First, people want to know if they are earning enough. Many don’t discuss their earnings with peers. With spouses, they worry about expectations. But there is the nagging question if they are doing well, or should they aim for more. Until they reach a level of comfort where they are able to spend and also have a healthy bank balance, many do not feel comfortable with their finances. That state of satisfaction is reached later in life. In that journey, people need someone to tell them if they need to do more. Many struggle with the notion of not earning enough, even if they are doing fine by normal standards.
This is so true for women who make career choices keeping their family situation in mind. They remain in doubt about how much they earn, whether it must matter more, and if they must do more. They are unable to speak about issues of their own financial independence with the spouse. They need someone to evaluate their situation and their choices and help them make their decisions.
Second, the journey with money has its pitfalls. Indebtedness is the most dangerous of them all. It is more common than we care to accept, for people of all age and income groups to extend themselves beyond their capabilities and find themselves in financial trouble. Many choose denial as their response, and simply refuse to talk about it. They just wish the problem would go away.
A business could have failed, with creditors waiting; a job could have been lost with loans still due; a credit card could have been overspent and accumulating usurious interest; a hand loan may be well past due threatening the relationship with the borrower; there may be an irrecoverable loss from stock trading; and so on. Distress hits our financial lives unexpectedly and we are not sure how to recover. We don’t know how to ask for help.
Third, somehow our money lives and decisions are enmeshed in a manner we can’t control too well. In the generations of earners of the last century, someone who went to work first bore the burden of the family. Educating the siblings, marrying off the sisters, caring for the parents were all responsibilities that every earning member of the family was expected to bear and share. We may have moved past those times of extraordinary expectations and somewhat unfair allocation of money for causes the earner had no control over.
But we still deal with members of the household who will make decisions about our money. Or have expectations around how we would use the money for them. Even in a nuclear household, the husband and wife may differ widely in their attitude towards money. There are spouses who disapprove of the other’s spending habits. There are parents who dislike how their children allocate their earnings; and there are siblings that judge the other’s lifestyles. People need help dealing with these differences and expectations. How much to give and where to draw the line? How much to interfere? How much to control or direct? They would like to sort these issues without giving up on their near and dear ones and in confidence.
Fourth, people do not make investing decisions confidently. There are so many avenues and products that they do not know which one might work for them. Not many are willing to sit down and craft a strategy for their asset allocation, and make investment decisions to a plan. People lean loosely on the stories and recommendations of friends and relatives.
Many investment decisions are made on a whim and without much thought, unfortunately, because there are friends and family who are doing it. People choose frivolous deposit-taking companies; they buy into less known IPOs; they buy stocks based on tips; they indulge in futures trading based on stories; they invest in land and property with friends; they time their investment in gold and stocks. It is alarming to see how gullible many are in making investment decisions without much thought.
They need help when these schemes fail. Since they do not know how they made money in the first place, when things went right, they do not know what to do when things go wrong. Investor associations that fight for recovering money from fly by night operators, have members who are indignant about the unscrupulous operator. What they do not see is that they failed to conduct adequate due diligence before making their decisions.
But in most cases, people nurse these wounds alone. They may grieve, protest and hope with other commiserates. But they need someone who can help them get out of the mess they find themselves in.
How can we help? Those that need help with their finances are not seeking out others actively. They do not want someone to hear their stories and show sympathy. They need actionable steps. They need trust and confidentiality. They need competence and skill in the other to believe that they are confiding to the right person. We have to be sure we have these qualities before we step in to help. We need empathy above all. No one likes to be judged for their actions.
Professional financial advisers are well suited to play this role. They are independent and they are bound by ethics of confidentiality. They can step in to gauge how the financial lives of their clients are progressing and be able to identify distress along the line, and step in to offer a keen listening ear and guidance. Many step up and offer these services; many more need to see it as their role.
Spouses, close friends, siblings or relatives may also be able to help. If they enjoy the trust and confidence of the person and if they are able to show adequate empathy. Each one of us can be the listening post for another, if we make the effort. Can we?
(The writer is Chairperson, Centre for Investment Education and Learning.)
