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Too Much Money Can Be Stressful: Financial Comfort Zones

Have you ever figured out the minimum amount of money you need, both savings and income, in order to be comfortable? Most people haven't done this exercise, although most people do recognize that there is a minimum amount of money below which they would be uncomfortable.

Fewer people yet have thought about the maximum amount of money we could have in order for us to be comfortable. Sounds strange, right? How could anyone ever have too much money?

There Is A Minimum AND A Maximum

It is is easy for us to think about having too little money. We have bills to pay and a lifestyle that we've chosen. We need to keep that going. If we don't have or make enough money we can't afford our lifestyle anymore.

It's harder for us to think about having too much money, though. If you don't believe me, try this thought experiment. Think about people you know or have heard of who make twice or three times what you make. Then think about the people who are worth 5 or 10 times what you are worth. What do you think about those people?

We Try To Fit In

Humans have a desperate need to fit in. We need to be part of a tribe. When we find ourselves outside of what we are comfortable with financially, we don't feel like we belong. If we come into more money than we're used to - an insurance settlement, an inheritance, a promotion or a business that took off - we now have a different set of problems to worry about. Problems that we're not familiar with. We see ourselves as those "rich" people we used to dislike. This comes with discomfort.

We're Comfortable In Our Childhood Neighborhood

In their book Mind Over Money, Drs. Ted and Brad Klontz ask you to imagine what it was like growing up in your childhood neighborhood. If you're like most people, you felt safe and secure because that is what you knew. You knew the rules. You knew the people. This is the place you felt most comfortable. If you moved to a different neighborhood later in life, it could feel uncomfortable. That discomfort happens whether you had to move to a worse neighborhood or were able to move to a better one.

Similarly, our upbringings gave us a financial comfort zone. In what was "normal" to us financially growing up, we learned the rules. We knew the people. The rules and people are different as you move up and down the financial scale. This is uncomfortable.

We Will Try To Reduce Our Discomfort

When we find ourselves uncomfortable, we will make automatic and subconscious decisions to try and relieve our discomfort.

If we've suddenly fallen below our financial comfort zone (which could be investment losses or job loss) it is possible for us to start taking steps to get back into our comfort zone. We may take excessive investment risks by speculating in individual companies or currencies, we may fall for "get rich quick" schemes, we may gamble, or take on more work leading to a more stressful life. We try to get back up to a level that is comfortable for us. This doesn't just apply to people who are at or below the poverty line. A family of doctors used to making over $1 million per year who all of a sudden make $250,000 - an income most would be happy to make - could feel very stressed. It's all relative.

If we've suddenly risen above our financial comfort zone it is oftentimes stressful for us to maintain our comfortable lifestyle. Suddenly we have more money than our friends or family members. The neighbors think differently of us. Automatic and subconscious money decisions we might make in this situation to get back into our comfort zone are compulsive spending (though usually on things others don't know about since we don't want to appear "rich"), gambling, and high-risk investments.

Issues For Couples

We all individually have a financial comfort zone. When we are part of a couple, each of us brings our own financial comfort zone to the table. Money is the number one topic couples fight about and part of that is each partner having a different comfort zone. One individual may be more comfortable with less while the other one is more comfortable with more. Sometimes one partner has a wider range and is more comfortable with both more and less.

Knowledge and Awareness

Just knowing and being aware of this issue can go a long way. Everything is fine when we are living inside our comfort zones. The issues happen when we have a significant increase or decrease in our financial lives.

With this increased awareness, my hope is that you will be able to start stretching your financial comfort zone - both ways. Learn to be comfortable with more. Have conversations with your partner, friends, and family members. Learn to live on less and have a plan in place if you lose significant money.

With an increased comfort zone you will have a smaller chance of behaving in a way that goes against your best interests.

Read More:


Brad Klontz, Ted Klontz: Mind Over Money


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© 2018 Money Health Solutions, LLC



About the Author

Derek Hagen, CFA, CFP, FBS, CFT-I, CIPM is a speaker, writer, and coach specializing in financial psychology, meaning and valued living, resilience, and mindfulness.


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