Managing Money and ADHD
Managing finances can be a challenge for people with ADHD. The symptoms of procrastination, disorganization, and impulsivity can wreak havoc on your finances. A recent study found that adolescents impacted by ADHD are more likely to have greater financial stress in their late 30s than those who are not impacted by ADHD.
If you would like your finances to be hassle-free, without the fear of being overdrawn on your checking account, being turned down for a loan, or having your lights turned off, you’ll need a plan. In order to make a plan that you can stick to, you’ll need to recognize your weak areas so you can work around them.
The following suggestions and strategies are based upon best clinical practices and the application of behavioral and financial principles. They are designed to help you understand how to:
- set priorities
- determine problem areas
- set goals
- get organized
- curb impulsivity
- understand and track where your money is going
- develop a spending plan
- pay off debt and create savings
It is possible for an adult with ADHD to be a successful money manager. Plan time in your daily and weekly routine to incorporate these steps, and seek out any support you may need to start and maintain these steps.
Clarify Your Vision
Every good financial plan begins with a vision of an ideal lifestyle. A vision is a blueprint of your lifestyle that reflects your unique values and interests. Everyone needs money for shelter, food, transportation, and clothing. But beyond these necessities for survival, there are countless other items that you can buy with your disposable income. For instance, some folks value beauty in their home so they may spend more on decorating and home remodeling than someone who values adventure and travel. Some people may value education more than a new car, while for others may value having the latest safety features from driving newer cars. Some people may value services like personal assistants, organizers, coaches, and therapists more than having the newest and most advanced television or smartphone.
Also, every person has a unique family situation―some are married; some have children to support; some have elderly parents who may need assistance or may provide them with an inheritance. Some people have retirement plans provided by their employer; others must save for retirement themselves. Whatever your special circumstances, you will need to clarify your values and how much money you will need to live the life you desire.
Four reasons to clarify your vision:
- helps you know your unique values—what matters most to you
- helps you recognize when your spending is not in alignment with your values
- gives a beginning structure to your budget or spending plan
- motivates you to take the necessary financial actions
Clarify Your Values
Take some quiet time to reflect on what you value. Don’t allow your inner critic to judge your thoughts and ideas. Just let yourself day dream.
During this exercise, jot down notes to yourself until you get some clarity. The following questions may help you:
- How would you spend your day if all of your money woes were magically taken care of?
- What type of home would you live in?
- Where would it be located?
- What type of furnishings would you have?
- What colors, textures, and space would surround you?
- What would you be wearing?
- What would you be doing with your day?
- Who would be with you?
- What are your favorite hobbies?
- What activities bring you joy?
If you’re more of a visual and artsy person, you could make a collage or painting with pictures that depict ideas, scenes, activities, moods, or objects that you would like to have.
Once you have your list of ideas, take a break. When you come back to your list, see if you have new items to add. Then, prioritize your list into two groups:
- Nice to have but not essential
Look at your list of essentials. What are the top three to five things? These are the values that are most important to you.
Needs vs. Wants
In order to manage your finances in a sustainable manner, begin with a clear picture of your current living requirements, to define your:
- Fixed expenses such as housing, utilities, loans, transportation, dues, etc. These are the expenses at a fixed dollar amount that you must pay to avoid penalties.
- Variable expenses with an average amount or range. This is what you typically spend on things like food, gas, clothing, and entertainment. These are expenses that could be higher or lower, depending on circumstances (e.g. how many hungry teenagers in your household) as well as self-control (e.g. how many times you eat out, or how many new shoes you buy.)
Be sure to include not only the expenses you see every day, week, or month, but think about your quarterly and annual expenses such as taxes, homeowners’ fees, and memberships.
What’s left over after those expenses is your disposable income. This is what you will use for future expenses, such as those unexpected repairs, vacations, college, retirement, etc. What you do with your disposable income will depend on:
Your personal situation:
- whether you’re married or single, have children to support, have elderly parents who may need assistance, etc.
- whether you have retirement plans provided by your employer or must save for retirement yourself
Your lifestyle preferences:
- For example, some folks value beauty in their home, so they may spend more on decorating and remodeling than someone who values adventure and travel.
- Some people may value education more than a new car, while others may value having the latest safety features from driving newer cars.
Be sure to determine whether your living requirements and lifestyle preferences are in line with your vision and values.
Establish Short-, Mid- and Long-Term Goals
Now you have a framework that includes your vision, values, fixed and variable expenses. The next step is to set short-, mid- and long-term goals for improving your finances.
- Short-term goals may include things like saving $5 per week, curbing eating out, or keeping your papers together.
