Personal finance advice relies on shame; What if we try empathy?

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Personal finance advice relies on shame

When Suze Orman applied to appear on the show in June 2012, she was a young doctor making $58,000 a year with $240,000 in student loans from medical school and $40,000 in credit card debt. As a divorced mother of three who also cared for a terminally ill parent, June’s income barely covered her living expenses. 

When a friend suggested she apply to be on the Suze Orman Show, June agreed; She wasn’t familiar with the show but figured it couldn’t hurt to get some professional advice. 

Initially, her experience with the show producer was positive. The producer told June that she was working very hard and that she was the kind of person Suze wanted to help. 

That’s why she was so surprised when Orman, one of the best-known faces in the personal finance industry, started off by telling June that she shouldn’t have gone to medical school.

Orman then advises her to declare bankruptcy, questions whether she should buy her children Christmas presents, implies that June is spending money on her children to make up for her guilt over the divorce, and says that June’s 16-year-old child needs work. Need to start doing. To help meet June’s debt obligations. 

“Tell them the situation you got yourself into.” Suze shouted. “Let them see the reality when you are irresponsible in facing the truth – what it can cause.” 

This advice may sound shocking, but most traditional money advice is based on shame, often packaged as tough love and personal responsibility. In a shame-based framework, financial stability is accessible to everyone. 

Certain financial decisions are positioned as purely positive, such as home ownership and 529 education savings plans, while other financial decisions are viewed as purely negative, such as consumer debt and bankruptcy. Not only are these decisions wrong, but they are presented as failures for which only the individual is to blame. 

From the ultra-simplistic math of David Bach’s “The Late Factor” to Dave Ramsey’s condemnation of almost all debt, extreme frugality and the media’s obsession with early retirement, the message is clear: If you’re struggling financially, you only have yourself to blame. give In these myths, only once a person takes full responsibility for their situation, will they be able to make the so-called right choices to achieve financial prosperity.

The problem is that shame doesn’t work. First of all, telling people that their financial circumstances are entirely their fault is not true. In fact, it has been proven time and time again that the wealth gap is systemic and created by public policy, not individual choices. 

Such advice also ignores the reality of a changing financial landscape with skyrocketing costs of living and stagnant wages. Home prices are rising faster than incomes in 80% of US cities, health-care costs have risen twice as fast as wages, and child-care costs have risen 2000% over the past 40 years. 

The rise of the gig economy leaves more and more Americans without a steady income or access to affordable health care. Even before Covid-19, one in every 10 US workers was underemployed. And student loan debt is at a record high. Yet the personal finance industry continues to ignore the data and perpetuate the myth that if people aren’t financially secure, it’s entirely their fault. 

What makes people feel ashamed about their finances is that it backfires. Rather than engaging or motivating people, shame has the opposite effect: it gives people a fight-or-flight response that reduces their ability to process information. Shame does not induce behavior change. In fact, it reduces the desire to try new behavior for fear of the negative consequences of making a mistake. As June was pushed by Orman, she said, ”It felt like I had white noise in my head. I felt my cheeks getting hot. I just separated. ”  

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After her experience on the Suze Orman Show, June tried working with some other financial advisors and had similarly disappointing experiences. 

“They had the mentality that ‘this is on you, and you need to get yourself out of this somehow’,” she says. Eventually, June gave up on seeking professional help. “I decided I wasn’t going to talk to anyone else about this because I didn’t need to be told what an idiot I was.”

So if Americans are in a financial crisis and shame doesn’t inspire change, what will? We believe the answer is empathy. Unlike shame, empathy actually works to change long-term behavior. Empathy is adaptive, realistic, and has been shown to cause a growth mindset, meaning that individuals are more likely to make efforts to improve their traits and abilities rather than viewing them as fixed and therefore not worth trying to change. 

The effectiveness of empathy is already being studied in the medical field. In a 2015 study by researchers at Florida State University College of Medicine, obese patients who were shamed by their providers were three times more likely to still be obese four years later than patients who received neutral or sympathetic treatment. 

In contrast, a 2019 study showed that patients with type 2 diabetes were 40% less likely to die from a heart-related event if they had a highly compassionate provider. Research in the fields of addiction, family wellness, and smoking cessation all paint the same picture: more empathy means better outcomes. 

We are not suggesting that empathy equals indifference, or that we should give up advice and financial education. But the way advice and education is given is not working. If it were, we wouldn’t see 74% of Americans living paycheck to paycheck and unable to find $400 to cover 4 out of 10 emergencies. It’s time for a new model: from shame to empathy. 

This new model begins with listening without judgment or the assumption that there is only one right answer. It means helping someone understand their finances in the context of their emotional, generational and social circumstances. When people stop seeing their situations as personal failures and come to understand them as part of the human experience, it reduces feelings of fear and anxiety.

Under this new model of personal finance, the expert will focus on working through past mistakes, empathize and encourage the practice of self-compassion to build resilience, which is necessary to make small improvements. 

How will this model work in practice? For June, it will feel like someone is listening to her without judgment or oversimplifying corrections, then helping her identify areas where she is already succeeding and building on them, focusing specifically on those areas. Instead, what doesn’t work.

June needed sympathy: she was in a difficult situation partly because of her choices and partly because of issues beyond her control, such as her divorce and her parents’ illness. Her finances were not a reflection of her moral character, and small victories combined with self-compassion could help improve the situation. 

Instead, June was left trying to navigate her financial woes on her own. Eight years later, she has a thriving medical practice, has raised happy, confident children and is thankful that she ignored Orman’s advice. Like most doctors, she still has a lot of student loan debt, but she has managed to pay off all of her consumer debt. She bought life insurance and started saving for retirement. 

She still doesn’t feel financially stable, but she’s proud of what she’s been able to accomplish. Although she wishes she had a trusted advisor who could help her, she says she’s done consulting personal financial experts: ”I can’t deal with this attitude anymore.” 

As Covid-19 takes its toll on our country – destroying lives, jobs and bank accounts – a new model for personal finance is needed more than ever. We must admit that what we are doing is not working. It’s time to look to the science and practice of empathy to do what shame couldn’t.

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