In this article, we consider how psychology and social sciences play a role in financial planning
Financial planning as a liberal arts based profession
Here’s a quote that for me, sums up so much of what I love about the art of financial planning. It’s from Dick Wagner’s book, “Financial Planning 3.0”.
“If we consider financial planning to be a liberal arts based profession, we need to know a lot about a lot, and then we need to know how it all fits together. Our client relationships and professional undertakings require us to engage in work and conversation encompassing geopolitical realities, the ever-unfolding miracles of the physical sciences, the anticipated tragedies of global warming, potential pandemics and peak oil as well as the mysteries of the spirit and multiculturalism. They take us all the way into the most intimate details of an individual’s personal aspirations. To work effectively with their money, we must grasp their most cherished family relationships and personal relationship with the divine. Our work requires us to see into the future even as we understand and appreciate the past. It forces to us to understand how intangible forces influence the survival of six and a half billion souls on a vulnerable planet. Face it, this work calls for wisdom and understanding on a par with any other profession or sensitive undertaking. No other profession needs more depth and breadth as essential aspects of its training and daily work.”
I recently heard an interview with a person who teaches financial planning classes at the university level, who recommends all her students take psychology classes. You may have the best financial analytical skills around, but you will have a hard time helping others with financial planning if you can’t communicate and understand why they make the decisions they do around money.
I feel strongly that my liberal arts education has been a benefit in this profession. My liberal arts degree taught me to see the big picture; evaluate research and solve problems; how to communicate with others orally and in writing; what motivates people to make decisions, and more.
Money and Emotions
So much of our behavior around money seems to come from a place of emotion or deep-seated fears/anxieties around money. Here are some things I’ve heard clients tell me about money:
We never had enough growing up so I think I won’t ever have enough.
My parents always fought about money so I do everything I can to avoid money conversations with my spouse.
Money affairs should be kept private and not shared with anyone, even my spouse.
My mom lived check-to-check, racking up credit card debt while I was growing up so I don’t see any other way to be.
My dad was money-obsessed, so I’ve taken a different path. Maybe I should have learned a little more from him about money.
Understanding how to discuss emotions around money
As an integral part of my practice, I strive to understand my clients’ emotions around money. I try to ask open-ended questions in my client interviews to help get at these underlying feelings around money. Questions like, How do you feel about the amount of money you have? How does your perspective on money differ from your spouse’s? What would you like your children to learn about money? What was your earliest memory of money?
I also try to let there be space in the conversation to allow my clients to feel comfortable to talk about what’s important to them and why. I find that when a safe space is created, people are willing to share these deeply personal feelings about money.
Ultimately, money is usually a means to an end. I think the way we use our money should be aligned with our life’s goals. I love learning what my clients imagine their life could be in the future. And I am so grateful that I have a chance to play a small part in helping them get there.
