Five Stages of Financial
By Ellie Kay
I've always been an exercise advocate. It increases my energy,
keeps unwanted pounds at bay (when I'm not scarfing down Krispy Kreme
doughnuts), and even improves my disposition. It's easier to exercise
at some times than at others. I remember feeling extreme frustration
while trying to get in my daily walk when we were expecting our youngest
child, Joshua. I had Daniel (age seven) on a bike, Philip (age five)
and Bethany (age three) in a double stroller, and Jonathan (age one)
in a backpack. Of course, the baby whale was out front (he weighed
10 lbs. 6 oz. when he was born). It was tough to push that stroller
and balance Jonathan on a tired back with my expanding middle leading
I used to walk three miles, three times a week, right up until the
last few weeks of pregnancy. But the thing that bothered me the most
was not the physical exertion -- no, it was the way people gave me
"the look." I was in complete denial about what a comical
sight I was and the fact that most people had never seen such a walking
circus before. After rounding up Barnum and Ellie's circus clowns,
I'd head out the door to do my routine, and people would drop jaws
and stare. Oh sure, some were more subtle than others. Some would
just give us a sidelong glance. Others would openly gape. There was
one neighbor, in particular, who I was convinced called her friends
and asked them to come drink coffee on her porch at precisely 9 A.M.
every Monday, Wednesday, and Friday. I think she might have even sold
tickets for a front-row seat.
Bob said that one time a friend of his was driving by with his windows
down and saw me glaring at a motorcycle driver who had slowed down
for a better look. This "friend" told Bob he overheard me
shout, "What are you lookin' at?"
I don't remember it that way.
Bob said I must have had a memory lapse due to my "delicate"
condition. Believe me, at that time the only thing delicate about
this determined mama was my ego. I had to face the rude awakening
that I was the neighborhood entertainment.
Sometimes families face a rude awakening when they have a financial
counselor crunch their numbers or if they use an online source to
do the same (there are excellent tools found at www.cfcministry.org
or at www.moneycentral.msn.com
under My Money/My Accounts.) Pamela York Klainer, Ed.D., the author
of How Much Is Enough? (Basic Books, 2001), says, "When
you get all your finances together, and you see it all in front of
you, it's very jarring." Klainer says the typical client response
is "Is that all there is?" and "Is it enough?"
She even likens it to other news: "It's like going to the doctor
and getting on the scale. Now you have the data."
So when we have to face the hard facts about our finances, it's
not always an easy transition. In fact, depending upon the severity
of your financial situation, many families go through five different
stages that are similar to the stages of grief: shock, denial, depression,
anger, and acceptance. Let's take an in-depth look at each stage.
I recently worked with various families in a reality television
series called "Simplify Your Life" on a brand-new network
called The Fine Living Network. It's a great premise for a reality
show: examine basic problems that families have and bring in experts
to solve their problems. I was a financial expert that was sent to
work with families on a couple of different episodes. One of the families
experienced firsthand the "rude awakening" that I described
above: a moment of truth where the bottom line of their finances was
revealed. How would you feel about finding out the bottom line of
your family's finances in front of a national television audience
with a camera pointed in your face? You can imagine the look that
registered on the husband's and wife's faces. You guessed it: shock.
Their mouths dropped open, and they stared in disbelief at the figures
on the paper I held. I spoke to them in a calm, soothing voice and
assured them that the figures were accurate.
Shock is defined as a violent, unexpected disturbance of mental
or emotional balance (Webster's II, New Riverside Dictionary).
Consequently, the shock you feel at this stage will be directly proportionate
to the predetermined belief you held about your finances. It wouldn't
be a violent disturbance if you already knew your net worth
was 50K in the red, and you're only mildly shocked at how those
numbers look on paper. It still doesn't make you feel good, but it's
not a severe shock. On the other hand, another family would suffer
a severe shock if they thought they were only a couple of years away
from being debt free -- but the numbers indicate that if they continue
paying the minimum balance and acquire no new debt it will
take them fifteen years to become debt free. That is a severe
and violent disruption of their emotional balance and will take time
to absorb. Obviously, the latter would most likely be a state of shock
longer than the former.
