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Psychological Barriers: Admitting There’s a Problem

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It’s difficult to get into this topic without sounding too much like a motivational speaker. I am strongly averse to most motivational training. Here’s my problem: Motivational training, in the corporate world, encourages teamwork — good — but often at the expense of personal identity and independent thinking — bad.

The nuances are subtle, though; task and project efficiency and the drive for overachieving become perceived as positive personality traits through motivational development, but these are traits that have no purpose for individuals unless they are in charge of their own business destiny. Working for a company, for an entity you have no personal connection with and a boss whose own success is irrelevant to you, the only beneficiary of efficiency and extra effort is the company. You may be told you’ll be rewarded “later” for exhibiting these attributes over and above colleagues who don’t “get with the program,” but that future reward, for most, never comes.

Motivational speakers often talk about overcoming psychological barriers. If the speaker’s purpose is to motivate directly and to provide tools for self-motivation, then he or she must address what typically prevents someone from taking the first step towards a goal or dream. The good thing about these barriers is that they are mental constructs — the exist solely in the mind. Thus, all it takes is changing one’s mind to overcome any psychological barrier.

People hold firmly onto limiting beliefs — these psychological barriers — that may be wrong. Why? It’s natural to protect oneself from failure, if failure is seen as a negative outcome. Limiting beliefs protect people from failure.

An excellent article by James M. Olson, PhD, published in the Canadian Family Physician, looks at psychological barriers as they prevent personal behavioral change pertaining to healthier lifestyles. The concepts form an excellent basis for financial change, as well. The psychological barriers are broken down into three categories: barriers to admission of a problem, barriers to initial steps, and barriers to long-term change.

In personal finance, coming to terms with the existence of a money problem can be difficult, but admission is essential before anything else.

These are the barriers:

Denial or trivialization

The consequences of bad financial choices aren’t so bad, right? The news media publish stories all the time about people who get into financial difficulties, are bailed out by someone else — could be the taxpayers — and they go on living their lives. It makes it easy to say, “I don’t need to worry about losing my house. Other people are fine when they stop paying their monthly mortgage, according to an anecdote in today’s newspaper.”

Perhaps the media do show someone else’s negative consequences. Here’s a common thought process: John learns about Mary who had to declare bankruptcy (and thus couldn’t buy a house when she wanted) after being faced with a surprise medical bill without insurance. John doesn’t have medical insurance, either, and because he has the same risk as Mary, he comforts himself by accepting the belief that he would probably not be faced with a surprise medical bill, and therefore does not need to worry.

Perceived invulnerability

This psychological barrier overlaps with the previous example. A smoker might intellectually understand that the habit causes lung cancer, but to protect itself from the cognitive dissonance that arises from trying to understand why he continues to smoke with this knowledge, he allows himself to feel that the worst won’t happen to him.

If someone punches you in the stomach, you feel pain right away. If you habitually spend more than you can afford with your credit card, you won’t feel the pain until much later. This delayed effect makes it easier to feel like no harm will come. You would probably avoid getting punched in the stomach repeatedly because you know the pain is immediate and will compound with each blow. But increasing your debt load doesn’t hurt physically, and it’s easy to ignore the damage by refusing to calculate your net worth each month.

Faulty conceptualizations

Misconceptions about how aspects of personal finance works can prevent someone from recognizing a problem. One of the most glaring misconceptions comes from advertisements. Television, radio, online, and print advertisements often name loan interest rates. It’s popular with mortgages and auto loans. “Visit your local dealer today for 0% APR financing on a beautiful new car!” Mortgage interest rates are low, we hear, so combined with low prices, it might be a good time to buy a house.

Maybe. But only a small percentage of customers qualify for those low rates. If you go into a situation with the conception that you will automatically get a great deal, you’ll likely be spending much more money than you expected over the long term.

In the same respect, consumers tend to be conditioned to believe that financial salespeople are obligated to do what’s in their customers’ best interest. We trust the broker when we go to the bank to invest money. We trust websites that provide stock trading advice and analysis. The truth is there are few salespeople that have any motivation other than their own self-interest. Even the concept of a fiduciary standard, where some advisers are members of organizations or have certifications that require them to supply advice towards the customer’s best interest only, is not a perfect guarantee that the advice will be good. Everyone is selling something, and the belief that we can trust salespeople is a naive misconception that could have expensive consequences.

