County Credit

In Denial About Your Debts?

Fri, 18 Apr 2014
The young man was having bad dreams and trouble sleeping. He told Wynnewood, Pa., psychologist Maggie Baker that he was haunted by his two card tables full of unopened bills.

While most people don't have two tables full of overdue bills, there's no shortage of people in denial about their financial situation, financial advisers and therapists say.

But it's time to face reality and take ownership of your financial situation before it's too late, experts say. Six tips on how to get real:

Stephen Methode

1. Open (and Read) Your Statements.

"It's important to notice that even though you're denying your situation, some part of you does know that you aren't dealing with it and can never be fully relaxed," says the Atlanta financial psychologist.

If you're having trouble opening those statements, ask a trusted friend to open them with you, she says.

 

2. Track Your Spending.

"And you wonder where the money goes," Mr. Vidwans says.

T. Rowe Price TROW "Folks usually find that they're spending much more than they think they are," she says. You also may realize you're spending more than you make.

Charleston, S.C., financial planner Helen Berenyi says to go on an all-cash diet for two months to gain awareness. "You'll get a much better idea of your true needs and actual spending," she says.

Looking at potential financial risks will give you a good dose of reality, says Joe Duran, chief executive of United Capital in Newport Beach, Calif.

Mr. Duran says you should create a genogram (a type of family tree) and identify who would be responsible if a financial disaster occurred to any of the people on the tree—including you.

"You need to think about what risks you need to be ready for should some bad surprises occur," says Mr. Duran.

For clients in denial about how much money they need for retirement, Mr. Vidwans shows them projections of their financial future. For example, if a 50-year-old couple's annual expenses are $50,000 today, he'll show that 25 years from now those same expenses may run about $82,000, assuming a 2% inflation rate. Many clients don't have pensions like their parents and will likely face higher health-care costs as they age.

 

5. Set Goals.

You may want to contact your lenders to negotiate more favorable repayment terms or seek help from the National Foundation for Credit Counseling, says Ken Donaldson, a St. Petersburg, Fla., mental health counselor.

If your spending isn't aligned with your priorities then you may need to make some trade-offs, says Ms. Ward. For example, if you need to save for retirement, you might set aside 10% of your paycheck to your 401(k) plan—even if it means you don't get a new car next year.

 

6. Seek Help.

 

 

 

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