I felt calm as I sat on a blue couch for my close encounter with the nascent field of financial therapy. I watched as Joel Reimer, a fit, 50-something man in a golf shirt, put sensors on my thumb and fingers.
I was in the middle of Kansas, in one of the exam rooms at the Financial Therapy Clinic, a counseling and research center run by the Institute of Financial Planning at Kansas State University. The clinic was on Poyntz Avenue, the main street in Manhattan, Kan. The office, like the town, the street and the building, was clean, spare and quiet.
“So I appreciate you coming in today,” Mr. Reimer said. “I’m just going to ask you some questions. Some background questions first and some financial goal-setting questions. Do you have any questions?”
I didn’t. He began by asking about my marital status, children and employment. Then he went into questions about my family’s finances and about our goals.
Which of the following best describes your financial situation at the end of the month: Do you have several unpaid bills, do you break even or do you have some money left over?
We have money left over, I said.
Suppose you were to sell all of your possessions, including your home, so you have turned all your assets into cash and you were going to try to pay off your debt. After doing that, would you be in serious debt, break even or have a lot of money left over?
I asked him what he meant by a lot since that was a relative term. He wouldn’t say, but I chose it anyway, since we would have money left.
When he got to my financial literacy, I gave myself high marks. I took a moderate grade for my willingness to take risk on an investment. And I spoke in detail about our financial goals for the year.
After 30 minutes or so, he unhooked me from the machine. “That’s it for our questions at this point,” said Mr. Reimer, with the same friendly but unreadable expression he had evinced since the start. “We’ll let you go on out and answer some additional questions.”
The written questions should have been easier. They were focused entirely on basic financial concepts, responsibilities and anxieties around money. But they asked for actual numbers, like our monthly housing costs and income after taxes. I had been honest up to this point. But I felt uncomfortable revealing this information, even though Mr. Reimer was a complete stranger.
I shouldn’t have worried. The researchers didn’t care about any of my answers. They cared about my stress level when I answered the questions.
“Do you think you were stressed or not stressed?” asked Sonya Britt, the chairwoman of the personal financial planning department at Kansas State.
“I don’t think I was stressed,” I said. “I think I was cold.”
“Hmmm … you actually were quite stressed,” she said. “It doesn’t matter what the room temperature is. After about two minutes, you should be able to adjust and go back to your homeostasis level. You got more stressed as you went on.”
She then showed me a graph of temperature at my fingertips. It started at 74 degrees and dropped to 72 during the questioning. The ideal temperature, she said, was 92 degrees. Most people who were relaxed were around 82 or higher.
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Post-therapy
3 months later
“I felt financial planning should be available to everyone, but it’s hard to make a living when you work with clients who are of modest means,” he said.
He recalled a case where a woman was playing what he called “credit card roulette” to keep herself afloat but still supporting two sons in their 40s. This was a straightforward case to counsel. But he did not take her on as a paying client when he realized she couldn’t even give him a monthly list of expenses.
Unlike psychotherapy, where determining the effectiveness of the advice is difficult, financial therapists have tried to quantify the impact of their work. In a clinical trial published in The Journal of Psychological Services, Mr. Klontz and four other researchers found that in two key areas — psychological distress around money and ratings of financial health — people who underwent financial therapy maintained the gains three months after treatment ended.
Financial therapy is meant to get people thinking about the financial decisions they make — and not about their investment returns. These methods of addressing clients could help give people of various income levels the financial security that only the wealthy enjoy.
And there is an interest in this sort of financial work beyond a small niche. Large financial firms are making a push to talk to clients more explicitly about broader investing biases drawn out in the field of behavioral finance, which looks at the ways predispositions influence and distort financial decisions.
“All of these biases that you find in investors is a direct result of their experiences and their preferences that they’ve had in financial markets,” said Barbara Reinhard, chief investment officer of private banking Americas at Credit Suisse. “Asking ‘What’s your bias?’ doesn’t get you anywhere. It’s, ‘Mr. Smith, tell me, what’s the fear?’ ”
As I sat there that day at Kansas State, I knew if I had answered the questions again, knowing what I now knew, I doubt I could have masked my stress any better. Being open and honest about money, even around complete strangers, is hard.
“My stress isn’t, ‘I’m not going to be able to pay my bills,’ ” I told Ms. Britt and Mr. Reimer. “My stress is, ‘I know how people perceive money.’ It was more stressful filling out the money parts of this survey. …”
“Just divulging the numbers,” Mr. Reimer said.
“Exactly,” I said.
As I was leaving I asked Ms. Britt who had the lowest stress level in this experiment. She turned to Mr. Reimer, and they agreed it was a chatty teacher.
“Basically she had never talked to anyone about her finances before, and she wanted to keep talking,” Ms. Britt said. “We felt bad that we had to move her along.”
Maybe the teacher didn’t know enough to worry. Or maybe she knew that she had a pension, had saved some money and would have no worries. Either way, she was living a financial life with an openness that could be a model to others.
PAUL SULLIVAN is the Wealth Matters columnist and author of “The Thin Green Line: The Money Secrets of The Super Wealthy,” from which this article is adapted.
