Scene 1: You're having a meeting with yourfinancial planner. He gets up several timesto go to the bathroom. You notice that hishands are chapped, as if he has washed themexcessively. You notice that his papers must bepiled neatly, but he can't seem to focus on whatis written on them.
Scene 2: You're sitting with yourspouse, going over the family budget.Suddenly you feel sweaty; your heart isracing. You feel very anxious. You get upand leave, apologizing, "Sorry, darling, Ijust can't deal with this right now."
NOT AT OUR BEST
It's a sobering thought, but we andthe people who assist us in financialaffairs are not always at 100%. Physiciansshould understand this. When wedeal with a patient, we never assume thatwhat they do will be rational from ourpoint of view. Likewise, why would weassume that all the parties in a financialtransaction are wholly rational?
In fact, the National Institute ofMental Health tells us that, at any given time,22.1% of Americans have a diagnosable mentaldisorder that impairs their ability to function insome way. That's 22.1% of all American adults:22.1% of accountants, financial planners, lawyers,and investors. And, it's reasonable to assume thatmeans 22.1% of the doctors reading this column.
Let's be honest with ourselves: Were we awarethat the number was so high? Let's take a trip to theworld of psychiatry and visit some of these diagnosablemental disorders and explore how theyaffect the way we handle our money.
• Major depression. About 9.5% of the adultpopulation suffers from this mood disorder.Symptoms include sad, hopeless, and helpless feelings.There is no optimism here. Those with majordepression have a hard time making financial decisionsabout the future because they don't see muchof a future. Depressed people don'tmake good long-term decisions. Tothem, things are bad and will only getworse in the future.
• Dysthymic disorder. Approximately5.4% of adults deal with this typeof depression, which can persist for atleast 2 years. Sometimes it's hard to spotthese people because it seems that theyhave always been this way. "That's justJoe," his friends will say. Nevertheless,they still have trouble envisioning a successfulinvestment plan.
• Bipolar disorder. The 1.2% ofadults who suffer from this depressionhave manic episodes in which they goon spending sprees, make grandioseplans, and sometimes start new businesseswith an insuppressible optimismnot grounded in reality. Those with maniamay jeopardize their future with injudiciousactivities, commonly involving spending, ratherthan saving, large amounts of money.
• Panic disorder. The 1.7% of adults whodeal with panic disorder have a tendency to breakout in a sweat when there is no real threat to them.They may do it in a business meeting, at church, orwhile watching the financial news.
• Obsessive-compulsive disorder. About2.3% of adults suffer from this condition, whichinvolves intrusive thoughts. Those with this disorderrepeat certain activities, like hand washing.They can have an excessive fear of germs. Theymay have a set system for investing that they stickto, even when it's failing.
• Generalized anxiety disorder. This usedto be called "free-floating anxiety." The 2.8% ofadults who suffer from this anxiety disorder havea sense of foreboding that something bad isgoing to happen to them, and they don't knowwhat, so they're constantly anxious and worried.When the market goes up, they're worried; whenit goes down, they're worried. It doesn't matterwhat happens; they're always worried. Thesepeople, with their excessive worries, may be completelyincapable of taking risks.
PSYCHOANALYSIS IN FINANCE
Now that we know a little bit about the world ofpsychological disorders, how can we use this knowledgeto protect our financial planning? It seemsprudent that we all keep on the lookout for theseproblems in the persons who handle our money, aswell as in ourselves and in our loved ones.
Next, realize that the fine points in the diagnosisof the different disorders above are there for areason. There is now treatment for all these, andthe treatment is usually pretty good. In otherwords, if you have a problem, get help. If a lovedone has a problem, encourage them to get help. Ifsomeone who you have a financial relationship withhas a problem, either ask them to get help, or getyour financial advice from someone else.
The third step is to develop a financial planthat will work well in all circumstances, even ifyou and your advisors someday find yourselvesimpaired. Your financial plan should be simpleand easily understood.
Louis L. Constan, afamily practice physician in Saginaw, Mich,is the editor of the Saginaw County MedicalSociety Bulletin and Michigan Family Practice.He welcomes questions or comments at 3350 Shattuck Road,Saginaw, MI 48603; 517-792-1895; or email@example.com.