I want to know more about ADHD and debt. I know many people with ADHD have trouble managing their money, and neurotypical solutions don't work for us. I hope you can help find some solutions to save money or try to pay off debt. Personally, I have student debt and some credit card debt from impulse spending. How can I best cut costs with a sustainable solution given my ADHD tendencies related to difficulty following too much structure?
ADHD affects approximately 8 million adults in the USA. This can affect impulsivity and executive functions, making money matters more difficult. People with ADHD report higher levels of debt, impulse buying, difficulty saving money, and trouble understanding banking protocols—you can probably relate, and you're not alone. It's hard when commerce designed to remove all obstacles in the way of spending money; It is not surprising that impulse buying occupies a position between 40% and 80% all purchases.
I addressed your question to David DeWitt, a 32-year-old certified financial planner in Devitt Capital Management in Wayne, Pennsylvania, who specifically works with clients suffering from ADHD. He also has ADHD and had to get out of credit card debt years ago due to impulsive spending.
DeWitt creates savings and cost reduction systems for its clients that automate their work as much as possible. “The hardest part is finding the energy to set it up and doing the groundwork to figure out what your total running costs are and how much you need to spend on this and that. But once it's set up, everything happens automatically,” he said. Many of his ADHD clients have already spent a lot of effort creating budgets, but as you mentioned, this structure can be difficult to follow. “One little glitch in the system and you just sabotage yourself and give up – and I understand that,” he said; it feels overwhelming, so you give it up. His advice is aimed at “building walls that won't crumble” when you're “mentally blown up.”
Impulse spending and cutting it down
Cutting expenses is often the first step to paying off debt, as long as you use unspent money to pay off debt. “The real work comes down to working on yourself and learning how to stop impulsive spending if that's why you're in debt,” DeWitt said, noting that some people are triggered by stress or anxiety or are looking for a hit of dopamine while shopping. “There is no magic bullet for ADHD,” but there are concrete steps people can take to help themselves in a world carefully designed to encourage impulse buying:
- To increase awareness of your spending, for three months in a row, write down every time you buy something, the moment of purchase, and keep a running total. This is what he advises all his clients to do. “It's real magic because you quickly see how much it adds up. You see how quickly the page fills up. You see the ridiculous amounts of money you're spending and it starts to insult you,” DeWitt said. “That's what changed my whole life. From that moment on, my impulsive spending almost completely evaporated – and I felt bad.”
- Use only debit cards and cash for at least three months—a “weaning off period,” as DeWitt calls it—so you don't spend more than you earn or take on more debt. Research shows that people spend a lot more when they use credit cards. The ceiling becomes your credit limit, not your income. (You can read my column about paying off credit card debt and switching to cash and debit cards. Here.)
Once you've switched, you don't want to take out an overdraft and pay those fees, so check your account regularly (even daily). It will also give you the ability to review transactions so you can notice patterns and become more aware of your spending, allowing you to make better decisions in real time.
- Cancel subscription services and memberships that allow you to easily make purchases (such as Amazon Prime, recurring subscriptions and save, etc.) to see if you really need them. Often, “it’s just a search for dopamine,” DeWitt said. “If you have to pay for shipping, you really need this product.” While you're at it, cancel any subscriptions you no longer use.
- Use application and website blockers (some impossible to reverse until the lockout period ends) to break the habit. Many people tend to buy the “glittery Instagram update.” DeWitt said he looks at a lot of his clients' credit card statements and “food is the No. 1 biggest problem” because delivery apps have made it easier to order takeout. DeWitt said, “I've had a lot of people tell me that after months of not spending $200 a week on DoorDash, they wouldn't miss it.”
Manage your money to pay off debt and save
As for paying off debt reliably and saving money, DeWitt said. reverse budgeting could help. This is where you first set aside money for savings and investments (and, based on your concerns, student loan payments and credit card debt), and then budget for the rest of your expenses. This is the opposite of what most people do, which is save what is left at the end of the month. “Many of my clients set goals like $500 a month towards debt, and we'll start from there,” DeWitt said. It's important to keep track of what money is coming in and going out each month, decide how to allocate your dollars, and then automate as much of it as possible.
- DeWitt suggests creating multiple bank accounts, each serving a specific purpose, and giving them specific nicknames. For example, Monthly Bills and Expenses – (including loan payments), Emergency Savings, Housing Fund, Investment Money, Spending Money.
“If you label your accounts very specifically, you're much more likely to stick with it,” DeWitt said. If you're planning a trip to, say, Italy in October, “you can't just have a Vacation account;” it's too easy to steal because it's not real in your head yet. It should say: “Vacation 2023 to this location.”
For the Monthly Bills and Expenses account, add up all your current expenses and use that total to determine how much you will contribute to this account, preferably through a direct transfer from your paycheck. You should have a separate Spending Money account for discretionary purchases so that these things don't get mixed up.
- If your employer can split your salary into these different bank accounts depending on your budget, take advantage of that option rather than relying on automatic transfers from your bank account, which are all too easy to turn off. “For people with ADHD, I totally want them to go through an employer and set up direct deposits,” DeWitt said. “If you create more friction to turn something off, it will be easier to stick with.”
- It is extremely important that your Spending Money account must stay above zero so as not to start stealing from other accounts. You don't have to sit down and create a detailed spending budget if it seems overwhelming, DeWitt said, “but you have to last that long.”
- DeWitt advises clients to automate bill and debt payments so they don't snowball. “Switch all your bills to autopay and the correct amount of money will always go into that checking account, so you don’t even have to worry.”
Devitt said, “ADHD helps explain your behavior, but you can still get out of the situation. At the end of the day, you need to take care of yourself.” ●
