5 steps to escaping your money trap

By MP Dunleavey

A couple of weeks ago, I wrote a column about money traps -- why it's so easy to get stuck making the same money mistakes over and over. This week I want to talk about how to get out of such traps.

You're in a money trap when you make choices that have consistently negative financial fallout yet you're unaware of the pattern you're following or you can't see any alternative.

What makes money traps so tricky is that while you may be aware of the mess you're in, it's hard to spot what you're doing wrong because you've been following the same rules for years.

That's because most dysfunctional financial behavior "is the result of all your life experiences around money," says Reeta Wolfsohn, the founder of the Center for Financial Social Work. "A lot of this is learned behavior, and the good news is that it can be unlearned."

A double whammy

A money trap has two parts: behavior and belief.

Your behavior is what traps you financially. Some examples:

• Buying things you can't afford.

• Sticking with a business idea that's not viable.

• Staying in a home that's too expensive.

• Keeping up appearances or a lifestyle beyond your means.

• Supporting others at your own expense.

• Believing the future will take care of itself.

What keeps you stuck in the trap, repeating self-sabotaging actions, is a set of bedrock beliefs about whatever decision you're making: that there's no other way to do things and that you don't have a choice.

It's as if you're following rules you've never stopped to question:

• "It's OK to do X."

• "I can't possibly do Y."

• "I must do Z."

A common money trap

That unquestioning belief is how Bethany, a member of the Women in Red who lives in Olympia, Wash., describes her husband's money block.

"The money block I see most frequently is 'It'll work out somehow,'" Bethany says. "Basically, you're behaving like a head-in-the-sand ostrich. Life is too short to spend it worrying about pesky little financial details."

Like other people stuck in money traps, Bethany's husband has lived his financial life by the unspoken mantra "live now, pay later" -- with perilous consequences.

In college, Bethany says, her husband borrowed tens of thousands of dollars in student loans with no idea how he would pay them back. After graduation, they had to wait for the six-month grace period to pass and for the loan statements to arrive because he didn't even know how much he owed or to whom.

• Tell us: What's your biggest money problem?

It didn't matter if bills were paid late or if he never seemed to have extra money to save for retirement or if he "Visa'd" a new laptop he couldn't afford, Bethany says, "because it was all going to work out somehow."

In his case, believing that money matters take care of themselves dovetailed with another classic money-trap belief -- "money is toxic" -- as if dealing directly and responsibly with money is so stressful that it can only make matters worse.

"It has been hard for my husband to overcome this block because any attempt to discuss money matters will leave him very anxious and stressed," Bethany says.

An epiphany

Money traps typically stem from a set of magical (or irrational) assumptions about how the world works, and these feed a pattern of unhealthful money choices. Take the "someone else will save me" scenario:

Nancy Munro, a successful corporate consultant in West Palm Beach, Fla., and a member of the Women in Red, says she was stuck in that trap until about five years ago.

Although she earned plenty of money, she says, she never kept track of where it was going -- and it was going. Munro had always saved for retirement, thanks to her various jobs. But until she had her epiphany, "I had no emergency fund, I was $10,000 in credit card debt, and I had big medical bills from two major operations."

Worse, she wasn't paying attention to where her paychecks were going. "I'd look at my balance to see how much more I could spend," she says.

Then Munro's father died. Her mother was left with little to live on. "She lost the house, the cars, pretty much everything." And Munro woke up. "I realized that the knight on the white horse wasn't coming, the money fairy wasn't flying in, that no rich relatives were going to die and fix my problems with an inheritance," she says.

"I had to force myself to accept the fact that finding this money, either by earning more, spending less or reallocating what I had, was my responsibility."

Continued: A 5-step financial recovery

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