The last time I wrote about financial stress and wellness, I emphasized the need to understand our individual differences as the first step toward better understanding how to deal with our finances.
In reality, a majority of us don’t have the natural cognitive and organizational styles of those who excel at the kind of thinking that financial planning requires. To this point, I offer an anecdotal observation along these lines: My company, Payoff, has spent some time in the past year working with those in the financial industries. As part of these conversations, we asked everyone to take and share the results of our Financial Personality Quiz.
This group of people, which I guestimate to be a bit more than 80, was almost entirely one of two financial types: The Guardians, who tend to be traditional and conservative in their thinking, and The Architects, who are highly organized and fit well into hierarchies.
While this is entirely anecdotal, the fit between our perceptions of the “personality” of financial services as an industry and the Financial Personality types we observed in decision-making roles within this industry was too snug to ignore. While Guardians and Architects are not underrepresented in the broad population, there are clearly many people who find the linear, hyper-rational, traditional thinking that defines the financial industry a comfortable enough fit that they work, usually with great enthusiasm, in the industry.
For many others, however, these ways of thinking are almost a foreign language.
When we were doing the early psychometric work to validate the Financial Personality Quiz and the 10 financial personality types it delineated, I experienced one of those times when the data stymied me for a longer period of time than I care to admit.
Most of you know how the scientific method is supposed to work: based on a theory of action, scientists explicitly state how this theory will be evidenced in a specific scenario, called a hypothesis, leading to some empirical test, ideally a nice randomized, controlled experiment.
But as an applied scientist, I have been on the quasi-experimental train all along. For sure, ever since I joined forces with David Herman, PhD, and an ever expanding band of scientists to execute Payoff founder and CEO Scott Saunders’ vision of using science to improve people’s relationship with money, we quickly realized we were bound together by the common belief that advanced data analytics are absolutely essential for the growth and well-being of our species.
Just as quickly, though, we realized that the available science, from a psychological perspective, was slim at best.
What is Personality?
Prior to our study of financial personality, the existing theories about how people differ in their views of money were poorly developed. In moments like this, my instinct is to take a step back and look at things on a relatively simple level. We stepped back and decided to apply what we know about personality in general to how people demonstrate individuality in their financial values, behaviors and attitudes.
The state of the art in understanding personality when we began this project in early 2014 was clearly the Five Factor Model (FFM), often referred to with the acronym OCEAN.
OCEAN is at the heart of the study of personality and measures us this way:
- Openness – Our approach to novel experiences and information
- Conscientiousness – Our organizational preferences as well as our relationship with authority
- Extraversion – As a source of energy, a high comes from social activity and adventures, a low from introspection
- Agreeableness – Our preferences in close relationships: high indicates nurturing, low indicates questioning
- Neuroticism – Our emotional thermometer, where high wears emotions on a sleeve, and low is very self-contained
We developed a set of over 50 questions based on OCEAN to uncover truths about financial personality, but found a great deal more than we were expecting. We expected these questions to relate in groups so that questions we developed to relate to Openness would hang together, as would those related to Agreeableness, and so on.
At first, what appeared to be unclear was in fact the beginning of a completely different area of study for us, because the results were so surprising, and eventually logical. For the analytical and clinical minds — like those on my team of clinical and research psychologists, neuroscientists, psychometricians and data scientists — these kind of findings are what we live for, what drives us to advance our thinking.
We asked study participants to respond to seemingly unrelated statements, for example:
- “I do my taxes at the last minute.”
- “It’s not worth my time to plan for my financial future because I will never be able to make enough money.”
- “I have little idea of how much money I really have.”
- “I often over-charge my credit cards.”
- “I do not allow my family to know my real financial picture.”
In their responses, we saw a profound problem emerge. Feelings of stress, failure, isolation and pure, simple fear kept popping up in our analyses. This is not what we expected as we had thought the FFM would have aspects of fear specific to the dimension it related to most closely. For example, we thought people high on Agreeableness would have more concerns about family welfare. But instead we found the items relating to fear hanging on a single factor. Unclear of exactly what was repeatedly emerging, we respectfully labeled it “Factor Fear,” as we saw this dimension with alarming regularity.
