Financial therapy: What it is and who could benefit from it

Financial Therapist Lindsay Bryan-Podvin, LMSW, joins Yahoo Finance Live to discuss people's relationship to their finances, managing anxiety stemming from financial worries, financial insecurity during the pandemic, and inflation.

Video Transcript

RACHELLE AKUFFO: Well, with that market selloff, inflation at 8.3% and the cost of a tank of gas at record highs, money worries can send your anxiety through the roof. Well, our next guest helps clients with just that. Lindsay Bryan-Podvin is a certified financial therapist and author of "The Financial Anxiety Solution." So, Lindsay, welcome to the show. Obviously, two things people already aren't comfortable about talking about-- their personal struggles and their finances. Break down what financial therapy is.

LINDSAY BRYAN-PODVIN: Sure, Rachelle. So financial therapy helps people understand their thoughts, their feelings, and their intersectional identities, and how they contribute to what they do with their money. So the way that I explain it is it's much less what is a budget, and how do I make a budget, and much more, what's getting in the way of me creating one? Why is it so hard for me to learn about personal finances? Why is my response to hold on tightly to money or to spend it as soon as I get it? So it's more about digging underneath those actual financial behaviors.

RACHELLE AKUFFO: And it's interesting because how we react to financial stress stems from our relationship with money, perhaps how we were raised to even view money. So you identify four archetypes in this. Talk about those.

LINDSAY BRYAN-PODVIN: Yeah, sure, so the four archetypes were born out of different research on money disorders. My training is that of a social worker, which means that I come to things from a strengths-based lens. So I try to think about things, what is the strength of the reason a person is behaving in this way? How does this behavior help them? How is it supportive of them? So the four financial archetypes are doomsday prepper, which we all know this person. They're the person who always has a coupon. They're cutting their sponges in half so they last longer. They're storing money under the mattress. They're very fearful of money and also like to hold on to money.

Then, we have the blissfully ignorant. This is the person who gets grossed out thinking about money. They don't like talking about it. They think it's rude, they think it's impolite. So they just avoid it as much as possible. Then we have the money admirer. This is the person who really gets excited about money. They like the idea of earning more money. They're your side hustlers. They tend to be your entrepreneurs. They tend to be your workaholics.

And then we have the free spirits. And those are the people who love to do spontaneous weekend getaways. They're often going on shopping sprees. They're the life of the party and also might struggle with overspending.

RACHELLE AKUFFO: So, then, given those different sort of approaches to money then, why might someone need financial therapy, especially in times of high inflation or even if they're prepping for a recession?

LINDSAY BRYAN-PODVIN: Yeah, really good question. So we're driven by emotions. Humans do not act the way that robotic economists predict that they will. We're talking right now on this segment right beforehand talking about stocks going down and inflation going up.

And if we look at it rationally, and we zoom out, we see that there are always these periods where markets go up, they go down, inflation goes up and it goes down. And what we know is that, over time, if we hold on to our stocks, the market tends to recover, and things will be OK. And with inflation, there are different measures that can be implemented through different government interventions to help slow that inflation. And eventually, things kind of even out.

So holding still and not selling off all your stocks or going to Costco and storing up on non-perishable goods is the best course of action. But we're humans, and so we don't like feeling uncomfortable. We don't like feeling anxiety. So we tend to do one of two things when we feel that financial anxiety. We tend to react. And that does look like selling off stocks right now, stockpiling on purchasing things, or we tend to shift in the complete opposite direction, which is procrastinating and avoiding our money altogether.

So when it comes to financial therapy, it helps people to hit pause between the stimulus, which we're talking about is inflation, how it's going up so much, and responding and really making sure that they're taking financial actions that are really the best for them in the long-term and are in alignment with their unique goals and needs.

RACHELLE AKUFFO: And I want to ask you about some of these sudden losses of wealth. Obviously, the crypto crash wiped out hundreds of billions of dollars in wealth. Global stock markets have lost about $11 trillion this year. When someone does experience a sudden loss of money or income, what should be the first step in trying to manage that?

LINDSAY BRYAN-PODVIN: Yeah, so one of the first things that a lot of people do who have experienced things like that is go, I know what I'll do. I'll go buy more of it, and then hopefully, I'll earn my money back. But what we know is that that isn't always the best idea. If you've just lost a ton of money in NFTs or in crypto, then going out and buying more of it right now might not make the most sense. This is where coming back to basics, as boring as it sounds, tends to be the best choice of action.

So when you've lost a lot of money in a more potentially risky investment, depending on your risk tolerance, the best thing to do can be going back to basics, making sure that you're not over purchasing on things, making sure that you have an emergency fund, and that you can bulk it up, and really getting back to the financial basics, because the financial basics are kind of at the bottom of Maslow's hierarchy of needs, if you remember that triangle from psychology 101. And that helps to cover things like food and shelter and safety. And so we want to go back to that when we've experienced some sort of economic loss in our personal lives.

RACHELLE AKUFFO: And when I looked on your website, your client roster is already full, so clearly, there's a demand there. But what role can and should some of these financial therapy tools should be implemented when you think of things like your traditional wealth management and financial planning services?

LINDSAY BRYAN-PODVIN: Well, I think the first thing is just to incorporate and acknowledge that we are all emotional beings. We all act with our emotions. And so for financial advisors who are working in a more traditional setting, just pausing and asking a very basic therapy question, which is, how does that feel for you? Does that feel good for you and in alignment with your values? Asking a couple of quick questions just to check in with your clients' emotions can be really, really powerful.

And for folks who don't have traditional wealth managers and they're doing their own personal finance planning and they're kind of acting as their own CFP, it can be worthwhile just to think through the different times in which you're interacting with money. And if you don't know what I mean, that could be everything from tapping your phone on Apple Pay or Google Pay or logging into your retirement accounts, and taking note of the different thoughts running through your head and the different feelings you're experiencing in your body.

Are you noticing a pattern? Are you always feeling anxious when you're looking at retirement? Are you always feeling really relaxed when you get your paycheck? Starting to take notice of patterns so you can make decisions from a calm and neutral place, and not from an anxious or reactive place.

RACHELLE AKUFFO: Certainly lots of great advice there. We do appreciate it. Lindsay Bryan-Podvin there, certified financial therapist and author of "The Financial Anxiety Solution." Thank you so much.