But keep in mind that shock isn't always a negative emotion. You
could be pleasantly shocked that you are farther down the financial
road than you thought you were. And that would be a pleasant shock
(we should all be so shocked). It reminds me of a scene from "Fiddler
on the Roof" when Tevya was told that "riches are a curse,"
to which he responded, "May I be so cursed that I never recover!"
Another benefit found in the state of shock is that it is the first
step toward financial recovery. It may be a harsh reality, but it's
a place to start, and you have to start somewhere. The shock phase
can last anywhere from hours to months -- depending upon the reality
of where you are compared to where you thought you were.
This is the most common stage in financial recovery. In fact, some
people never move out of this stage and end up with perpetual financial
woes. M. P. Dunleavey, a hilarious staff writer for MSN Money, had
this to say:
I was thinking I'd conquered most of my financial demons, when I got
burned by the oldest and most insidious: Denial. The evil Dr. Denial
is short, bald and, for a demon, very persuasive. His official title,
for the record, is 'King of Willful Ignorance and Subtle Acts of Self-Destruction.'
really,' Denial said in a brief phone interview, 'I just do whatever
people ask me to do: cover-ups, muddled thinking, head-in-the-sand
jobs, that sort of thing.'
Well, that may be a funny way to look at denial, but the truth of
the matter is that the enemy does not want us to be financially free
and will use all kinds of tactics to keep us in financial bondage.
But once we face denial we can overcome it and be well on the road
to recovery. Dunleavey goes on to say, "Recent surveys of consumer
spending indicate that Americans spend with one hand and use the other
to cover their eyes" (www.moneycentral.msn.com, December
2002). This statement is backed up by the following facts:
- Two-thirds of Americans aren't saving enough for retirement.
- The average credit-card-carrying household is sitting on a total
balance of more than $8,500.
- According to a 2000 Consumer Expenditure Survey, U.S. consumers
spend about $8 million a minute.
- Last year Americans dropped about $63 billion on various forms
This last fact may seem a bit out of place when we are talking about
financial recovery -- but it's right on target! The more people deny
the seriousness of their financial situation, the more likely they
are to try to find a quick fix to the problem. In fact, denial makes
us more at risk for the temptation to gamble, figuratively or literally.
People in denial are easy prey for various get-rich-quick schemes
that are rampant on the Internet and in your e-mail inbox.
According to Margo Geller, MSW, a wealth counselor at GV Financial
in Atlanta, there are four red flags of financial denial. She says
you are in trouble if:
- You find yourself in the same financial pitfalls over and over
and you're not sure why. You are always paying late fees, missing
payments, balancing bills, or perpetually short of cash.
- You find yourself behaving in ways you know you shouldn't, such
as buying another suit on your credit card, eating out when you
promised yourself you'd cook at home, buying a special toy for
your child for no reason.
- You are financially stuck and cannot get unstuck (you are unable
to reduce your debt, or if you do, you are soon back into debt
- You find yourself using the following stupid rationales to explain
the above: "I'll deal with it." "Other people do
this all the time." "Right now this is more important."
"I need to." "I don't care, I'll figure it out
later." (www.moneycentral.msn.com, December 2002)
My husband knew what had happened when he came home early from work
and followed the trail of chocolate candy wrappers down the hall,
up the stairs, and into our bedroom, where I sat curled up in my robe
and fuzzy bunny slippers reading a book and drinking coffee.
"Did it happen again?" he asked compassionately. "Yes,"
I replied, trying to stifle a sob.
"How much?" he asked in a soothing voice as I sat crying
I took a bite of amaretto truffle. "Twenty dollarrrrrrrrs!"
Poor Bob; this happens every time I purchase something and then
find out I paid too much. It's enough to drive a Savings Queen to
Okay, so I'm exaggerating a wee bit. I have to confess that sometimes
I look for the tiniest excuse to play hooky from life and stay in
my robe a bit longer, make another pot of java, and snitch a good
piece of Godiva.
