Holiday bills may lead to financial denial at beginning of year
Nothing confirms the holiday season is firmly in the rear view like receiving your first credit card bills of the year. But while most people will face their holiday spending head-on, some will never even open the envelopes.
Financial denial or Bill Avoidance Disorder is a psychological condition. It's difficult to say how many people actually have it, but Dr. Brad Klontz, a financial psychologist and co-founder of the Financial Psychology Institute based in Hawaii, has done extensive research on the topic and estimates that one-third of North Americans would rather not think about money.
Financial denial causes people to avoid looking at their bills and bank statements to a financially disastrous degree. If you think you may suffer from this affliction, there are ways to overcome Bill Avoidance Disorder and become financially solvent again.
The first thing to realize if you suffer from financial denial is you're not alone, especially in the months following the holidays.
About half of Canadians live paycheque to paycheque, and the holidays are an especially expensive time for them - Canadians spent an average of $884 in 2016 over the holidays. Afterward, we spend months trying to catch up, so it's very normal to have some anxiety around opening your first few credit card bills of the year.
"We see this year in and year out," says Jeffrey Schwartz, executive director of Consolidated Credit Counselling Services of Canada. He says people routinely overextend themselves at Christmas, only to bury their heads in the sand come the first quarter of the year.
The warning signs
A lot of people don't like opening their credit card bills at the best of times, but there are a few warning signs that indicate that casual disinterest has crossed into full-blown financial denial.
"The three warning thoughts associated with financial denial are: ‘I avoid thinking about money,' ‘I try to forget about my financial situation' and ‘I avoid opening or looking at my bank statements or bills,'" says Klontz.
According to his research, those more susceptible to a pathology of financial denial are young, single and less educated, and usually have less income, less net-worth and higher credit card debt.
"Whether behavioural manifestations, such as avoiding your bills, have crossed the line into a psychological disorder really comes down to whether they lead to any significant impairments in your life," says Klontz.
Financial denial also could co-exist with a host of other negative financial behaviours, such as compulsive buying, gambling, hoarding, financial dependence and financial enabling.
What causes financial denial?
Financial denial is the behavioural manifestation of what Klontz calls money avoidance. It's the belief that money isn't important, so it's not worth thinking about and even comes from some negative associations about money such as, "Rich people are greedy" or "Money corrupts."
"An ego defence mechanism is another reason people go into financial denial," says Klontz. "They want to protect their self-perception and self-identity by avoiding thinking about money."
In the short-term, there are benefits: financial denial saves you from becoming anxious or depressed about your finances. But in the long-term, your life just becomes more and more unmanageable.
"What I know about someone living in financial denial is that the behaviour didn't come out of nowhere," says Klontz. "It was something they were taught; it was modelled for them or it was based on an early experience."
In treating someone with financial denial, Klontz tries to identify what those early experiences were and does some work with them around their beliefs about money. If he can help that person to process where these beliefs come from, the realization will shift their beliefs and their behaviours will likely change.
How to cure financial denial
How can someone deal with the holiday overspending in the first months of the new year? "It's a great time to buddy up with someone in the exact same situation to help you get through this and stay accountable to one another as you face up to and start to repay your debt," Schwartz says.
Schwartz recommends saying no to any new debt during the months of January and February and switching your plastic from credit to debit.
"We used to recommend people throw their credit card in the freezer, but I'm not sure how many people actually did that," he says. "Perhaps you should be making goals instead."
Schwartz uses the acronym SMART: Specific, Measurable, Attainable, Relevant and Timely when helping people make realistic, achievable goals around paying off their debt.
"The first thing you need to do is create a budget," says Schwartz. "I know for some that's a four-letter word, but the reality is, you need to have a clear understanding of where your money is coming from and where it's going if you're going to make any headway in paying down that debt.
"Pull up your big boy socks and develop a budget."
your debt dragon
Ultimately, Schwartz contends there are only two strategies for paying off your debt. Either reduce your expenses or increase your revenue.
Once you've explored all the ways you're able to cut back, maybe it's worth it to try and pick up extra shifts at work or take on even more clients. Whatever you do though, you need to face your debt head-on.
"Don't avoid your bills," he says. "Face them head-on because you know they're not going to get any better, and the reality is they may get worse if you don't open up your mail.
"In a circumstance where you're going to have trouble, call your creditors because you don't want to accumulate more interest penalties as time goes on and it could have a negative impact on your credit report."See related: Smart credit card tips for every season, 5 signs you need to get debt help, How to overcome a debt mountain
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