On day two of #ThePerfectStorm, we spoke to financial wellbeing coach Catherine Morgan, about “emotional spending” – and how, for some, financial therapy might be the route out of debt
Catherine Morgan had a deeply emotional relationship with money, living in her overdraft throughout her 20s and spending money before she even received it. To escape this cycle, she started looking for the root cause. Her conclusion: “I overspent on clothes because I had a huge self-confidence problem which came from my childhood.” Morgan was bullied as a child and suffered from an eating disorder throughout her teenage years, and this eventually led her into debt, she now believes.
“When I started earning money, I wanted to spend it on clothes. I thought if I bought new clothes, I’d feel skinnier and happier with my body.” She remembers the moment in her late 20s when she started to reform her spending: “I was sitting on the couch surrounded by 12 bin bags of clothes. Thousands and thousands of pounds worth of clothes, and I just cried my eyes out. It was like someone had given me permission to throw away all the stuff I was hoarding in my life in order to try to make myself feel better.”
Spending to fill an emotional void is something she sees in all her clients. “I worked with a GP who was taking in over 100k each year, but she was in 70k of debt,” she says. “She had lost a child and both her and her husband began to use money to feel better about themselves.” The husband treated her to necklaces, and they went on holidays they couldn’t afford. In order to address her debt, this woman had to address the underlying emotional reasons for her spending. Budgeting plans were useless until she received therapy to help her bear the loss of her child.
Half of those indebted in the UK also suffer mental health issues, and some experts believe that sustained problematic spending is often the result of personal traumas, which can lead to PTSD (post-traumatic stress disorder). This is necessitating a new approach to debt, focusing on financial therapy and targeting the sub-conscious beliefs that influence our spending.
Morgan draws attention to this more holistic approach to debt, and is the founder of The Money Panel, a financial advisory and coaching service that helps women understand and treat the emotions driving problematic spending. She believes money habits are intrinsically linked to emotions and behavioural patterns, developed since childhood.
Morgan’s approach is based upon research showing that children will have developed their relationship with money by the time they’re seven, when the rational part of their brain develops. Over the years, behavioural patterns are influenced by their school experience, parents, and growing up.
“The women we help are from all walks of life,” she says. “There’s definitely been an increase in women emotionally spending and dealing with associated mental health issues in the last few years.”
Young women in their 20s are particularly susceptible to this kind of emotional spending, Morgan explains. “They’re coming out of university, going into work and they’ve just never learnt how to use money.” Children are not taught to have a positive relationship with money, or even have any relationship with money at all, Morgan says, believing that better financial education is a priority.
Stress, anxiety and paranoia about money can develop into a toxic relationship with your finances, leading to unrealistic budgeting, she says. Equally, overspending can lead to stress, worry and distrust towards money: it’s a vicious cycle.
Morgan emphasises that most people aren’t in debt due to being “bad” with money, but due to myriad underlying issues that exacerbate their money problems. “It’s like going to the GP and them not looking at any of the other surrounding and interrelated issues.”
Financial jargon purported by banks and debt advisors can be alienating and confusing for those struggling. Morgan has worked with debt charities and believes the language they often use is not collaborative. “People feel very low when they reach out to debt charities and they may feel a lot of judgement. The situation should be much more about empowering the client.”
A poor emotional relationship with money is “passed down the generations” she says, with neither parents nor schools talking to children about money. She thinks the school system is definitely improving, but adds, “it’s still nowhere near where it should be.” But education is not the be-all-end-all. Morgan believes you can know everything there is to know about finances and money, but entrenched beliefs and habits can still cause bad spending.
“People need to be aware of the financial habits that we have inherited, that sit in our sub-conscious. If you combine that awareness with financial education, that’s where the magic happens.”
Morgan knows this better than anyone; when her spending got out of control, she was working in a bank as a financial adviser. Her day job gave her the logistical foundations for sensible spending, yet in her personal life, her debts were spiralling.
In the last decade, financial therapy has been a burgeoning field in the US. The Financial Therapy Association was founded in 2011, and pioneers psychological therapy alongside financial methods. They argue that most therapists are routinely faced with clients who voice financial anxieties that are closely linked to their mental health problems – but are untrained in treating the nuances of financial worries. The Association’s financial therapy, however, does not come cheap and is yet to take off in the UK.
Morgan’s currently seeking a qualification in financial therapy and hopes to make it more widely accessible over here. “The American psychologist I work with has done a lot of research, and 90 per cent of people who have a spontaneous relationship with money have had some kind of trauma. It could be going through a divorce, or something going on at school.” She is urging people to become more aware of financial PTSD.
Understanding your relationship with money is key to Morgan’s holistic approach. “If we are operating from a mindset of negative self-belief and negative self-worth, then actually none of the financial advice will click anyway. Coming from a strong, empowering position of knowing your relationship with money is critical.”
Morgan urges clients to get “financially naked” and advocates for a no-shaming policy. “So much evidence shows if we focus on our self-worth, our mental well-being and financial well-being, then that has a far bigger impact than merely focusing on money.” Morgan says. “Our self-worth is far more important than our net worth.”