Facing financial fears

As IFS therapists and practitioners, we understand that taking care of ourselves involves working with our many parts to address the multiple facets of our lives. One of the most overlooked and ignored aspects of a therapist’s internal family system is their Internal Financial System™. So many of us have parts that resist dealing with finances and money, usually at the expense of our financial and emotional well-being. Talking about money—our money—is anathema to so many of our parts. Work with those parts to step back and let some Self-led curiosity step forward and your finances can improve.

While there are many aspects to financial well-being, let’s consider just one: the importance of creating financial independence in the later years of our lives. Most countries have some type of old-age pension (Social Security in the US), and this is typically only enough to provide for the most meager of existence in retirement. Family can fill the gap, but that often comes with a loss of independence and additional burdens. For most Americans, this leaves saving and investing as a crucial component to building financial independence and ensuring that we have income when we are no longer able or willing to work.

Financial therapy helps provide Self leadership to our system, so our parts can become emotionally capable of setting aside funds for their future. There are many extreme burdens that our parts hold to block financial independence. Burdens, or “money scripts,” are emotional blocks that tell us: “investing is only for the rich,” “I don’t make enough to invest,” “investing in stocks is embracing the evils of capitalism,” “I will never understand investing,” or “investing in the stock market is the same as gambling.” All of these beliefs, while true in some circumstances and false in others, can impair progress to financial independence.

Examine these beliefs, and you’ll see they are often born in trauma, like most other extreme beliefs. For instance, it’s common to believe that the stock market is “too risky.” Most of us have a part that is truly afraid of losing it all. This fear can stem from experiences or stories we learned from our family. Someone we’re close to could, in fact, have lost everything due to a business failure or some other financial setback. It’s important to sit with that part and bring compassion to it, because it does have good intentions. It wants to protect a vulnerable (and perhaps traumatized) part of us from experiencing fear and potential suffering. When the time feels right, you might ask that part if it would be willing to consider some new information. If it is not, some additional exploration of that fear is probably warranted.

Here is some information that may be helpful to that part. Investing in stock markets means ownership of shares of a wide variety of corporations. There are thousands of companies in business in the United States, and their values go up and down. Investing in the stock market guarantees that you will see losses at times. However, unless you sell your shares, these losses are not coming out of your pocket. Typically, the markets turn around and go back up, so your accounts will regain value.

Staying the course when markets go down is what is so hard for those anxious parts that believe investing is just gambling. This is an extreme belief that parts can acquire. Done correctly, investing in the stock market cannot be called gambling. (To be clear, I’m not talking about compulsive gambling, which is an addiction and a separate topic.)

For example, one of the most popular games of chance is blackjack, which has the highest probability of winning compared to almost any other game. There is a statistically right way to play every hand. But even if you do play each hand exactly right, your chances of winning over a long period of play are 0%. For every $100 you bet, chances are you’ll lose only one or two dollars. With keno and slot machines, the statistics are worse; there’s a 100% chance of losing up to $50 for every $100 bet over time. Statistically, when we gamble, there is no chance that we’re going to win over a long period of time.

Correct investing in the stock market, however, has been demonstrated to generate positive returns over a long period of time. Over 10 years, chances to increase your investment are over 94%; for every $100 put into the stock market, there’s a 94% chance you will gain an additional $96 over 10 years. That’s an annual return of 7%! And those are conservative numbers. The annual return of U.S. stocks has ranged between 9% and 14% over the past 10–30 years.

Yes, people have lost fortunes in the stock market. But those who quickly gain or lose huge amounts in the markets are not investing, they are speculating. Speculation is an attempt to get in quickly, make money as fast as possible, and then get out. It’s fast-moving and full of adrenaline and excitement that some parts really love. In my early 20’s, I had saved $12,000 and decided to “invest” it. I put it all into gold futures and pork belly futures. These are highly speculative financial vehicles. I lost everything. A part of me vowed to never invest again. But I hadn’t been investing or saving—I was speculating. Lacking the specialized training and experience, I got burned.

Frequent day trading is risky, like putting all your money into one or two trendy stocks, buying futures options, short selling, or getting into highly risky cryptocurrencies. This is speculating. Eventually my parts learned to appreciate the value of boring investments and helped those parts that lust for excitement and control to relax and redirect their needs to more productive activities.

Smart investing in the stock market means putting your money into a diverse portfolio of mutual funds or exchange-traded funds that hold thousands of stocks around the world and then leaving that money alone (without touching it!) for 10 years or more. Keep adding to this fund. Don’t sell it. This is boring. If you get an index fund with very low fees (maybe a Vanguard fund or some index funds at Schwab), you don’t really run the risk of a bad fund manager, because index funds are not actively managed. They’re not trying to beat the market.

Almost anyone can invest successfully in this manner. It doesn’t require studying the stock market, picking winners, and avoiding losers. The key is to keep it boring. It helps parts to know that market ups and downs are normal. This is why investing correctly includes a diversified mix of assets. If your funds are invested in a diversified index fund with low costs, the chances of long-term success are hugely in your favor. This also means having a time horizon of 10-plus years. The younger you begin investing, the more your assets will grow.

For anyone that has parts with emotional blocks to investing, the first step toward financial independence is doing internal work with your family system. Eventually, once those parts are liberated, they will be able to access Self energy when they become fearful about market moves. Your financial-management parts will not need to panic and sell your shares in order to calm the anxiety of the vulnerable parts. This will keep your financial system engaged and healthy. Keep breathing instead. Leave your investments alone. The market will eventually recover.

Doing the work to heal the traumas that have shaped your “money scripts” will help you build a stronger Internal Financial System™. Your emotional and financial wellbeing will benefit.