Cents and Sensibility: The Intersection of Mental Health and Financial Well-being

The Basics: Financial and Mental Health

Financial well-being is about more than just the numbers—it's a balance between managing your money and the emotions tied to it.

While having financial security is part of the equation, it’s not just about how much money you have. It's about how well you're able to navigate financial challenges without being overwhelmed by stress.

Mental health, like financial well-being, is multi-dimensional. It includes our emotional, psychological, and social well-being, influencing how we think, feel, and act. Just as financial well-being is not solely about having money, mental health is not just the absence of mental illness.

The link between financial health and mental well-being is something that often goes unspoken, but it’s as inseparable as hand and glove. While this connection has always existed, ever since money became central to our lives, the pandemic has made it clearer than ever. Many have found themselves caught in an ongoing cycle of financial pressures and mental strain.

Whether the economy is heading towards a recession or a soft landing, the stress related to financial challenges is palpable, with statistics showing a clear link between financial difficulties and deteriorating mental health. The type of stress people experience depends on whether they have control over their financial situation or are caught in crises beyond their control.

Why This Topic Matters Today

Finances are one of the main sources of this stress. In fact, two-thirds (66%) of respondents in the APA’s “Stress in America 2022” report cited money as a major source of anxiety, with stress levels linked to finances reaching their highest point since 2015. Research also shows a clear connection between financial difficulties and mental health issues, such as increased anxiety and depression.

However, the direction of this relationship isn’t always straightforward. While financial challenges can trigger poor mental health, it’s also possible that mental health struggles make it harder to maintain financial stability. In "The Psychology of Money," Morgan Housel explains how emotions like fear and stress often lead people to make irrational financial decisions, driven more by anxiety than logic. This underscores the idea that financial stress can cause people to make short-term decisions that negatively impact their long-term financial health.

The Interplay Between Financial and Mental Health

Managing financial stress presents a unique set of challenges. One reason is that we are constantly required to make money-related decisions—ranging from small choices like buying groceries on sale to bigger decisions like lending money to a friend or family member. Additionally, financial decisions often involve more than just one person. When sharing finances with a partner or family members, differing priorities and financial backgrounds can complicate things.

On top of that, some financial burdens are long-term and can feel crushing. If your income barely covers basic necessities, the stress of meeting monthly expenses like rent or medical bills can be overwhelming. Instead of confronting these problems, many people may try to avoid the stress, which only prolongs the cycle.

Given all this, The social and emotional toll of financial difficulties can be significant. When people are broke, they often experience a wide range of feelings, from guilt over overspending to anxiety about not being able to spend at all. Many find it hard to say no to friends or family when asked for financial help, even when they’re struggling themselves, which can create emotional strain.

Beyond personal relationships, financial struggles can lead to social isolation. The stigma of being unable to keep up with others financially, or the shame associated with debt, can make people withdraw socially, further compounding feelings of stress and burnout. This emotional burnout is intensified by a constant fear of not being able to meet one’s financial obligations.

A brief look into how the female experience fits into this narrative:

Research has shown that financial stress affects different groups in different ways. Single women, for example, are often more financially vulnerable than both single men and those who are married or partnered.

Surveys report that more than two in five women reported that financial issues negatively impacted their mental health, contributing to feelings of anxiety, depression, and stress. These women often expressed greater concerns than men about having enough emergency savings and covering everyday expenses. Women are also more likely than men to feel emotional strain when checking their bank accounts or facing unexpected costs.

Financial health is crucial for mental health, and the lack of conversation around single women and money management is concerning. Society tends to focus on financial milestones associated with relationships, like marriage or starting a family, but fails to address the long-term financial needs of women who are single for part or all their lives. Empowering women to manage their finances independently is critical for both their financial and mental well-being.

Women in any culture, we’re expected to be the rock. We expect ourselves to parent well; we expect ourselves to be good spouses, to be good employees, to be good managers. Money is in that same category, but it can get lost in the shuffle. — JoVonna ChaseWashington, D.C., resident

Breaking the Cycle: Strengthening Both Together

Financial Literacy

One of the most effective ways to reduce financial stress and promote better mental health is through improving financial literacy. Strategies like monitoring cash flow, setting clear financial goals, building credit, budgeting for major purchases can provide a sense of structure and control. Learning more about building wealth through investments also provides long-term financial security.

For women, financial literacy plays a particularly important role in closing the financial planning gap. Despite many women feeling confident about their finances, studies show that they tend to lag behind men in areas like budgeting and long-term planning. This is partly due to a lack of early financial education. Younger generations, especially Gen Z women, have seen some improvement, but there is still much work to be done in promoting financial education.

Another crucial element is cultivating open conversations about money. Whether it’s discussing financial habits with parents or building financial intimacy with a partner, talking openly about money can reduce stress and improve relationships.

