Cash Crunch

As a child I loved to play Monopoly. I'd spend all the money I had trying to win. Now I realize that as adults we sometimes do the same thing. We play with our finances as if it were Monopoly money. In many households, ATM withdrawals account for as much as 20 percent of spending, and most people can't account for how those dollars are spent. Others just use credit cards. We charge vacations, Christmas presents, and car repairs as a matter of habit, even if we know there isn't any real money to cover the expenses.

At some point, such couples face a rude awakening when hit with unexpected medical bills, a hail-damaged roof, college tuition. When faced with the hard facts about their finances, many couples go through five stages similar to the stages of grief. Here they are and what to do about them.

Stage 1: Shock

The shock felt at this stage is directly proportionate to a couple's predetermined belief about their finances. I worked with one couple who knew their consumer debt load was $40,000, and they were only mildly shocked at how that looked on paper. On the other hand, another couple thought they were only a couple years away from being debt-free, only to learn that if they paid only the minimum balance and acquired no new debt it would take 15 years to get out of debt. I watched their mouths drop as they stared in disbelief at the figures.

What to Do: Shock isn't always negative. It's a great place to start taking charge of your finances. As a couple, write out all of your incoming cash flow, expenditures, and debt—every penny. Take a good hard look at the figures and let the truth of your situation sink in. Make that the impetus for change. Make a budget—and follow it. Some resources to help you get started include www.crown.org or www.moneycentral.msn.com under Money Accounts.

Stage 2: Denial

Denial is the most common stage in financial recovery. Many couples tend to spend with one hand and cover their eyes with the other. Some couples never move out of this stage and end up in the land of perpetual financial woes.

Not surprisingly, if you're in denial, you probably don't realize it. That's why it's a good idea to continually ask yourself, Are we financially healthy? Are we on budget? Is our debt load out of control?

(Of course, if you're in major denial, you're probably not even reading this article! If you are reading it, that's a good sign you're conscientious about your finances—and less likely to be in complete denial.)

The more couples deny the seriousness of their financial situation, the more likely they are to try a quick fix such as a second—or third!—mortgage, borrowing from friends or family, playing the lottery, or other "get rich quick" schemes.

Margo Geller, a wealth counselor at GV Financial in Atlanta, Georgia, says there are four red flags of financial denial:

You make the same financial mistakes over and over and you're not sure why. You continually pay late fees, miss payments, or are perpetually short of cash.

You behave in inappropriate ways such as buying another suit on your credit card, eating out when you promised yourself you'd cook at home, or buying a special toy for your child for no reason.

You are financially stuck—unable to reduce your debt, or if you do, you are soon back where you started.

You make rationalizations to explain the above: "Other people do this all the time," "Right now, this is more important," or "I don't care, I'll figure it out later."

What to Do: If any of those red flags describe you, you're likely in denial. Don't blow it off; take an honest look at your finances together. Ask each other, "Do we have a problem here?"—and be candid in your answers. If the answer is yes, we do have a problem, it's time to find solutions. Go to www.crown.org/tools/budgetometer.asp to crank these numbers. Accountability is the name of this game. Make yourself accountable to your spouse and another couple you trust.

Stage 3: Depression

As couples move out of the denial stage, they can become overwhelmed by the mess they're in. The situation can begin to press in around them and threaten to overtake their fake sense of calm. Soon, these couples can experience depression, characterized by any of the following:

Lack of concentration: The inability to concentrate on anything regarding finances; avoiding discussion of the issue.

Insomnia: Loss of sleep over your apparent financial hopelessness and your anxiety over whether you will experience financial recovery.

Dejection: Inability to shake a strong, often overwhelming or paralyzing sense of despair.

What to Do: Many couples pass quickly through this stage. If not, that couple should see a qualified financial counselor. Consumer Credit Counseling Services, a non-profit organization, specializes in debt reduction and financial education. Call 800-388-2227 or go to www.nfcc.org to find a counselor who can help you get your credit card interest rates lowered, payments deferred, and set a doable plan to emerge from debt depression. Or check out Cambridge Credit Counseling Corp at 800-897-2200 ext. 594 or www.cambridgecredit.org.

If your depression doesn't lift during that process, you should see a physician or mental health professional who can offer further help.

Stage 4: Anger

This stage can be scary for both partners, because anger can be anything from mild displeasure to outright hostility. Society's number one reason for divorce is "finances," so it's easy to see how couples in this stage end up in divorce court. Here are typical statements people express in this stage:

"My spouse bought that new ______ and that's why we're in trouble."

"My parents (or brother, sister, friends) have tons of money; they could help us but they won't."

"My spouse is a spender and I have no hope of financial recovery as long as I'm married to him/her!"

"We've tried budgets and they don't work for us."

"This isn't my/our fault."

If you see yourself in any of these statements, talk to someone. Talking through the anger helps diffuse those feelings. In her book How Much Is Enough, Pamela York Klainer gives four suggestions for couples reluctant to face the ugly truth:

Don't blame. Don't blame your spouse. Or your parents. Or your lousy childhood. Blame only generates more anxiety.

Own up. Take responsibility for your mistakes. After all, you made the decision, for instance, to say yes to a vacation instead of paying off debt.

Practice, practice, practice. Build your skills. Learn to budget, save, and invest. It takes time. Don't beat up yourselves if you don't get it in the first several months.

Mastery. What works well for one couple may not work for you. Some couples love computer financial programs; others prefer self-help books. Or financial counselors. Or seminars. Find what works best for you, and master it.

Anger is the last step before acceptance on the road to financial recovery. So if you deal with anger in a proactive way, it will become a good thing.

What to Do: Don't be afraid of anger. But instead of directing it toward your spouse or others, refocus it toward unhealthy patterns that landed you in debt. Anger can be your best friend when it becomes the driving force for change. Find a couple, financial counselor, or Christian family therapist to talk to about these feelings. Make a list, "Things We Will Never Do Again," and put it where you can review it daily.

Stage 5: Acceptance

This is the final stage of financial recovery. A couple knows they've reached this stage when at least some of these elements are evident:

Change. The couple has asked themselves what they need to change and they're willing to make those changes.

Responsibility. They've stopped the blame game and have accepted responsibility for their roles in their current financial status.

Accountability. Besides mutual accountability, couples have also made themselves accountable to another couple or financial counselor.

Hotspots. Couples have identified hotspots where they've fallen short financially and purposed to avoid them. For example, if they buy or lease a new car every year, they've traded it in and purchased a reliable used car, and paid it off.

Patience. The couple now realizes there is hope. They're more tolerant of their spouse's mistakes and have decided to learn from them.

What to Do: Take responsibility for moving forward. Commit to getting and staying out of debt. Remember, you didn't get into debt overnight and your recovery won't come overnight either. Just take it a day at a time. Some day, you'll be on the other side of this problem. When you've been blessed with financial recovery, it will be your time to help someone else who will benefit from your experience.

Ellie Kay, MP regular contributor, national radio commentator for "Money Matters," and author of A Woman's Guide to Family Finance (Bethany House), lives in New Mexico. For more information and money-saving links, go to www.elliekay.com.

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