to charge interest on the amount borrowed (unless their religion forbids it). But what happens when the terms of repayment go beyond a person’s idea of what is fair and reasonable, or when the borrower feels powerless to meet the lender’s demands?

As terms become more unbalanced in favor of the lender, the borrower’s sense of ownership for the debt decreases.

Call it the consumer's APR: Adjusted Personal Responsibility.

I’ve said before that lending is a business, and right now the lenders are holding a lot of cards. Regulatory caps on interest rates and fees have been eroded in recent years, and consumers live in a world where the 0% APR on your Visa can jump to 23% (or higher) just because you’re late paying the electricity bill. These are pretty tough terms. Factor in the aggressive practices of collection agents and you have a situation where the besieged borrower, already stressed, now feels attacked and victimized.

In these situations, the mind will reframe the circumstances in a way that preserves the borrower’s sense of his own self-worth (“goodness”) and will recast the lender as predatory, unfeeling, and downright evil.

Part of the problem is the way that consumer goods in general, and credit in particular, are marketed and sold. In order to ease consumers through the anxiety that comes from parting with their money, they are presented with the option of buying on credit. And in order to get the consumer to override their natural aversion to debt, they are flattered and told that this credit is something they’ve actually “earned,” something available only to people who are “worthy.”

So when a lender switches from acting like a loving parent or an approving friend to acting like a wronged lover, this can come as somewhat of a shock to the consumer. The consumer may experience the lender’s escalating (punitive) interest hikes as erratic and unreasonable behavior.

First, the borrower is wounded:
Creditor, I thought you loved me!
Next, the borrower reproaches himself:
Maybe I’m not as great as Creditor said I was.
Then the borrower’s sense of self-preservation kicks in:
This Creditor is acting like a real creep.
Finally, the borrower rejects the negative message:
Creditor, we’re through.

The “break up” can take a number of forms depending on the situation. Maybe the borrower stops answering the creditor’s calls or opening their letters. They may transfer the balance to another card (if they’re able), or take steps toward filing for bankruptcy.

Since you cannot actually break up with a creditor, all of these scenarios are bound to cause more grief for the borrower than they will for the lender. Trust me, you can't punish MasterCard by throwing their bills in the trash. Eventually they will get your attention.

However, I do feel that creditors are taking the wrong tactic with their penchant for ever higher fees and interest rates. I’ve spoken with many consumers who feel personally betrayed by the actions of their creditors. Having experienced extreme consequences for what they perceive as relatively minor missteps, they are bound to be wary of exposing themselves in the same way again if they can possibly avoid it.

Creditors should be concerned about the rising tide of consumer anger. When creditors hold all the power in a relationship, they also hold a higher proportion of responsibility. Even in Shakespeare's day, nobody cried for the money lender.

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Stars - They're Just Like Our Libidinal Fantasies!

I am a tabloid reader. I admit it. I’m not proud of my up-to-the-minute knowledge of Britney’s hair color changes or how Brangelina feel about marriage. Tabloids are my candy, my escape from complicated thoughts.

Even the most casual tabloid browser knows that there are two major celebrity activities that end up in Us Weekly or Pink is the New Blog: nightclubbing and shopping. Getting Starbucks runs a distant third, mostly because there are still a handful of stars who spend their days running to and from meetings, not acting out for photographers.

I snark with some affection here, because I myself have pored over what the It Girls wear when they go to It Girl parties. (Or, as of late, what they don’t wear – yuck, Britney.)

But why shopping and clubbing? Why do people outside of Los Angeles even know about the existence of Kitson or Hyde?

Shopping and clubbing are activities that are primarily driven by libidinal impulse. Besides just a sexual drive, Freud felt that the libido was an instinctive life force that bucked at the conventions imposed by civilized society. This is the society where you and I live, forced to repress our libidinal impulses in order to work, follow traffic laws, and pay for things using money we earn. Repressing the desire to act out and run free takes energy, and so to let off steam we fantasize about scenarios where youth (youth is the playground of the Id), beauty, and lack of responsibility are celebrated traits.

Who hasn’t wanted to walk into a store in the middle of the afternoon, try on loads of fabulous, expensive outfits, and then walk out with whatever we wanted without a care to cost? Or go out any night of the week and not worry about having to be functional the next day? And what’s more to be fawned over for such behavior?

I raise this topic on The Good, the Bad, and the Money because the escalation of celebrity consumer culture has a profound effect on our sense of what is “normal” (hence “good”). When we are surrounded with images that portray a certain way of living, this is bound to influence our own expectations.

