Category Archives: Financial therapy

New-poor or bad financial behavior


In an article in a Icelandic national newspaper readers are introduced to „new-poor“ individuals. The author of the article described the main reason for being new-poor to be costly education, poorly paid jobs and high cost of daily life due to many children, high food prices, and high rental and housing prices.

This new concept is dangerous and I hope it will not stick in our minds. I hope people never accept they are diagnosed as new-poor.

It‘s most likely that the new-poor people in question are not really poor, but over-in debt. People whose external pressures of society helped them make bad decisions in finance.

In the mentioned article, the solution is to increase support for those in bad financial situations. For example, housing costs should be optimized, financial aid increased and general support would be income-linked to better help the new-poor. These are all good and noble ideas but unfortunately not good for long term because if we do not address people’s behavior then nothing will change in their finances . If you know little about money and make poor financial decisions by habits you will continue to do so even if you acquire more money. Chances are that if you do not take care of your money today you will not do it tomorrow either- because it‘s a habit.

Our personal finances are more of a habit than rational thoughts. Habits we learn from our experience or learn from other people. We see what others do and repeat what we think works. The new-poor do not see their habits in finance. They do not see that they repeat their mistakes and maintain their situation. They do not see that their own decisions made their financial reality. This behavior is largely under the influence of our society. We recognize that it is ok to indebt ourselves for education, cars, mobile phones, in fact everything. Foresight in finance is little and discussions about our finances are a taboo. And when we are over-indebt we put the blame on those who „allowed” us to make all these bad decisions and demand that they take responsibility of our situation. But we made the decision. No matter how poorly thought it was, or whether it was the financial institutions that took advantage of our impulsiveness and desire, it was we who made the decision. We choose the education that delivers low wages, we choose houses that are more expensive than we can afford, and we choose more expensive food than we should buy.

There is no quick fix for the „new-poor “. The society will not save us. What the government can do however is to offer professionals helping people to change financial behavior. As a financial behavior therapist I am working on material to teach consultants and professionals to support and educate people out of their financial situation.

And we can change our situation by examining how we behave ourselves. We can begin to look at the situation as it really is. We can monitor how we can afford to live today. We can begin to prioritize our needs. We can set goals.

Get started today by answering our five financial behavior questions:

• What money, what is our income?

• Where’s the money, what are our expenses?

• Does the money have to go there?

• Do we want the money to go there?

• Is the money supporting your goals?

Why you need financial therapy


Financial problems are behavior problems. We are locked into behaviors and thoughts that have a negative impact on our finances. We let our emotions decide how we spend our money. The way out of this situation is changing our behavior.

The foundation for good finances is gaining good self-control . Self-control is the ability to influence our behavior by overriding our emotions. The individual takes control of his emotions or behavior, and comprises the success or avoid harmful consequences.

Three factors describe the composition of self-control: Goals, self-monitoring, and willpower. Goals consists of our living standards, ideas and state. Our goals are crucial when we want to change less desirable behavior or situations.

Self – monitoring is a way to measure our success. We review our situations and feelings again and again to assess whether we are successful in gaining our goals.

The most important part of self-control is will power. Our emotions have the biggest affect on our willpower . When we are tired or feeling down, experiencing hopelessness or lack of knowledge our willpower is intentionally small. The better we understand our emotions the more likely we are to respond properly to the situation. If we rest properly, eat healthy, and seek knowledge on how to react to any given situation we will be better fit to work towards our goals and more willing to self-monitor our behavior. Self-control is then like a muscle that reaches fatigue if it is only exercised and not rested and nourished properly. Goals and monitoring are then meaningless if we forget to take care of the power source.

Traditional financial advice is based on the first two factors, goals and monitoring of success. But these two factors do not last long if we do not know the reasons why we begin every path with good intentions, but constantly lose our willpower and fail even simplest tasks. Like a car we run out of gas and fail to perform or achieve our goals.

 Financial therapy combines all the factors of self-control. We review our financial position and get an overview. We set goals to reduce debt and start saving. But we take a look at our selfs personally and learn who we really are and how we can change our behavior and find in ourselves the willpower needed to fix our financial situation permanently. We learn that we are human and make mistakes. We learn to deal with fatigue and lack of knowledge. We get tools and power source to improve our lives permanently, in more areas than just financially.