Can Financial Planning Reduce Stress?

We’ve all had those moments when bills, loans, investment decisions overwhelm us, and we shut down. We do nothing and we stress…alone. But it doesn’t have to be that way.

There was a moment as a college kid when I realized I had no money in my checking account, and I owed $300 on my Mastercard.  That might not seem like a lot to anyone nowadays when you can spend that much in a weekend at dinners and bars. But to a college kid with a part-time job back in the 90’s, it was a lot of money.  My stomach and my head hurt every time I looked at the bill on my dresser.  As my industry colleague Jen Lee, a Debt and Credit Strategist, says repeatedly in her talks, on her blog and in her social media posts, many people have illnesses and health-related problems because of the debt and financial stress they are facing.  

I saw this first-hand with a client who amassed several thousands of dollars in credit card debt across 6 different cards.  When we first met, she alluded to credit card debt but wasn’t exactly sure how much she owed in total and how much card charged in terms of interest.  The good news is that she had negotiated a fixed payoff rate for 3 cards and wasn’t being charged additional interest on those. The bad news is that the other credit card companies were not willing to negotiate and would not lower the interest rates. And guess what? They didn’t have to.

Credit-card loans crossed the $1 trillion mark, reaching $1.08 trillion in Q3 of 2019

We met one fall afternoon to review her credit card bills and her monthly household and business budgets.  One thing that struck me was how nervous she was to discuss and review these documents with me. Her hands were shaking, and her voice cracked while she handed me the documents. I reassured her we were in the “No Judgement Zone” of financial budgeting and advice. While I might challenge her on budget assumptions, household and business expenses over the next 2 hours, there was no judgement, there was empathy and support for working this situation out to her best interest.

According to, credit-card loans crossed the $1 trillion mark, reaching $1.08-trillion in Q3 of 2019 and that is only 26.2% of total U.S. consumer debt! They say on average, each household with a credit card carries $8,398 in credit card debt.  So, while my client may have had thousands of dollars in credit card debt, she was no alone by any means and should not feel shame. Instead, she needed a calm and quiet meeting to assess the situation and create a plan of action.

We definitely had our moments during this financial planning project where my client was defensive, frustrated and sad.  She pushed back hard when we reviewed her business and household budgets and I asked her about some areas she might give up or cut back.  The best part was when she saw the full amount of her debt, the schedule to pay it off, how long that would take and the “to the penny” business / household budget we created together.  She said she felt relief knowing there was a plan in place to resolve the debt so she could begin saving for retirement and a stronger emergency fund. 

The great thing about my client was her ability to create a positive mindset for the future.  I learned from her the ability to create a daily mantra of the goals and outcomes I want to achieve for my personal and business life.  This is where the stress and implications to health come into play.  If you’re so worried about finances and debts and it’s causing missed days at work, tension in your relationships and depression about your situation, it can lead to serious health issues.  My client decided her attitude was going to be positive and to visualize the day when she paid everything off.

7-8% of nonprofits are technically insolvent, 30% have minimal cash reserves and 50% have less than one month of operating reserves. ~Oliver Wyman, SeaChange Capital Partners, GuideStar, January 2018

I strongly encourage anyone in a debt situation to visit Jen Lee’s website for resources, videos and links to consumer protection information that can inform you.  Jen said the biggest issue she finds is the lack of information consumers have around their debt and the wrong information they receive.  

Since we also service nonprofits, foundations and endowment clients in addition to individuals, I feel it’s also important to discuss when nonprofits or businesses incur debt, both credit card and lines of credit. Unfortunately, this happens all too often to nonprofits serving at-risk populations and whose funding sources are especially volatile.  As we’ve written in previous blog posts, 7-8% of nonprofits are technically insolvent, 30% have minimal cash reserves and 50% have less than one month of operating reserves.

On a personal level, I have had this happen on nonprofit boards where I have served.  Unfortunately, Boards and Finance Committees can be woefully underprepared and under-educated on nonprofit finance and approve short-term loans or remain unaware that there are proper operating reserves in place.  A “placeholder” in the budget for a reserve is not the same as an actual, segregated “reserve fund”.  I learned the hard way a few years ago when I served on a board who had both credit card and revolving fund debts that could not be immediately paid back.  Through financial planning which included staff reductions, budget reductions, cuts in spending, the organization was able to pay back the credit card debt and short-term loan.  As discussed in an article from US News, there are 2 methods one can use to payoff debt for both individuals and organizations: 

1. Snowball: Make minimum payments on the larger debts and pay off smaller balances first. Once you payoff that debt, you tackle the second smallest debt and so on.

2. Avalanche: Pay off the credit card with the highest interest rate first.  Then address the next highest and so on.

The Avalanche method seems most logical given that you want to minimize the compounding of debt interest. However, every circumstance and personality is different.  A nonprofit, for example, might want to pay the more expensive credit card debt off first so they can begin using the cards again for necessary purchases. While an individual might want to pay off the debt with the highest interest rate first which might be a second mortgage or consumer line of credit and then they’ll pay off the low interest rate credit card last.

Whatever method you choose to use, consider talking to a professional to plan both your debt and credit strategies and then your subsequent savings or “cash reserve” plans. This will set you on the right course for a healthy financial future.

Related: Are My Charitable Donations Having An Impact?