Earlier in my career I used to call this the Nice Girl Complex, because this was how I thought of the set of expectations that influenced me and my girlfriends. Nice Girls have their nails done. Nice Girls have good haircuts and keep their roots re-touched. Nice Girls know about this season’s bag, heel shape, and hemline. (Though my ideal of a Nice Girl may not have been too concerned with actually being nice, she was awfully fashionable.)

Being seen as someone who was able to stay current (or as I might say at this point in my career, “able to effectively manage the signifiers of competitive material culture”) was a demanding job and a serious drain on the finances. Eventually I had to shake the Nice Girl and decide for myself what my priorities were for myself and my life.

I still see many people who need a constant diet of new and stimulating, or else they become agitated, bored, and even self-destructive. These people are highly likely to try to spend their way out of an unpleasant mood. A new outfit can represent a shiny new self. A night on the town can stand in for love and approval.

These people are usually terrified of a balanced spending plan, because the idea of having to defer the impulse to spend, consume, and to run free is tantamount to a maximum security prison. Having never learned to manage their own emotional processes and self-soothe, they are afraid they will never be able to. These are usually people who declare that they are “bad with money” or “hopeless with budgeting.” This is actually code for “I can’t (or won’t) control my impulses.”

To give in to an impulse is not necessarily a bad thing. In fact at the opposite end of the spectrum are people who experience every impulse as bad and dangerous. They are the ones who must have rigid structure or else they feel completely out of control.

True emotional maturity is characterized by appropriately moderating impulses. In my financial wellness practice, I try to help clients flex their beliefs about what is “good” and “bad” financial behavior and instead look for what is healthy and sustainable for them.

Healthy spending involves meeting one’s needs and experiencing gratification in ways that are not destructive to oneself or to others. It’s okay to buy yourself something nice. It’s not okay if it means you won’t be able to pay your rent, if you have to lie to your significant other about the expenditure, or if it creates unsolvable debt.

A sustainable, well-formed budget should create balance between your impulses and your priorities for growth and self-care. It should feel like a perfectly tailored garment, with the right fit, construction and support to make you look and feel your best.

Fantasizing about the hedonistic lives of celebrities can be a harmless diversion, but if it makes you feel bad about yourself, creates temptation to buy things you can’t afford, or causes you to devalue your own personal experiences and relationships, then it is not an activity that contributes toward your quality of life.

To chase an "ideal" of good, bad, fun, or fashionable means that you are pursuing an extreme. And any extreme is very likely unhealthy. In money as in life, you are unique.

Besides, you've can see how well it's all turning out for Lindsay Lohan. A cautionary tale if ever there was one.

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The Belly of Beliefs

Most therapists I know love the word “inappropriate.” In social work assessment, where we look at how the individual functions in his/her environment, “inappropriate” usually means that something in the client’s presentation is inconsistent with other aspects of his/her life. In my work, a good example of this would be, “The client’s lack of anxiety was inappropriate given the severity of his financial crisis.”

Inappropriate is a flag for further investigation. When we probe how individuals think and feel about the events in their lives and their role in shaping these events, we find a gateway to clients' underlying beliefs.

Belief frameworks are what financial wellness work is all about. Beliefs tell us what is “good” and “bad” behavior, and we measure ourselves against these internal standards. Most beliefs about good and bad can be traced back to our families, the original crucible where we are taught how to understand and interpret the world. Depending on the circumstances, children come to either accept (repeat) or reject (react against) their parents’ interpretations.

If prompted, most people can recite a laundry list of financial lessons learned when they were growing up. Some are popular adages, such as “money doesn’t grow on trees,” or “if you do what you love, the money will follow.”

However, the strongest beliefs are often unconscious, and uncovering these unconscious beliefs can even surprise the person who holds them. Children are finely attuned to the emotions of their caregivers, so when a parent angrily tosses off a comment like, “Look at that jerk in the BMW,” a child may understand this to mean that having a nice car is somehow associated with being a jerk, so if they want their parent’s love they shouldn’t have expensive things. This may sound far-fetched, but I’ve treated many adults who experience powerful ambivalence about material good fortune, and in 9 cases out of 10 it is because a parent felt unfairly thwarted or punished by others’ success.

Parents themselves can be surprised to learn what interpretations their children are making. Children lack adult cognition, so when left to fill in the blanks they can make wild leaps that may be far out of line with what the parent intended. If seeing mom take out the checkbook to pay bills is usually followed by a period of crabbiness and hearing her say “no” to anything you ask, you’d better believe that children will learn to fear that checkbook. Because of this, a parent who is careful to the penny may have a child who eschews even the most basic activities of financial management because he associates them with anxiety.