Even though I make light of my need to bag the best bargain, a series
of financial disadvantages can add up to a ton of problems.
And when these problems come crashing down around us, it can be downright
This depression stage is characterized by any of the following:
Concentration: An inability to concentrate on anything that
has to do with finances. An avoidance of any type of discussion on
Insomnia: You cannot sleep well because you are bothered
by the apparent hopelessness of your situation and are preoccupied
with worry over the steps that you must take for financial recovery.
Another issue that robs you of your sleep is concern that your spouse
or other family members will not be supportive in the recovery process.
Guilt: There can be a great sense that you are responsible
for where you are -- whether that feeling is valid or not. Sometimes
people take on the responsibility of their spouse's or their own circumstance
(lost job, medical bills, and other catastrophic events), even when
they are not responsible, and the result is feelings of guilt.
Dejection: A predominant sense of disheartenment in which
your spirits are down to such a degree that they contribute to a sense
Once again, the amount of time you spend in this stage will be directly
related to the severity of your financial condition. Hopefully, you
will pass quickly in and out of this natural step in the process of
financial recovery. But if you find yourself unable to move from this
state, I would suggest you secure the services of a qualified financial
counselor. Go to the Yellow Pages and look up Consumer Credit Counseling
Services. Be sure you call the nonprofit organization and not a for-profit
look-alike. This service will give you a plan to emerge from your
present state and will help you take the steps necessary to move to
the next step. They can get credit card interest rates lowered, payments
deferred, and help you with a decisive plan to emerge from the debt
It is sometimes said that depression is simply anger turned inward.
The anger stage is sometimes scary because anger can be manifested
through a wide range of emotions at a high intensity level. It can
be as mild as severe displeasure or as severe as outright hostility.
When the number one issue cited in divorce today is "finances,"
you can see people in this stage of financial recovery end up in the
"debtor's prison" of divorce court. Following are the top
twenty statements people express in this stage of financial recovery.
Some are justified and others shift the blame. I threw in a couple
of responses that are clearly uncommon, but they're funny in an otherwise
unfunny list -- see if you can figure out which ones they are.
Top Twenty Reasons I'm Angry About Our Finances
"My spouse bought that new _____________ (fill in the blank),
and that is why we're in financial trouble."
"My parents have tons of money; they could help us but they
"Our ___________ (fill in the blank with neighbors, parents,
siblings, friends, etc.) never have financial difficulties; they don't
know what it's like to have problems."
"My spouse is a spender, and I have no hope of financial recovery
as long as I'm married to him."
"My plan was to move to Bora Bora, but my spouse won't let
"My spouse got laid off of his job and we can't even pay our
bills. I'm so angry at (fill in the blank with your choice of blame
targets: from the company to the economy to the president or God)."
"We had a family member hospitalized with a severe medical
problem, and now we can't pay our bills. Why would God allow this?"
"We work hard for our money and end up paying all that money
in taxes -- it isn't fair!"
"The cost of living is so high where we live, we'll never get
"My spouse made a bad investment, and my children and I have
to pay the price of his mismanagement!"
"My ex-spouse has lots of money, and I have to work night and
day to make ends meet; he doesn't deserve it!"
"I always seem to be a day late and a dollar short, no matter
how hard I try."
"I couldn't afford to go to college, and I'm stuck in a dead-end
"I got a college education, and I'm overqualified and underpaid
for this job."
"I have a third-grade education and don't understand why I'm
not a corporate CEO yet."
"We've tried budgets, and they don't work for us because we
can't stick to them. We've tried reading financial books, and they
don't work for us."
"We've talked to a financial counselor, but it didn't work
"We've got a reason why everything you've written in this book
doesn't work for us."
"We're not to blame."
will notice that there tends to be a lot of blame shifting in this
it the best response to the circumstances? No.
there a healthy alternative?