We asked ourselves: Was this a temporary neurosis brought about by stress? Was it an existential fear stemming from financial concerns? Was it indicative of money tweaking our brains in some profound way that both scientists and laymen alike had missed? What was going on?
My team and I began to hypothesize.
The Emergence of PTSD in Financial Stress
Out of left field one day, the answer jumped out and hit me in full force: It’s PTSD, dammit. Post-Traumatic Stress Disorder has been officially recognized by the mental health community as a serious mental condition since 1980, but has been observed in some form by the military as far back as 1905, when the Russian army called “battle shock” a medical condition.
Stemming from a happenstance conversation about the financial pressure felt by someone who had lost everything after a divorce, I was reminded of the checklist of PTSD symptoms, which I spent several years focused on while working with Marines and humanitarian workers in an effort to prepare and protect them from Post-Traumatic Stress Disorder before deployment.
Once the lightbulb went off, the clarity of what the people I was studying were experiencing was as clear as day.
A diagnosis of PTSD requires someone to meet a number of criteria. Often reliving the event through nightmares or flashbacks, the disorder brings on avoidance of any situation that reminds someone of the trauma. Also, one’s beliefs and feelings change, the world feels more threatening and relationships become very hard, leading to depression and isolation. Underpinning all of this, PTSD results in hyperarousal, in which it’s chronically difficult to calm down and any sudden sound makes a person jump, expecting the worst. The mind and body are always prepared for trouble, and that’s a deeply unhealthy way to live.
Our studies led us to astonishing findings: 23% of adults and 36% of Millennials experience Acute Financial Stress at levels that qualify them for a diagnosis of PTSD.
That’s more than 56,000,000 adult Americans and nearly 30,000,000 Millennials.
We knew people were feeling under the gun and often anxious about their futures, but this degree of clinical stress was vastly more severe and pervasive than we could have imagined.
Months later, we interviewed one study participant, Mr Jones, who met all the criteria for Acute Financial Stress. He and his wife had lost a home during the economic crash and had been struggling to make ends meet since then. He told us they couldn’t even talk about money anymore, because if they did it was a guarantee for a knock-down, drag-out argument. Their relationship was in crisis because the financial stress they were experiencing had them at each other’s throats.
Mr. Jones added there was no one he was comfortable talking with about his finances, not even his father, who had always been his best friend. He said he was no longer comfortable going to New Orleans — his favorite place — because the home he lost was there. As he was talking, his phone rang. His physical reaction was alarming: He leapt out of his chair like he had been shocked and looked fearfully at his phone as though it were a rabid dog. It was a few minutes before he could sit down again.
Mr. Jones’ entire system was focused on the financial stress in his life and it accompanied him everywhere. He was unable to undo the knots in his mind and body, leaving him with the chronic anxiety that people who suffer from PTSD carry with them, even in safe environments. He was experiencing all of it: avoidance, hyper-vigilance, chronic and extreme anxiety, conflict in his relationships, guilt and a pervasive feeling that it wasn’t going to get better.
It Can Get Better
This is where scientists seek solutions to problems they’ve uncovered. Having identified a problem, we use our experience to offer help. As a psychologist, it’s important to me to develop solutions that work with people’s strengths and weaknesses to enable them to live better.
It starts with being able to talk about this. I’ve found that by simply discussing their experiences, people with Acute Financial Stress can find a sense of relief and realize they’re not crazy, that this is a real issue. There’s no personal failure here, just circumstances that are troubling and can in fact be managed.
We don’t think this place of stress is where people have to stay. We are proposing a journey of self-understanding combined with developing a sense of financial security that is going to give us all a renewed sense of individuality as well as a sense of support that comes from taking this stress out of the shadows. There’s a path to financial wellness that will totally change our lives. And that’s the solution my team is focused on uncovering and sharing.
Disclosure: The Huffington Post's Editor-in-Chief, Arianna Huffington, serves on the board of Payoff.