Anxiety and Investing: Taking the Fear Out of Finances
The chances that either you, a loved one, or a friend have had an incident with, or an ongoing relationship with heightened anxiety are likely. Almost 20 percent of the population expresses some sort of anxiety disorder in a lifetime. It comes from a combination of genes and impactful experiences throughout life. Whether relatively mild, or the cause of full on panic attacks for the victim, it is a disruptive force.
Fear and worry can be associated with any number of events or circumstances, but I’ve found that finance can be a leading cause. This post is written for anyone who has anxiety around their money, or for those with a loved one who might. In either situation, it’s important to understand how to take the “fear out of finances.” In this three part series we’ll talk about how to Process, Plan, and Pursue more comfort and confidence in personal finances and investing, hopefully leading to decreased anxiety for those affected by this part of life.
As you get to know our “characters” by their “style of attachment” (the basis for how we think about and interact with our financial lives), I’ve written the characters to represent the extremes. You, or your peer / loved one, may not feel as strongly one way or the other as the examples, but you may find more similarities to one character than another. Wherever one finds themselves in the spectrum, they are not alone, and these processes can be put into practice for a confident future with your finances.
According to The Anxiety and Depression Association of America, almost one in five people (18.1%) suffer from anxiety disorders, affecting 40 million adults in the U.S. age 18 and older. What’s more is that only about a third (36.9%) of those suffering pursue and receive treatment for their (very treatable) anxiety. That means that about two thirds who acknowledge that they have more fears or worries than others, go on without doing anything about it. Of the most common anxiety triggers are relationships, social interactions, and money. The condition, by definition, disrupts the brain’s ability to think logically and weigh the probability of outcomes around a situation or relationship. It can be debilitating at times, and while it may be “part” of one’s makeup, it doesn’t have to be the driving force for anyone.
Hi, I’m Pat Alfano, and I have personal experience with anxiety and with helping others that share the condition. Most people have no idea, as I carry myself in most situations without any noticeable signs, however, those closest to me know that it is very real, and left unchecked, can be very destructive. Thankfully, I have come to understand my condition and have found freedom by accepting that it’s part of who I am, and through being open about it with those around me. I have also have had the chance to serve and work along side others that display anxiety with their finances. These lessons come from not only my own relationship with money, but also from those that I have walked along side of as an advisor.
Part 1: Process Your Attachment Style With Money
We have a relationship with money just like we have relationships with our friends or loved ones. Just like the people in our lives, we can be really happy with money at one time, and overwhelmed with fear and anger around your relationship with money at others. We’re all born with, and further develop through life experiences, an “attachment” style with the relationships in our lives. Studies and writings, such as “Attached: The New Science of Adult Attachment and How it Can Help You Find – And Keep – Love,” focus on these styles and how to understand your loved one’s, in an effort to pursue stability in relationships.
There are three main relationship attachment styles: secure, anxious, and avoidant. As you’d imagine, the secure attachment group suffers little from obsessive anxiety over their relationship, nor do they fear intimacy or loss of independence in a relationship. While the anxious attachment tends to be overly concerned in relationship, and the avoidant makes sure they don’t lose their freedom. Combinations exist, as that’s what makes each of us unique, but if you look at the characteristics you should be able to identify a certain type that you’re more like than the others.
Through my work with individuals in investing and planning, it’s striking to me how much the interpersonal attachment styles show in an individual’s relationship with their money and finances.
For instance, I can ask the same question in two different meetings and hear very different answers from people with similar incomes, time horizons, and lifestyles. The question (one of my favorites) is:
Q: How would you describe your relationship with money?
Answer 1: I am worried about not having enough. I check my balances every day, and I budget down to the penny. I really don’t like not knowing what’s going to happen with regards to my financial future.
Answer 2: Money is necessary, but I don’t let it run my life. I have enough in the bank to cover what I need, and I am ok with that. Thinking about saving for retirement bothers me, because I don’t want to live without enjoying life until I’m in my retirement years.