Parents can mediate this by talking about money more openly with their children. Asking children what they think about who should earn the money in a family or how the family’s money gets spent can provide parents with an opportunity to guide and reshape beliefs as they form.

For adults, cognitive therapy techniques can be an effective in exposing beliefs that are unconsciously directing present day actions.

Though we may think about money often, many of us still experience a disconnection between financial activities and the more personal aspects of our lives including relationships, values, and dreams. Yet money is a subject that is deeply personal, often painful, and very seldom rational. Financial wellness work is a way of exploring the role of money its full context: taking into account our cognitive processes around money, how money is a factor in our social environment, and how we learned about money in our family.

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Are You In (Over Your Head)?

You may be surprised to hear that I’m actually pretty temperate on the topic of credit. Though I’ve seen how debt can cause serious strife, I don’t believe that the lending industry exists to deliberately wreak havoc in the lives of its customers. Profits are profits, and for better or worse this industry profits by siphoning off the earning power of all those who carry a balance. Caveat emptor, cardholders. At least read the Schumer Box before you’re seduced by the suggestion you’re “worthy” of “platinum status.”

My general neutrality ends when lenders cross the line between offering a product and enabling an addiction. Arriva is being positioned as a card designed for the gaming lifestyle. How so? Because the major selling point of the Arriva is the fact that you can get a cash advance of up to 100% of your credit limit. You know, because throwing your car keys or the deed to your house on the table after you’ve lost all your money is only really done in movies.

I won’t belabor the facts about how Arriva charges you 3% on every transaction (makes the $5 fee on casino ATMs seem like a downright bargain), or how Arriva’s interest rates, from 15.49% to 24.49% are significantly above the current industry average of 13.16%. The terms and conditions page lays it all out for you in black and white (and red, with pictures of pretty girls and guys having loads of fabulous fun).

So why does this product fill me with outrage? Because it’s primary attribute is that it enables a problem behavior. “Enabling,” in the addictions world, is defined as depriving the addict from the consequences of their behavior in a way that prolongs the cycle of addiction. Labels can sometimes distract from the point at hand, and I want to be clear that I’m not labeling all Arriva customers gambling addicts. But when you choose to borrow money at 15%+ so that you can continue to gamble, it might be time to take a hard look in the mirror.

For the non-problem gambler, it hurts to lose money. It hurts, but the non-problem gambler uses this environmental feedback to enter a healthy decision-making process that goes something like this:

“I came to the casino with $500 to gamble with. I’ve lost my $500. That sucks. I’d really like to continue gambling – maybe I could win my money back! No, I should step away from the tables (slots, etc.). Five hundred was my limit, and I can’t afford to lose any more.”

The difference between the problem- and the non-problem gambler is that the problem gambler’s persistent impulse to continue gambling overrides the negative environmental feedback. He/she engages in progressively more risky behaviors in order to continue gratifying the impulse.

The Arriva is the enabler here, because this card's entire premise implies that it’s perfectly okay to borrow money to continue gambling. And Arriva is hardly a disinterested enabler. The parent company of Arriva, Global Cash Access, is "a leading provider of cash access products and related services to approximately 960 gaming properties..."

The message that it's okay to borrow to gamble is also obscured by offering rewards and points that seem almost like the consumer is getting a deal.

This is a gross distortion of reality. A person who borrows $5,000 – oops, make that $5,150 because you have to tack on the 3% transaction fee – will pay back $463.59 a month for an entire year, and Arriva will collect $563.08 in interest and fees above the $5,000 you withdrew. That's a great deal for Arriva.

What do you get? Well, you get a chance to gamble with that $5,000 and you get a whopping $37.50 in cash-back rewards (redeemable for food or merchandise on the casino floor). And don’t make a late payment over the course of the year – I computed the above example using 15.49%, the lowest rate offered.

Arriva is a product that profits from the poor choices and limited options of its customers. It might even be subject to products liability regulation because offering high-cost credit for gambling purposes is inappropriate and predatory.

Bottom line: it feels bad to lose money. It feels bad to have to walk away from an activity that’s fun and exciting. It feels bad that this is your vacation, and you don’t want to have to stop having fun on your vacation.

Sometimes things happen in life that are difficult and unpleasant. When we can’t face this, we enter a process of denial that takes away our ability to make good choices. Arriva promises escape (or delay) from the pain of loss or anxiety in much the same way one might use opiates. It’s important that potential consumers examine the dangers of this product, and try to limit their exposure to risk before they’re in an emotionally-charged situation.

When it comes to using Arriva to gamble, just say no!

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