- Mid-term goals may include saving for a vacation, saving for furniture replacement, or paying off debts.
- Long-term goals may include saving for college tuition or planning for retirement.
Prioritizing these areas poses a special challenge for someone affected by ADHD because successful money management means paying attention to all of them. It is advisable to break down each task into small action steps and incrementally build your confidence until you are attending to the whole financial picture. You may need assistance from a friend, therapist or coach. Don’t be afraid to ask for help if you need it.
Identify Problem Areas with Money
Most people with money problems believe that not having enough money is their primary problem, and are unable to pinpoint their specific difficulties. Upon further analysis, many adults with ADHD have one or more of the following specific issues:
- losing track of checkbook balances, leading to bounced checks
- disorganization, making it easy to lose bills and challenging to locate important papers at tax time
- impulsive spending or buying things on a whim
- large credit card balances
- forgetting when bills are due—like credit cards, mortgage, car payments—and paying late, which negatively impacting your credit
- not saving for the future, especially for big-ticket items such as new dishwashers, vacations, children’s college, or retirement
- procrastination, which leads to not paying bills or doing taxes on time
- not earning enough money for survival (financial underachievement)
Which of these do you struggle with? Are there others that are negatively impacting your money management? How are they impacting you and your finances? Having a clear picture of your challenges is critical to effectively managing or overcoming them.
Organizing Financial Papers
Many individuals with ADHD get into financial trouble because they lose money, bills, and checkbooks; can’t find the necessary papers at tax time; or just don’t plan. This disorganization is no different than the general disorganization of an individual with ADHD. However, losing financial papers often can have serious consequences, such as not being able to do your taxes correctly or on time, having your insurance cancelled from not paying your premiums, late fees and negative reports on your credit.
To avoid misplacing or losing financial papers, have a special spot in the house where all financial papers can be stored. For important papers like titles, birth certificates, wills and deeds, you will need to keep the original documents. Label file folders with the name of each document and store them in a file cabinet.
For documents related to money management, use file folders or envelopes to organize them and store them in a file cabinet, desk drawer, special box, large plastic envelope, or a large basket. This central location should be near where you open the mail. You can also include a calculator, stamps, envelopes, and anything else needed for paying bills.
Create a daily mail routine so that when the mail arrives and is opened, money papers are immediately separated from the rest of the mail and placed into the special container or space you have chosen. Money papers include checkbooks, bills, bank statements, legal papers, insurance papers, checks to be cashed, and extra checks. Anything that has a designated account number is important and needs to be immediately separated from the remainder of your papers.
A “paperwork flow system” may also be helpful. This is a system in which all the money papers “flow” to one central location. For instance, “temporary holding tanks” are designated in the wallet, purse, planner, and car, which hold money papers and receipts until they can be placed in the special money location. These temporary tanks can be clear plastic envelopes, fancy shoeboxes, plain envelopes, or even more simply, a special spot in the wallet for receipts. Once a month or so, these papers can be transferred to the central location. Consult Getting (and Staying!) Organized for more organizational tips.
Know Where Your Money is Going
Successful money management demands that you be able to account for your money. Keeping a record of purchases helps curb impulsivity and lets you know whether you are spending your money where you want to be spending it—toward the things you love and toward your vision and values.
Carry a little notebook or use smartphone apps, a day planner, or an extra checkbook register to keep track of all of your purchases. Record even small purchases, such as 30 cents for the parking meter or $1.39 for a candy bar. Don’t forget to record your online and mobile purchases as well.
As spending is tracked, certain categories will naturally emerge. These categories are different for each person, but the main categories for many include parking, groceries, restaurants, snacks, coffee shops, books, movies, gasoline, clothing, newspapers, cosmetics, household items, donations, and hobbies. As you continue to record your spending, you will no longer have to wonder where all your money goes.
It may be difficult for adults with ADHD to write down all of their expenses, but do the best you can. Try keeping track of expenses for one week or two weeks at first. Enlist the help of a spouse or a trusted friend in recording all your expenses to remind you if you forget. Try dictating them into your smart phone or send yourself an email to yourself to record your expenses. Even if you do not keep a perfect record of every expense, the records that you do collect will help you move forward in developing healthy money management habits.
Develop a Spending Plan
One secret to healthy financial management is to plan for all expenses every single month. For instance, many people with ADHD have difficulty remembering that the insurance bill is due in 2 months so they impulsively spend or splurge on the latest electronic gadget or a vacation. The impulsive, live-in-the-moment lifestyle of the individual with ADHD makes it difficult to remember upcoming expenses.