Of course, I also receive very appropriate responses from those with a more secure attachment style, but you’d be surprised how often the answer falls into one of the two examples provided. Is one right, and the other wrong? Chances are if you share similar thoughts to one of the examples you believe there is a correct answer. I don’t think one answer is more correct than the other, but I do believe there are right and wrong management styles.
If you understand your attachment to money, you can take steps to manage your finances in a way that works best for you. Please stay tuned, as we discuss how to plan and manage your finances based on your attachment style in part two of the series.
Part 2 – How To Re-think “The Plan”
We covered that anxiety disorders are present in almost 20% of the US adult population, and that within our anxieties around relationships there are three main attachment styles that people have developed. “Secure Attachment” is consistent with the majority of individuals in their relationships, which leads me to believe that the style carries over most often to individuals’ relationships with their money. However, that means that there are still a number of us who fall into one of the other two styles, “anxiously attached” or “avoidantly attached”. How can you plan for your future and money if you live in one of these styles?
First, we have to start with the foundation of effective money management, because it doesn’t matter how you relate to your money, you can’t control everything. Nor can you ignore it all and be confident that you’ll end up with a successful outcome.
The basic principles of financial planning need be observed: Be aware, be intentional, and be adaptive. You can say this in many different ways, but my favorite quote in this area (most commonly attributed to Benjamin Franklin) is “If you fail to plan, you are planning to fail.”
Another version, by the philosopher and more accomplished baseball player Yogi Berra, “If you don’t know where you’re going, you’ll probably end up somewhere else.” Taking both versions, it is common sense that your plan, even though you can’t predict 100% certainty, is your best “map” to get to successful financial outcomes.
The anxious investor already has their hand up in the front row of the classroom. They want to say, “I’ve planned and planned again and every time some event or unforeseen circumstance comes up, it screws everything up. Therefore planning is flawed, and plans provide false security.”
And you know what, they’re right to a point.
If every step along the way the plan was 100% accurate, you wouldn’t have any money anxiety, because your planner would have to have the “crystal ball” and there would be no “events or circumstances” that could alter the outcomes.
On the other hand, the avoidant investor just shrugs when questioned about planning. If they were to say anything about planning, they might respond with, “Planning is for those who can’t enjoy themselves and be comfortable with the changes in life. You’ve got to just take it as it comes and don’t let it bother you.” (The truth is that they are very bothered not by the uncertainty, but rather the loss of their freedom).
And you know what, they’re right to a point also!
While the anxious investor was far too aware of the “dangers” that could hinder the plan, the avoidant provides a far too lenient approach to planning. What the avoidant investor fails to acknowledge is that they may have to “adapt” further outside their abilities, and in the end, lose the freedom they so desperately want.
Your best plan is a combination of facts and possibilities. The facts state what is and has been, and the possibilities represent a range of outcomes. The better you plan, and the more comprehensive your facts, the more narrow your range of possible outcomes. That is the ideal plan, but there is no perfect plan. So let’s explore what it looks like for either the anxious or the avoidant investor to implement an effective plan.
Part 3- Pursue The Plan And Let Your Fears Fade
For the anxious investor, no amount of planning will work because we can’t predict the future. For the avoidant investor, planning can be too restrictive, not leaving enough room for circumstances to evolve and change. But planning is less about predicting than it is guiding. We covered that you need to have complete information and understand the range of possibilities your plan might produce. So then, regardless of what your “attachment style” with money is, how do you pursue your plan and the outcomes you hope for?
The “pursuit” stage may be the most difficult for both the anxious and avoidant investors because of the effort continual planning takes. Discipline is a word that most people have mixed feelings about. In certain roles or activities in your life you may display great discipline, and with that discipline comes great satisfaction with your abilities. The opposite is also true when you acknowledge your lack of discipline in other roles or areas of your life. What I’d like to propose for both groups of investors (and even those that are in the stable attachment style with their money) is that discipline is about the journey. It’s not taking your plan and having everything go right with how you operate. Rather, it’s about maintaining focus and pursuing the best life path for you and your money. If we look at discipline in this light, you should feel confident in the face of mistakes or uncontrollable circumstances, even when you slip in your actions or an outside force threatens to disrupt your hopes and dreams.
