In the LearnVest Personal Stories series, everyday people share the details of their money lives, discussing the individual choices they've made and how it's impacted their financial journey.
Today, we learn how one couple navigated a true financial crisis with the help of a special kind of money expert.
Not long ago, my husband and I—both full-time freelancers in creative fields—found ourselves bottomed out by the recession.
That’s not an exaggeration. In fact, some people might call it an understatement. Instead of getting five assignments from clients each day, our workload dwindled to five a month. We used to be paid every few weeks. Now, months went by before we saw a check.
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We cut back as best as we could, but soon we found ourselves living off our credit cards. Bills, medical expenses and unpaid taxes piled up. Then one day, we were facing an aggressively thick ream of foreclosure papers from our mortgage company and wondering, “How did we get here?”
I should back up and explain: My husband and I are both responsible citizens, home owners and parents of two small kids. Neither of us had a criminal record or addiction problem. We’ve always prided ourselves on being hard workers, having stellar credit scores and living simply in the suburbs of New York City.
Still, we were drowning in debt. And the income we did have coming in was like random flotsam, not the life raft we needed.
We tried asking for help from a non-profit credit counseling service. But it was clear that slashing monthly expenses and consolidating credit cards wouldn’t be enough to save our house. Next, we contacted a HUD counselor about a loan modification. But although we applied seven times our bank didn't approve us, nor would they give us an explanation why.
Desperate for Help
Then one day, an online search—and who knows what I actually typed in, but it’s possible it was “In dire straits please help rescue us”—turned up a strategy we’d never considered: a financial therapist.
Imagine seeing a therapist to talk about how you feel about money and delving into the psychology of how and why you spend it, and you’ve got the general idea. I’d heard of financial therapy before, but until our own cash flow was at a standstill, I didn’t think of it as an option. Something about the touchy-feeliness of that concept, versus dealing with cold hard numbers, appealed to me.
I contacted a licensed financial therapist in New York. She underscored that she couldn’t make our money troubles disappear. But she could help us become more aware of our emotions about money so we could better cope with our current situation and make future decisions that were more in keeping with our personal values.
Like many financial therapists, she operated like a counselor who helped people deal with psychological issues: She met with clients in person and also offered sessions over the phone. She charged $250 per hour (not covered by health insurance, unfortunately).
My husband agreed to try it out. Though our relationship was on solid ground and we weren’t fighting, our house was racked with tension, which took its toll. He couldn’t sleep and was drinking too much. I was in tears all the time. Clearly, we had to do something.
Touching a Nerve
The paperwork she sent us to fill out beforehand was surprising. For starters, we needed to sign a contract, stating that we understood that although most people find financial therapy empowering and helpful, we might experience anxiety, guilt, sadness or even anger.
And although the therapist wanted specific numbers about what we owed for our house and credit cards as well as what we spent each month on everything from groceries to haircuts, the majority of questions concerned our attitudes about money: What was my earliest memory of money? How did spending money make me feel? What did my parents teach me about money? What emotions did I associate with it?
These were questions I’d never asked myself before. Answering them made me squirm. For the first time in my life, I realized that although I hated not having enough money to pay my bills, I didn’t like money anyway.
I didn’t like thinking about money or talking about it. I didn’t even like handling it. My habit was to toss crumpled paper bills and coins into my purse rather than tuck them safely and neatly away into a wallet. I was curious to hear what the therapist would think of this and if she would link my attitude to our financial situation.
During our two sessions together, with help from the questionnaires we had filled out, the therapist excavated the reasons for my discomfort with money. Much of it had to do with how I was raised. My dad had been in business for himself, but he regularly refused payment because he felt that helping people was the right thing to do. The therapist helped me see that I absorbed that message and skewed it so I felt that taking money was something to be ashamed of.
My husband had a similar view of money, and neither one of us liked to deal with conflict. We handled our financial crisis by not balancing our checkbook or learning how to use money-management software. Though very aware of our dwindling bank accounts, we kept our heads in the sand, hoping things would magically turn around. What we discovered about ourselves was painful to hear but necessary to figure out a way out.
Going forward, the therapist asked us, what could we do to save our house? “Well, we can’t declare bankruptcy,” I remember joking.
But she surprised me by asking why not.
Because it would be humiliating, I stuttered. I would be embarrassed. We would feel so guilty. So sad. So angry.
But, she pointed out, while not ideal, couldn't it potentially help us stay in our dream home? The one that my husband and I wanted to live in for the rest of our lives? Wasn’t that our goal?
When the session ended, I felt like crying. But for the first time in months, I also felt relieved. We might not be flush with cash, but we did have a plan—and answers to how we arrived at this point. We called a lawyer the next day to learn more about filing for Chapter 7.
Taking Back Control of Our Money
Here’s where our story gets bittersweet. Did we file for bankruptcy? Yes. And yes, it was as difficult as I expected. And while it did help us with our massive credit card debt, the bank still wouldn't grant us a loan modification or approve three separate short sales. We ended up going into foreclosure anyway.
The experience was like all of my worst money nightmares come to life. Yet throughout, I kept reminding myself of the questions the financial therapist had raised. Why does money bother you so much? What emotions are you attaching to money? How can you step back and try to be objective? Answering them helped remind me to face each step head-on, so we could start repairing our finances and look to the future.
Today, seven years later, my husband and I only rent. We don’t own a house and quite frankly, I’m not sure if I ever want to again. But happily, we pay for 90% of all purchases with cash, and we have very little debt. Thanks to a change of my husband’s career, we also have a steady income.
Do I balance my checkbook, faithfully use apps to track my purchases and carefully track the dollar bills in my purse? Not always. My relationship with money is still one of dislike. But now I see it as just a means to an end—not a symbol of my identity or a reflection of myself.
Financial therapy helped change my relationship with money, and I'd certainly mention it to friends who are in a situation similar to the one my husband and I were in—as long as they are honest and prepared for some potentially revealing self-discoveries.
*Name has been changed.