Debilitating emotions

On the other end of the spectrum from denial, there’s the possibility of becoming so overwhelmed about the existence of a problem that it becomes too emotionally painful to accept. Dr. Olson’s article offers the example of a patient who refuses to undergo a test for a disease because the consequences of having that disease are life-threatening.

Is there an analogy in personal finance? I think so. Turn back the clock to 2000, and pretend your net worth is fully invested in technology stocks. You hear the news about the tech crash, and you don’t want to open your statement. Thanks to your lack of diversity and safe asset allocation, you are afraid to see the damage.

Perhaps you and your spouse are not getting along well, and your significant other decides to go on a spending spree to spite you. Will you open that credit card bill? Or perhaps a divorce is in the works and your partner is taking whatever steps necessary to ensure you’ll end up on the financially losing end of the deal. While there’s not a lot of situations that could be considered life-threatening, being overwhelmed with emotions or being frightened of an outcome can prevent you from even knowing if you have a problem.

Overcoming barriers to admitting you have a financial problem

  • Nothing is permanent. People have the capacity to deal with problems, and they have the efficacy to be able to move in a better direction.
  • Financial education helps. Where misconceptions abound, education can go a long way to help people feel more comfortable about their situation. Education isn’t much of a motivation for change — and I’ve written often about the studies that show the traditional approach to financial education is ineffective, but one-on-one guidance with a specific problem can help alleviate misconceptions.
  • The negative effects of ignoring the situation are worse than the situation itself. This brings me back to the problem I had with multiple speeding tickets. I couldn’t afford the fees, so I just ignored the various tickets I received. And I thought I received them unfairly, that my car was just a police magnet. But I ended up in much more trouble — financially and legally — when I just ignored the warnings.

In a future article, I’ll address psychological barriers to making the first steps towards change and to being successful with long-term change.

Photo: Flickr
Canadian Family Physician [pdf]

Published or updated April 3, 2013. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 8 comments… read them below or add one }

avatar William

Great article about an under-served topi!.

So often we’re our own worst enemies. Just this morning my wife was asking about investors in a toll road bond issue a few years back that didn’t live up to their revenue projections. “So, did they lose all their money?” The all-or-nothing characterization of investing risk has probably held back more people than the lack of money.

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avatar Jenny

There was a study about a year ago about how young people with stupid amounts of debt were more confident than young people who were more responsible financially. The researchers thought that debt empowered the young. Nope! People with perceived invulnerability and faulty conceptualizations were more likely to be foolishly confident AND to have more debt. The root cause of both was messed-up thinking rather than large amounts of debt “empowering” anyone.

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avatar Steve

While financial situations may be less likely to threaten one’s physical person, they can still threaten one’s sense of identity, triggering the psychological defense mechanisms above.

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avatar Ceecee ♦53 (Newbie)

That last point about the negative effects of ignoring a problem are often worse than the problem itself is really on target. It is easy to approach a bill with the “I’ll figure out how to pay it when it arrives” mentality. Kind of goes back to the article on budgeting.

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avatar Jason

Good post Luke.

It’s interesting to reflect on quite how much limiting beliefs really impact on most peoples lives.

It is important to admit when you have a problem and stand up to it. But the fact is that many people blow up their problems out of all proportion.

As Tony Robbins says, if there are weeds in your garden, then admitting that is a good thing. But don’t make the weeds bigger in your mind then they are in reality!

With money issues you need to face up to them, but you also need to realise that even the biggest financial problem has a small first step that you can take.

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avatar Luke Landes ♦127,505 (Platinum)

Funny quoting Tony Robbins… The self-help industry — which I hinted at when discussing “motivational speakers” above — is the bane of my existence.

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avatar DonnaFreedman ♦90 (Newbie)

Self-help generally bugs me because it assumes everyone starts out in the same place, with the same advantages/abilities. Not everyone can overcome difficulties at the same pace, or at all. Some of us need more than a how-to book.
I don’t mind reading an inspirational story. I just don’t want to be told “if Person X can do it, anyone can.”

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avatar David

I think the “nothing is permanent” tip is the best one. Too often we find outselves in a situation we think we will never get out of. However, chances are that we will – we just have to keep that in mind!

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