Pursuing your plan for those that fall into the anxious attachment style with money means letting go of the reins a little bit. You will undoubtedly have a full understanding of how your plan is supposed to operate, just as you do with most aspects of your life, but you have to acknowledge what you can and cannot control. You’ll like reassurance through the process (which is absolutely normal) and you’ll need to share those expectations with the professional that helps develop your plan.
However, paying too much attention to the details may sidetrack your ability to pursue freedom in your finances. In other words, be diligent about the items you can control in your daily life, but leave the worrying about the unknown to those that have more context and experience in working through life and money issues. Anxious individuals are far more likely to work with a financial advisor, but they must remember why they hired their professional. Allow your planner to be the safety line, and pursue peace through letting your plan work while changing things when needed.
Pursuing your plan for those that fall into the avoidant attachment style with money means being mindful. You may walk out of the meeting in which your planner walks you through the details of the plan and forget 90% of what the plan says. You wouldn’t be the way you are if you let the details run your life. Don’t worry, by putting a plan in place you aren’t locking yourself down and throwing away the key. Instead, share with your financial planner that you don’t intend to remember the details, but would prefer to focus on a short list of reminders that will help keep you on track. In my planning practice, I have implemented small action steps that are understandable, and in phrases that are easy to recall when you are in a situation that you need to remember what you’re supposed to do.
For instance I have one of my clients wrap a sticky note around their credit card. The sticky note says what they can use the card for, and the client needs to take the note off of the card in order to swipe it. Notice how the practice wasn’t to “chop” the card up and have it shredded. You have your freedom, but you have to remember that your freedom today is also tied to your freedom tomorrow, because taking too much freedom today could lead to a lesser degree of financial freedom in the future. Who would want that for themselves?
For the avoidant investor, pursuing freedom is about being aware and disciplined with your plan. It’s about associating the reward of your continued freedom in the future with the steps you can take today in maintaining your freedom.
You Can’t Change How You Are Wired, But You Can Learn To Determine What Outlets to Plug In To
Maybe the words of this article jumped off the page for you. Maybe you picked this up to understand and help a loved one that operates differently than you do. However you got here, the emphasis should be on understanding the fundamental differences between how we, as individuals, can think and act so differently about money.
We are all a product of our attachment style: avoidant, secure, or anxious. The secure style may be the most desired, but none are right or wrong. But I do believe there is a best way to manage your financial future, dictated by your relationship with your finances. It is possible to draw yourself out of actions or thoughts that derail your efforts to reach your goals.
Think about who you are, plan to the best of your ability, and then pursue your objectives with confidence. One of the keys to financial freedom is working with the right professional. The professional that understands your fears, and how you deal with them, is going to be better at communicating and helping you understand your path as life changes around you. You deserve to be treated with care as the individual that you are and will become.
Pat joined the Prosperion Financial Advisors team in August 2017 as a part of the Anderson team, and brings ten years of experience in the financial services industry. Starting out as an “advisor to advisors” in 2007, Pat developed his industry experience by helping advisors bring solutions to their clients with mutual funds, separately managed accounts, insurance based products, and employer sponsored retirement plans. Pat started working with clients of his own in 2015 as an advisor to individuals and institutions, and has enjoyed being able to deliver goal focused results. As an advisor, Pat believes that every individual and group deserves quality financial advice and planning regardless of their stage in wealth accumulation or distribution. As an advisor, Pat develops customized strategies for individuals and organizations in light of their unique goals and aspirations.
https://prosperion.us/wp-content/uploads/2018/10/anxiety.jpg5001000Pat Alfanohttps://prosperion.us/wp-content/uploads/2017/02/whitelogosized.pngPat Alfano2018-10-11 14:01:292018-10-11 14:06:23Anxiety and Investing: Taking the Fear Out of Finances
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