A spending plan or budget can help keep these upcoming expenses at the top of your mind and ensure you plan for them every month and don’t forget. It involves figuring out a certain amount of money that you will require each month for each spending category in your life. It is easier to construct a spending plan monthly rather than annually since most utilities and installments are paid monthly.
Follow these steps to develop a simple spending plan. Spreadsheet software can be helpful in developing this spending plan, as many include a template for this purpose.
- Make a master list of all your expected expenses. Gather these figures from purchases you made over the last 12 months. Use your checkbook records and credit card statements to gather this information.
- Add up all the expenses from the past 12 months and divide by 12 to get your monthly total expenses.
Once you set up your spending plan, here are some suggestions helping you stick to your budget and track your purchases.
- Weekly review: Choose a day of the week to review your spending plan and budget. Many people use the beginning of the week, either Sunday or Monday, or end of the week, Friday or Saturday. Look at the coming week and determine what bills or expenses you expect for the week. Then look at the month to determine what expenses will need to be paid in the coming weeks. Look at your checking account to determine the current balance, minus payments you have made that have not been subtracted from the balance. If you are expecting to receiving money, paycheck or other funds, note that. Pay all bills due that week. If you need to wait for a deposit in order to pay all bills due, write the check and make a note on the envelope to mail it the day the money has been deposited.
- Checkbook recording: Record every monthly expenditure in your checkbook at the beginning of the month so you will know when they are due. It may be helpful to eliminate paper and arrange for utilities, car payments, and house payments to be automatically withdrawn from your bank account. Be sure to include upcoming payments in your checkbook, or electronic checkbook.
- Special savings: Open a special bank account for large ticket items and fluctuating categories—such as vacations, car repair, clothing, and home repair and replacements—and make a monthly deposit into this account.
- Emergency account: Most cars break down, teeth need repair, and homes need maintenance. They are a predictable part of life, so plan ahead for them. Open a special account for these sudden “emergencies” and make a deposit each month.
- Financial calendar: Individuals with ADHD often find it helpful to have a visual reminder of their financial obligations. If you find it easier, use a yearly calendar to track your obligations. At the beginning of each month, record all incoming money and all major bills for the month such as rent, utilities, insurance, and other payments due. After these are filled in, fill in other allocations such as groceries and fuel, because these are also necessary expenses. By using a calendar like this, you can see clearly at the beginning of each month what your obligations will be. Refer to this calendar daily. Some people also find it helpful to record the expenses that will be due later in the year.
- Money management timeline. Some find it helpful to organize money management ideas into a timeline. Below is one example. It specifies daily, weekly, monthly, and yearly tasks and the approximate amount of time it might take to accomplish each task. You can customize a similar timeline to your circumstances.
- place money papers in a central location (less than 5 minutes)
- open and sort bills (5 minutes)
- record spending (less than 5 minutes)
- review vision and budget if over spending (less than 10 minutes)
- keep a daily account balance on checking accounts (less than 5 minutes)
- resist impulsive spending
- pay bills: write checks and mail them; mark date paid and move paid bills to folder marked “PAID” (10–20 minutes)
- review expenses for the upcoming week (5 minutes)
- go to the bank; deposit checks and withdraw needed cash for the week (20 minutes)
- add up weekly spending, especially in problem categories (10 minutes)
- file “PAID” bills into appropriate files (5–10 minutes)
- reconcile bank statement (30 minutes)
- compare actual income and spending to budgeted allocations (5 minutes)
- assess areas of overspending
- collect money papers for tax preparation (1 hour)
- create a financial vision for the upcoming year (30 minutes)
- list large expenses for the next year: assess necessary repairs, clothes needed, major gifts, and travel (10 minutes)
- after tax preparation is complete, box up money papers, label with appropriate year, and put in storage (30 minutes)
Paying off debts
Success with finances demands the elimination of debt and the prevention of new debt. To pay off debt, make a list of all your debts. Include credit cards, outstanding debts to doctors, friends, and family, and any loans from insurance or 401K plans.
Make a chart like this so you can see your total debt:
|Creditor||Total Balance Due||Payment Due Date||Minimum Payment||% Rate|
If you are in serious debt, this may be an emotionally painful task. Do it anyway. Talk with a trusted friend or therapist to help deal with the emotional pain. Call creditors to ask for a lower percentage rate or reduced late fees. Arrange regular payments with creditors and stick to the plan. Do not promise more than you can realistically pay. They are less likely to cooperate if you don’t keep promises or don’t stick to what you have agreed to pay monthly.
The savings habit should begin immediately, even if it means starting with a piggy bank and making weekly deposits of small amounts, even 50 cents or $1.00. No matter how high the debt load, a savings habit needs to be developed. Start small and be patient with yourself as you learn this new habit. There are different purposes for saving money:
- Short-term expenditures: These include items like a new refrigerator, a vacation, or insurance payments due annually or semi-annually.
