Financial Counseling for Mid to Later Life: Facing Difficulties and Debts

Financial counseling is performed by financial counseling professionals, often employees of a nonprofit organization organized to assist clients in financial difficulty on a one-to-one basis. Clients are helped to resolve problems that impact their financial well-being, to make decisions that have financial implications for life now and in the future, to improve their financial management, to handle difficult transitions, and to improve functioning in the consumer market and/or legal systems by handling financial or consumer collections and other dilemmas. Financial counseling utilizes information and skills to assist clients in changing behaviors in resource management, consumption, lifestyle, and communication in order to obtain and maintain increased financial security. Problems and barriers to change are identified that interfere with meeting unique objectives for various stages of family life. Steps to resolving problems or implementing decisions are individualized and realistic for the particular client’s personality, resource limitations, and needs.

Need for Financial Counseling

Reasons that clients seek advice or assistance vary greatly. Some perceive seeking assistance as a weakness, while others perceive it as a sign of strength. Clients may be experiencing financial difficulty such as the possibility of foreclosure (bankruptcy home foreclosure or in foreclosure process), recent unemployment, garnishment of wages, the chronic overuse of credit, or facing some critical life event such as divorce, insufficient funds for retirement, gambling, or other spending addiction.

Psychological reasons may include feeling out of control, being unable “to make ends meet,” the inability to say no to a spouse or to children, insufficient income for a chosen lifestyle, continuously paying late fees, lack of confidence to reduce expenses, family fights over finances, or anxiety for the future or some other personal emergency. Some clients simply want assistance with decisions, information, or clarification about the confusing mechanics and financial instruments available to them. Some are in a stage of transition and want to improve their economic security, enhance their wealth, reduce risks, or optimize their resources. Some clients are overly optimistic and set unrealistic goals that are impossible to achieve at their particular education or income level. A common problem is overestimating income and underestimating expenses. Lack of experience, not keeping financial records, or refusal to face reality may cause this problem.

The need for financial counseling is not always due to mismanagement or lack of information about alternative behavior patterns but may occur because of external events or situations beyond the client’s control. An unexpected illness, change in family composition, job loss, car or appliance breakdown, legal problems, business failure, and downturn in the economy are a few examples of circumstances that can precipitate a personal financial crisis and the need for counseling.

Financial Decisions

Decisions in the complex financial arena are difficult: Facing and making decisions is often stressful. Too much information and too many companies, some reputable and others not, cause confusion. Too little information gathered by comparison shopping and experience causes errors and overspending. When people are emotionally disturbed or anxious, they often go in circles and need financial counseling to sort out the priorities, decision-making steps, and the information needed to make good decisions.

Sufficient information is needed for each decision in order to minimize risk or error. The financial counselor can point out the alternatives, the consequences, and steps, but the decision has to belong to the client, who follows through with it. Others in the family who have to implement the decision need to be involved in the decision. Time frames for experimentation or living with a decision and then evaluating can reduce reluctance to try something new.