Therapeutic Approaches

Financial therapy, which combines strategies from both mental health and financial experts, helps individuals manage their emotions, develop healthier financial behaviors, and regain a sense of control over their finances. By working through their emotional responses to money, people can create plans to tackle debt, manage expenses, and build a better financial future.

Therapists can guide clients through breaking large financial goals into smaller, manageable steps to avoid feeling overwhelmed. They can also help individuals work through the emotions tied to their financial situation, such as guilt or anxiety, and create a healthier relationship with money. If individuals find that spending makes them feel better when stressed, exploring different hobbies can serve as a healthier outlet for emotions.

Workplace Initiatives

Employers have an increasing responsibility to support both financial wellness and mental health for their employees. Companies can offer programs that educate staff on financial planning and provide access to resources for financial literacy. This is particularly important for women, who often face economic disparities and unique challenges in the workforce.

Workplace initiatives could include financial planning workshops, access to financial advisors, and support systems that help employees manage stress related to money.

Quick Tip: Budgeting Made Simple

Budgeting is a critical tool for reducing financial anxiety. By creating a clear plan for how money is spent, individuals can take control of their finances and avoid feeling overwhelmed. Start by using tools like Excel spreadsheets or pre-made templates to track income, expenses, and savings goals. These templates give you a snapshot of your financial situation, helping you make adjustments when needed. Don't forget to forgive yourself if you stray from the plan—it’s all part of the learning process.

It’s also helpful to break down your wants and needs to better prioritize spending. Automating payments can help you stay on track and avoid missing due dates. If you find this process difficult, consider consulting a financial professional—whether that’s someone in your family or an external advisor—who can provide guidance.

Finally, conduct financial check-ins every month. This will help you identify patterns, such as when you tend to spend more, and make adjustments to your budget accordingly.

Strategies for Mental and Financial Balance

Focus on What You Control: Financial stress often comes from focusing on things you can’t control. Shift your attention to what you can manage—like setting aside a modest amount each month for savings or paying off a portion of your most pressing debts.

Create Extra Income: Turning your hobbies or skills into a source of income can provide a sense of control over your finances.

Revisit Your Insurance: Having the appropriate insurance coverage is key to maintaining financial security. Compare plans and ensure your coverage fits your needs, especially when it comes to major life events.

Prioritize Your Well-Being: Set aside dedicated time each week to review your financial situation, but don’t let it dominate your thoughts outside of those sessions. Engaging in other activities like yoga, nature walks, can recharge you.

Strengthen Your Support System: One of the best ways to alleviate financial stress is by talking about it with others. Open-up to trusted friends, family, or professionals who can offer guidance.

Conclusion

Money is undoubtedly important, but financial well-being goes beyond just having enough. It’s about your relationship with money, how effectively you manage financial stress, and your ability to openly discuss financial matters when needed. Achieving balance in both your finances and mental health is key to overall well-being.

This article only scratches the surface of the complex link between financial well-being and mental health. The ripple effects of this relationship touch not just individuals, but also extend to businesses, financial institutions, and policymakers. Our goal is to inspire further dialogue and action to support those facing financial difficulties and help create a society where everyone has the opportunity to flourish.

References:

Thielen, P. (2023). The Connection Between Financial Well-Being And Mental Health. [online] Forbes. Available at: https://forbes.com/councils/forbesfinancecouncil/2023/03/14/the-connection-between-financial-well-being-and-mental-health/ 

‌Foster, S. (2022). Why Women Are More Likely To Stress About Their Finances. [online] Bankrate. Available at: https://www.bankrate.com/banking/federal-reserve/why-women-feel-more-financial-stress/.

Bethune, S. (2022). Stress in America 2022. [online] American Psychological Association. Available at: https://www.apa.org/news/press/releases/stress/2022/concerned-future-inflation

‌Bethune, S. (2023). Stress in AmericaTM 2023: A nation grappling with psychological impacts of collective trauma. [online] Apa.org. Available at: https://www.apa.org/news/press/releases/2023/11/psychological-impacts-collective-trauma.

Gonzales, Freschia. (2024). 12% more women feel financial stress, survey shows. https://www.wealthprofessional.ca/news/industry-news/12-more-women-feel-financial-stress-survey-shows/384318

EverydayHealth.com. (n.d.). What Is Financial Wellness? [online] Available at: https://www.everydayhealth.com/wellness/united-states-of-stress/what-financial-wellness/.

‌Sandberg, E. (2023). Forty-Two Percent Of U.S. Adults Say That Money Negatively Impacts Their Mental Health. [online] Bankrate. Available at: https://www.bankrate.com/personal-finance/financial-wellness-survey/.

State of the global workplace 2024. Gallop