First, people want to know if they are earning enough. Many do not discuss their income with their peers. With spouses, they worry about expectations. But there is the nagging question of whether they are doing well or if they are aiming for more. Until they reach a level of comfort that allows them to spend and have a healthy bank balance, many do not feel comfortable with their finances. This state of satisfaction is achieved later in life. On this journey, people need someone to tell them if they need to do more. Many struggle with the idea of not earning enough, even though they are doing well by normal standards.
This is so true for women who make career choices with their family situation in mind. They are left in doubt as to how much they earn, if it should matter more and if they should do more. They are unable to discuss their own financial independence issues with the spouse. They need someone to assess their situation and their choices and help them make their decisions.
Second, the journey with money has its pitfalls. Debt is the most dangerous of all. It is more common than we would like to accept it, for people of all ages and income groups to stretch beyond their capabilities and find themselves in financial difficulty. Many choose denial as the answer and simply refuse to talk about it. They just wish the problem was gone.
A business could have failed, with creditors on hold; a job could have been lost with outstanding loans; a credit card could have been overspent and accumulate usurious interest; a personal loan can be in arrears, threatening the relationship with the borrower; there may be an unrecoverable loss from trading in shares; etc. Distress hits our financial lives unexpectedly and we don’t know how to get over it. We don’t know how to ask for help.
Third, somehow our money lives on and our decisions are entangled in ways that we cannot too much control. In the generations of workers of the last century, someone who went to work bore the burden of the family first. Educating siblings, marrying sisters, caring for parents were all responsibilities that each member of the family had to take on and share. We may have passed this period of extraordinary expectations and somewhat unfair allocation of money for causes over which the employee had no control.
But we are still dealing with the members of the household who will make the decisions about our money. Or have expectations about how we would use the money for them. Even in a nuclear household, a husband and wife can differ considerably in their attitude towards money. There are spouses who disapprove of each other’s spending habits. There are parents who don’t like the way their children distribute their earnings; and there are siblings who judge each other’s way of life. People need help dealing with these differences and expectations. How much to give and where to draw the line? How much to interfere? How much to control or direct? They would like to deal with these issues without abandoning their loved ones and with confidence.
Fourth, people do not make investment decisions with confidence. There are so many avenues and products that they don’t know which one might work for them. Not many people are ready to sit down and strategize for their asset allocation and make investment decisions based on a plan. People freely rely on stories and recommendations from friends and relatives.
Many investment decisions are made on a whim and without much thought, unfortunately, because there are friends and family who do. People choose frivolous depositories; they buy lesser-known IPOs; they buy stocks based on tips; they engage in futures trading based on stories; they invest in land and property with friends; they time their investment in gold and stocks. It is alarming how gullible many are when they make investment decisions without giving it much thought.
They need help when these plans fail. Since they don’t know how they made money in the first place, when things are going well, they don’t know what to do when things go wrong. The associations of investors who fight to recover the money of the operators of night flights, have members who are indignant at the unscrupulous operator. What they don’t see is that they didn’t do their due diligence before making their decisions.
But in most cases, people treat these injuries on their own. They can cry, protest and hope with other commiserations. But they need someone who can help them get out of the mess they find themselves in.
How can we help? Those who need help with their finances do not actively seek out others. They don’t want someone to hear their stories and show sympathy. They need concrete action. They need trust and confidentiality. They need skill and skill in each other to believe that they are confiding in the right person. We need to be sure we have these qualities before we step in to help. Above all, we need empathy. No one likes to be judged for their actions.
Professional financial advisers are well positioned to play this role. They are independent and they are bound by an ethic of confidentiality. They can step in to assess the progress of their clients’ financial lives and be able to identify distress down the line, and step in to offer a listening ear and advice. Many are stepping up and offering these services; many others need to see it as their role.
Spouses, close friends, siblings or parents may also be able to help. If they value the person’s trust and if they are able to show adequate empathy. Each of us can be another’s listening post, if we make the effort. Can we?
(The author is president of the Center for Investment Education and Learning.)