- Mid-term expenditures: These include children’s education, a down payment on a new car, or the purchase of a new home.
- Long-term future savings: These include retirement. This type of savings is especially difficult for an individual with ADHD to conceptualize because there is no need in the here and now to be saving. Nevertheless, the day will come when you’ll need this money to live on.
Make saving money fun and visual. For instance, make a visual thermometer or graph to track your savings. Some people find it helpful to use a cute piggy bank for certain expenditures, or an envelope with a photo of whatever you are saving for glued to the outside. You can open a special bank account for a particular goal and have automatic deposits taken from your paycheck. If necessary, open this bank account at a different bank—across town so you’ll be less tempted to withdraw from it.
Curb Impulsive Shopping
Impulsivity, one of the hallmarks of ADHD, can lead to financial difficulties. Impulsive shopping and spending is defined as any purchase you did not plan to make when you left the house that morning, any purchase that is not a part of your budget, or any purchase that you don’t need. For an adult with ADHD, this spending happens spontaneously and without warning. Here are suggestions for curbing impulsive spending:
- Identify and stay away from your problem areas such as malls, favorite stores, arts and crafts shows, online websites.
- Shop with a list and stick to it. Before you go to the store, call a friend and commit to your shopping list, then report back to them following your trip.
- Add up your purchases as they accumulate. This will help you monitor how much you’re spending in real time.
- Wait a certain number of hours before a purchase, 24 hours or more. If after this time you decide that you still want the purchase and have the money to buy it, then go and buy it.
- Unsubscribe from company email lists. These emails are designed specifically to get you to visit the company’s website and spend money.
- Find fun hobbies or things to do that are free or inexpensive. Explore neighborhood museums and libraries, attend local lectures, join support groups or clubs, visit public parks and learn about nature, or participate in sports.
- Put a block between your money and the urge to spend it. If you find that the above tips aren’t helping you curb your spending, leave your credit cards at home; don’t carry much cash or your checkbook with you; and if necessary, add a cosigner to your checking account.
Managing Credit Cards
Credit cards and the debt that can easily accrue can take a person in the wrong financial direction. Balances build up rapidly from interest, late payment fees, and over-the-limit charges. This accumulation will rapidly turn small purchases into very large expenses. Paying only the minimum amount due on a large credit card debt means it could take 30 years to pay off the entire balance. If you are in the habit of not paying off credit card balances each month, stop before you use it again. Ask yourself if you love the purchase enough to pay for it over 30 years.
- promote impulsive spending.
- are easy and convenient to use and can be very damaging for a person who has a hard time prioritizing financial commitments.
- typically result in spending more for the average person compared to using cash.
If you run into significant issues with overspending, think of storing your credit cards in a safe location at home so you don’t carry them with you. Some individuals have even put their credit cards in a container filled with water and freezing them. By the time they defrost the credit card, the urge to make the purchase has often dissipated. Or, cut them up so you don’t use them.
Quick Tips For Managing Credit Cards
- Have a trusted friend or loved one hold your card. If you decide to make a purchase, you will need to have a discussion to get your card. Discuss the items you intend to buy, and how they relate to your vision and goals.
- Write a check to the credit card company immediately after making a purchase with your credit card.
- Place a sticker on your credit card that symbolizes some aspect of your vision. This way, when you pull out your credit card, you will be reminded of your longer-term goals and possibly pause long enough to ask yourself if this purchase is necessary.
If you have large balances on your credit cards and don’t remember what you purchased, you may be better off without a credit card. Write to the companies and close these accounts even if there are balances to pay off. Be aware that if you take this step, it will likely negatively impact your credit rating so this should be a last resort. But, it may be your best option. Consult with a financial advisor to determine the best strategy for your situation.
Find Support and Incorporate Other Resources
Some people may be able to implement the suggestions given here on their own. Others may need the assistance of a friend, therapist, or coach. An individual providing support can help you make budget categories and monitor and regulate spending. If you take medication as part of your treatment, make sure that the medication is active in your body when you are working on financial tasks.
It is possible for an adult with ADHD to be a successful money manager. In this sheet, the task of managing money has been broken down into a number of steps, and suggestions have been given for carrying out each of these steps. It is crucial for the adult with ADHD to plan time in their daily and weekly routines to implement these steps, and to seek out the support systems necessary for bringing these steps to fruition. Because money is a daily event, some action is needed every day. If consistently applied over time, these suggested techniques will help the adult with ADHD improve his/her money management.