Master ClassFinancial Health by Amanda Clayman
While the country is slowly reopening with the vaccine here, the long-term economic impact of COVID-19 remains uncertain and, for millions of families, anxiety about personal finance is taking its toll. Just how do you navigate the economic crisis we're in? Amanda Clayman, a financial therapist and financial wellness advocate for Prudential, has spent her career helping people change their spending and saving behaviors—and, here, she shares her tips.
Clayman knows firsthand how emotional bad habits can lead to fiscal struggles: In her twenties, she moved to New York without a financial plan, and went into major debt in the process. “I thought a budget was a form of punishment,” says Clayman, who previously worked in marketing and event promotions. But she was able to get herself out of debt and change her relationship with money, and is now helping others do the same. Below, her go-to advice for managing the stress, knowing when to make a financial plan, and how to explain financial challenges to the kiddos.
My husband has this black-light analogy that the stress of COVID-19 has basically shined a black light on our lives and what lights up are all the existing tensions we have, even before this happened. When we feel the stress of these tensions being magnified, we go to the strategies that help us feel safe. Planners, in particular, may be struggling right now because, when they feel anxiety, their coping mechanism is making a plan to fix it. But we can’t make a plan, with the current uncertainty about the economy.
It’s important to identify the feelings that are coming from the stress, and bring them to awareness so that we have perspective. The most important step right now is to figure out what is an existing problem vs a new, COVID-related problem. Both are real, but we may want to take a different tactic to approach the new vs existing financial problems.
Part of the stress that we are feeling is that we feel sad we don’t and can’t know about the future. Some of these dearly held plans, whether it is how we are going to feed our kids in a month or whether we can buy a house, we just don't have the answer at the moment. Right now, to be efficient with our own energy, it’s important to know when to turn the stress off if we have exhausted all the practical solutions.
“When we feel trapped literally or psychologically, we are in a totally different functional brain space. We are in survival-brain mode vs. thoughtful-brain mode.”
Age level matters a lot. But, fundamentally, children are attuned to adult and caregiver stress and they will likely pick up on something if their parent is stressed. If your child is correctly sensing the stress you feel, and you tell your child they are incorrect, you risk damaging the trust in their own emotional instincts.
One way to approach this is to acknowledge, in a loving way, that there is something that is happening and that you are dealing with it and ensuring their safety. You can also reassure them that you have a plan in place to figure things out, or you can be specific, (e.g. we have enough savings). If you are making impactful adjustments, such as letting go of a caregiver, it’s important to tell them because they may be seeing changes in a household.
As parents, we get uncomfortable talking about financial stress and we want to control the conversation. But it’s a good time to ask your kids questions. You can start with, “Tell me what you are worrying about,” or in the case of teenagers, “Tell me about what you are hearing from your friends.” Children mostly want to feel connected with a parent and want to feel that the adults in their life are looking out for their safety. If a child is worried about being evicted, it’s good to speak to things that they might be scared of, such as losing their house. One response to that concern would be to say, “We are all going to be together no matter what happens, and if it does happen, we can always go to grandma’s house.”
And your partner? Financial conversations with a spouse can be hard…
Every partner has a different role in their family system, when it comes to money. If you are feeling stress and discomfort in conversations, it’s important to take a step back and find a neutral way to talk about what was the state of the union before this time. So, if one partner took care of the day-to-day finances and another took care of big picture decisions, it’s important to acknowledge these roles pre-COVID.
We tend to create stories when we feel stressed as well. Couples should listen out for what the story is that each partner is constructing and find evidence of the actual problem—for example, if your income is unchanged, but a partner is saying we need to save every dime and cancel everything, it’s good to look at what is the evidence and facts supporting this idea.
There are some issues that have time pressure and need immediate attention. But if there isn’t a time pressure, take as much time as you can afford to make major decisions around family finances.
Also, make a framework for what needs to be talked about between you and your spouse or partner and don't try to compress everything into a specific moment of time.
What's the biggest misconception around financial wellness and health?
That it is something only applicable or accessible for the wealthy or financially comfortable. Financial wellness is holistic and everyone can have a healthier approach to money. The outcome could be that if we change our behavior, we bring in more money, or it may just be that we are super efficient at dealing effectively with financial challenges in our lives.
Top Tips When You're Struggling to Pay the Bills
Take into account data, such as how much money you have on hand, how much access to credit you have, what helpful offers are lenders offering (e.g. deferment of student loans, rent or mortgage payments).
Having the capacity of knowing that I can take care of myself in a crisis is so important. When we feel trapped literally or psychologically, we are in a totally different functional brain space. We are in survival-brain mode vs. thoughtful-brain mode, and it’s challenging in survival mode to use our brain to predict accurate consequences. Giving ourselves options makes us feel more grounded and in control of these tough financial situations, and in these times we need and crave the feeling of being able to nurture our own agency.
So a list of options could be, “If I pay my rent in full and put my student loans on hold, here is what will happen,” or “If I pay my mortgage but defer student loans, here is what will happen.” It’s also important to think of these options in time frames. Right now I would advise that people think of financial decisions in a three to six month time frame and not much longer, as things could change.
This is where so many plans fail, because we don’t think this part through. So if you decide to put rent on hold, and put that money towards student loans, you need to map out what are the ways to make that happen and what calls need to be made or what sacrifices need to take place. For example, my plan may mean that I need to ask my parents for a loan because I haven't been able to get through to my unemployment agency. But instead of calling your parents in a panic, figure out how much you need to get through the next three to six months and tell them the plan.
Implement the plan and continue to gather information to see how the plan is working. If it needs to adjust, this is a cycle when you can make changes.
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