As a Financial Therapist, I have seen a steady increase in the number of clients I work with who are young adults, who are fresh out of college or recent graduates around 22 to 25 years of age, and mid-adults, around 26 to 40 years of age, who significantly struggle with spending and budgeting, financial knowhow and management, and their perceptions or expectations of the “real world” in terms of their earning potential, obtaining assets, and financial understanding and responsibilities. Many young adults enter the workforce with the expectation or belief that they will earn a ton of money, be able to afford whatever they want, quickly pay off their student loans or debt, and they will understand and be able to navigate all of the financial responsibilities and expectations that come along with being an independent adult. Unfortunately, this is often not the case and it tends to produce significant stress and anxiety, over spending and financial issues, unhealthy money behaviors, and significant debt. Many young and mid-adults are unprepared for their financial responsibilities and obligations, which creates a vicious cycle of relying on credit and increasing debt and stress.
In a study titled “Overconfident and Underprepared: The Disconnect Between Millennials and Their Money, Insights from the 2015 National Financial Capability Study,” published in the National Endowment for Financial Education, the authors found that although Millennials have a variety of substantial assets, they are also significantly borrowing and leveraging against them, as the majority have some form of long-term debt, such as student loans or home mortgages. The prevalence of short-term liabilities, such as credit cards, is also very high among Millennials with a high proportion displaying expensive paying behaviors, such as only paying the minimum monthly payments, carrying a balance and having to pay interest, or incurring late fees due to an inability to pay the bill. The study also found that the feeling among Millennials was their debt was too high, the majority were dissatisfied with their financial situation, and many expressed that their financial expectations did not meet their realities. It is also important to mention that the study found that the majority of Millennials are also unprepared for financial problems or unexpected issues, seldom have emergency funds, and just slightly more than half of the subjects are not planning or saving for retirement.
Of significance, the study also found that Millennials are confident in their financial knowledge and skills but their actual financial literacy is significantly low and very few have ever received any type of financial education. With this in mind, why do we expect individuals to be able to enter the “real world,” manage their finances appropriately, and increase their financial security if they have not received any tools or training to help them do so? Financial therapists and planners can be a great asset and benefit to Millennials, and anyone in general, who find that they are unable to manage their money or are experiencing significant distress or anxiety as a result of their financial situation. Financial planners can help to create budgets and plans, provide money management tools and tips, and help the individual to decrease debt and plan for the future. With the help of a financial therapist, one can learn better money and stress management techniques, realize the possible psychological aspects for overspending, compulsive buying, or money issues and how to address them, and ways to have a more healthy and positive relationship with money.
If you are feeling stressed, anxious, or overwhelmed due to your financial situation, debt, or any other financial stressor, or feel that you have developed a negative relationship with money or unhealthy money behaviors, please contact Symmetry Counseling today to schedule an appointment with a Financial Therapist.