Dr. Megan McCoy, professor at Kansas State University's Financial Therapy Certificate Program, takes learnings from the therapy field and applies them to how we talk about money. “I like to equate it to massage therapy," she says. "We’re working out the knots you have around money to improve your wellbeing.” Here, McCoy discusses how we really should be thinking of retirement, a trick she uses to curb her Amazon spending, and why we all need to talk more openly about money.
Why do you think so many people are financially illiterate?
I think there’s a big taboo in our culture about money. I was talking to a woman the other day and she told me about this man-on-the-street interview she saw where a man ran up to random people and asked them about their sex lives. After they gave these really graphic descriptions to a stranger, the man asked, “How much money do you have in your bank account?” And they all said, "Oh no, I can't tell a stranger that!"
We did a study that found 90 percent of people haven't talked to a single person about money in an entire year. What else do we do everyday that we don't talk to a single soul about? It's really wild to think about.
There are also religious and moral causes around money. Some people think, “I shouldn't pay too much attention to money, that’s too greedy.” Or “I have too much of it, or too little.” So there’s all this morality around money that makes it difficult to talk about.
But I wish it was easier for people to talk about money with friends, family and partners. We need to make it less paired with stress. We tend to avoid money conversations until there's something terrible going on, and then we have to talk about it. So our money conversations tend to be very stressful and very bad.
How do you wish people talked about money?
Those conversations should be more about your goals. You’re not saving to save. You’re saving for your future selves to do something. So think about what you and your partner are going to do together in the future.
Instead of it being about, “Let’s figure out how to cut costs and budget and spend less”—which is not a fun conversation—talk more about the carrot you're chasing. Think about what will bring you joy and pleasure and what you're working towards, instead of a scarcity mindset of what you don’t have. What will we have, then let’s work backwards.
If you want to go to Europe in ten years to celebrate your anniversary, let’s think about how you’re going to make that happen. Let’s get creative to problem solve and reach that financial goal. Now it’s not about what we have to give up, it’s what we have to do to reach that place together.
It's easy to say you want to save money, but how do we actually do it?
Well, I think everyone should have more than one savings account and each one should be named something visceral and emotional so you want to put money in it. Don’t name it “Europe” or “Trip.” Name it “Tuscan Vineyard” and assign a year to it so you can count it down. Make it feel more like a game than a chore. Have six accounts going and give each a real name.
What advice would you give to people in their 30s or 40s who feel like it's too late to make any significant changes to their financial life?
It’s never too late if you are intentional. There are so many saving vehicles. Contribute your max to a Health Savings Account or Roth IRA or 401K. Track your spending. See where your money is really going. Everything I purchase I put into “hours of work” in other words, how many hours of work do I have to do to buy this sweater. Sometimes it’s worth it—ok, it’s a half hour of work. Sometimes it’s three hours and that’s a lot for a sweater. That made dramatic changes for me.
There’s a great article out there that says, “money doesn't buy you happiness, but it buys you the opportunity for happiness.” And there’s all these tricks to find out what actually brings you joy. Delaying gratification is annoying at the time, but it actually brings us more pleasure. If you love to shop on Amazon, for example, shop away. Just keep everything in the cart for 24 hours and in those 24 hours imagine what it’s like to own those things. Ask yourself, “How would that candle look in my house? How many days will I notice the smell of that candle?” Spend 24 hours playing with the idea of the purchase and you’ll realize if it will bring you joy or not. If it doesn’t, delete it from your cart.
Another thing to think about at this age is retirement and saving for your kid’s education. Saving up to send your kids to an Ivy League school may not need to be your number one financial goal right now because it may not be the best return on investment for them. College education has inflated dramatically since the 1970s, and yet the return on employees' income for that college education has stayed almost flat. You have to think about how someone can most effectively maximize their education and still get the job they want. Maybe it would be better to do student loans and community college—and get all those prerequisites done—then transfer to that more expensive school with a pedigree that will help you get through the door. We all think it’s the norm to go to the best school we can possibly get into and it’s not always the best financial decision. There are so many ways to get to your end goal.
As for retirement, people often say, “oh I can't wait to retire!” But what will it look like when we’re the J.Lo’s at 50 in amazing health? People need to let go of 65 as the retirement age and look at their job and say, “How can I transform my job into something I want to do way past 65?” That way you don’t have to worry about having a certain amount of money in the bank because you can work a couple years past that and be fine.