The solution for this stage is to talk to someone, almost anyone,
because talking through your feelings of anger will help defuse those
feelings. It's obviously important that we not behave in a verbal
or hostile manner toward family members. It's not going to help if
you call your spouse a "fat, selfish toad" and pack your
bags for Bora Bora. If you or your spouse have these tendencies, then
it's important to have a mutually agreed upon third party present
when you express these feelings -- preferably a financial counselor
or family therapist.
Pamela York Klainer, Ed.D., the author of How Much Is Enough,
gives four suggestions for those who are reluctant to face the ugly
truth in this stage.
Blame -- Don't blame your spouse. Or your parents. Or your
lousy childhood. Or yourself. Stop playing the blame game, as it only
generates more anxiety and escalates feelings of failure and incompetence.
Own Up -- The flip side of not blaming yourself is to own
up to your own mistakes and admit the places where you've fallen short
financially. For example, the time you took a vacation instead of
paying off debt.
Practice, Practice, Practice -- Unless you are a genius at
handling money, you are going to need to build your skills. Learn
to budget, save, and invest. It takes time. Even the Williams sisters
have to get on the tennis court on a regular basis to stay at the
top of their game. "Cut yourself some slack," advises Klainer.
Mastery -- We are all unique, and what works well for one
family's finances will not work for another's. Some families love
computer programs that organize their money. Others prefer self-help
books. Or financial counselors. Or seminars. Become a master of your
own methods of balancing your budget. Once you develop a level of
confidence, it will help to eliminate fear, anxiety, and especially
One final note on anger: Don't be afraid of it. Anger can be good.
Anger can be your friend. It is the last step before acceptance and
complete financial recovery. So if you see this characteristic in
yourself or your spouse, and you deal with it in a proactive way,
then anger becomes a good thing. A very good thing.
By the time you've reached this stage, you've dealt with all the
icky issues: the shock over the bottom line of your financial
situation, the denial that you've got a problem, the subsequent
depression that occurs when you face the truth, and the anger
you feel as you look around for someone to blame. By now you are ready
to enter the last and final stage of complete acceptance.
This is not a stage where a fairy appears, your finances magically
get better, and we read, "They lived happily ever after"
as the credits roll. You know you've reached this stage when at least
some of these elements are evident in your life:
Change -- You've asked yourself what you need to change,
and you're willing to make those changes now.
Responsibility -- You've accepted responsibility for what
you did to contribute to your current financial status and identified
the possible reasons that have contributed to that choice (money personalities,
inadequate budgeting allocations, giving in to keep-up-with-the-Joneses
pressure, emotions, habits, etc.).
Accountability -- It's not enough to accept responsibility.
In order to make the changes stick, we need to talk it over with at
least one other person in order to solidify our purpose and strategy.
If you're married, this should be your spouse. In addition, you could
also speak with a financial counselor or financially savvy (and trusted)
friend who can keep confidences.
Hot spots -- You've identified the hot spots of where you've
fallen short financially so that you know what needs to be fixed.
Patience -- If money has made you anxious in the past, you've
now realized that there's hope. You realize that with patience, you
will eventually succeed. You are also more tolerant of you or your
spouse making mistakes and learning from them. You are ready to keep
Escape -- You realize that in order to achieve your previous
goal of escaping to Bora Bora, you'd have to fly to Tahiti, take several
boat trips, and swat mosquitoes the size of sparrows. You decide to
cancel those reservations and take the family to Niagara Falls instead.
Put It Into Action: From Fighting to Freedom in Four Relatively
Now that we've looked at your money personality, the emotions associated
with money, and the five stages of financial recovery, it's a good
time to put what we've learned into practice. Studies indicate that
you retain 10 percent of what you hear, 20 percent of what you read,
and an amazing 60 percent of what you hear, read, and do. That's why
it's so important to put these principles into action, and the best
place to start is in the marriage relationship.
Most couples, when asked if they argue about money, will reply,
"Well, we really don't fight about money, we just have
some occasional disagreements."
When Bob and I were newly married, he went into an electronics store
to buy batteries and came out with a new VCR. We were $40K in debt
and barely had enough money to buy groceries. But did we fight
about his irresponsible, compulsive, selfish, horrid, despicable,
and not to mention stupid decision to drop $300 on a new VCR when
we didn't even own a TV? Nah. We just had a disagreement.
Okay, I'll admit it, Bob and I have more than disagreed about
finances -- we have gone to our respective corners and come out fighting!
Especially in the early years of our marriage, when Mr. Born Spender
and Ms. Born Saver tried to mesh together two vastly different views
of money management.
According to Barbara Steinmetz, a financial planner in Burlingame,
California, tension mounts between partners partly due to poor communication.
"It usually happens because the two people involved aren't on
the same page. One person thinks they have a shared goal of saving
for a house, car, or retirement, and the other doesn't." I would
also add that they may not agree on tithing or paying down consumer
What can you do to get on the same sheet of music and head toward
financial harmony? Sometimes one of the biggest keys to solving a
problem is recognizing what triggers financial disputes. Once you
know what the sources of strife are, you can steer clear of those
trouble spots. Here are several factors that often contribute to financial
Problem: A Spender Bender This is an age-old problem that
began when Eve was willing to pay the price for that piece of fruit
and convinced her husband to ante up, also. If one spouse is a born
saver, then get ready for the sparks to fly when the born spender
goes on a buying binge.
Solution: The Balanced Budget The best way to begin to curb
a spender's buying habits is to sit down and work out a family budget
(see chapter 4). If you've "been there, done that" and it
still isn't working, then do it again -- in front of a family counselor
who is familiar with principles of household budgeting.
Problem: The Done Deal "This is when one person opens
the credit card bill and -- surprise! -- sees the tab for the drum
set, the new suit, or the night your mate took the entire office out
for lunch," says M. P. Dunleavey, columnist with www.moneycentral.msn.com.
"The fantasy here is that because it's a fait accompli
your better half will let it go. Oh, but they don't!"
Solution: The Return Deal With the average American family
in $8,000 of credit card debt, we find that this "done deal"
policy only leads to more debt-and family problems. If you still have
the receipt and can take the item back for a refund, this is the quickest
fix to the problem. Additionally, make it a family policy to always
consult your spouse for purchases over (fill in the blank). Sometimes
just the idea of calling to ask what your spouse thinks about
buying that $500 suit is enough to help you forgo the impulse buy.
Problem: Where's the Money, Honey? This is where you (or
your honey) hits the ATM machine on Friday, and by Monday you have
no idea where that money went. You have nothing to show for it. Nada.
Solution: Target Practice The old saying "If you aim
at nothing, you'll hit it every time" is particularly true in
your family's finances. The solution lies in tracking the money. Keep
a list in your purse or car of when you got that $200 from the ATM
and where it went. This takes seconds to document and makes you think
twice about spending carelessly.
Problem: Too Many Chiefs, Not Enough Indians In New Mexico,
we lived near several tribal villages, and there was always a tribal
chieftan. Many financial problems stem from family members trying
to grab control of available resources. If you're not careful, the
kids can grab a large part of the control with all their needs and
especially their wants.
Solution: Checks and Balances In most families, one partner
is better with money than the other. It's natural to put that person
in charge of paying the bills and administering the household budget.
But it's also crucial that the other partner knows where the money
goes and how it is spent. I'm the better "money handler"
in our family (big surprise), but we establish our budget together.
Bob writes the checks, and I review the checkbook, so that we have
"How good and pleasant it is when brothers live together
in unity." Psalm 133:1
Excerpted from A
Woman's Guide to Family Finances by financial expert Ellie Kay.
Used by permission of Bethany, a division of Baker Book House Company,
copyright 2004. All rights to this material are reserved. Materials
are not to be distributed to other web locations for retrieval, published
in other media, or mirrored at other sites without written permission
from Baker Book House Company. Visit www.bakerbooks.com.
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