The Mental Health and Financial Wellness Connection
Financial wellness is the idea that people have basic financial needs to be met to lead a successful and fulfilling financial life. Similar to Maslow’s hierarchy of needs, there is a hierarchy of economic needs, and these may look and present differently for each person based on their own context, experiences, and mindset. Money can create emotional and psychological stressors in people’s daily lives. You will begin focusing on stress about money management. Your views of yourself will become based on negative self-worth or self-esteem associated with how much or how little money you earn, including societal stigma and social class.
Your relationship with money and how you spend, save, and invest may heavily influence your mental state. Inversely, your mental health can also have a significant impact on your relationship with money. This delicate balance is why it’s so crucial for everyone to reflect on their own financial wellness situation. This blog will highlight and explore how to identify your own money story and the common emotional triggers around money in yourself or others around you while coming up with tools to build financial wellness and cultivate a healthy mindset.
Understanding Your Own Money Story
A money story refers to influences within your life that have shaped the way that you look at money. These were most commonly observed in childhood, witnessing your primary caregivers discuss and react in financial situations. Family dynamics, cultural influences, and childhood experiences heavily impact your money story. It may include narratives or scripts we tell ourselves about spending or saving money. Oftentimes, these narratives may not be accurate, but we are rigidly holding ourselves to these values.
For example, take Karen – a 31-year-old woman who works in finance. Karen grew up lower middle class but in an affluent neighborhood, so she and her siblings could have access to great public schools. In childhood and adolescence, Karen developed a scarcity mindset regarding material items as she compared the things her family could afford to those of her peers. It caused Karen to pursue a career where she knew she would be financially stable. However, she can still not save money many years into her career, as she spends much of her monthly paycheck on rent and frequently shopping for material items. Karen hasn’t been able to contribute to her 401k in years, and the stress and shame of not properly planning for her future keep her up at night.
With Karen, we can see how her money story caused core beliefs or narratives around material items and financial freedom. These beliefs influenced her life decisions, including her career, spending habits, and financial planning. Identifying these beliefs, narratives, and behaviors can help you begin to assess what is helpful in your own financial wellness plan and what may need to change. To reflect on your own money story, ask yourself the following questions:
- What information was shared with you about money growing up?
- How did you view money within your own family compared to others around you and society? Are there any emotions associated with these thoughts?
- How much do you feel money is at the forefront of your decision-making process? (spending, saving, and financial planning)
- What happens when your relationship with money is challenged? Do any thoughts or feelings come to mind?
Common Emotional Triggers Around Money
Many emotional and psychological triggers relate to money, and it’s important to understand your triggers around money. In this instance, a trigger refers to the core beliefs or narrative that causes an emotional or behavioral response. The most common emotional reactions as they relate to money are as follows:
Money and Stress—Being stressed about money is very common and valid. We happen to exist in a society where money is needed to fulfill your basic needs, let alone introduce items of comfort. Individuals with lower incomes have high-stress levels regarding money concerns. It is also not uncommon for stressors around money to shift and grow as your finances and bills increase. In a study measuring stressors, people found them most impactful in life; 68% of participants listed financial stressors as their number one priority across various financial backgrounds.
Money and Self-worth—Many people report negative or positive self-esteem and self-images closely tied to the amount of money they are making or the amount of money they have saved. This is also often tied to a perceived view or expectation from society that they should have access to X amount of money at different milestones in life.
Money and Shame/Guilt– Shame and finances go hand in hand, especially at times when money is tight or there is a decrease in finances, especially when debt is involved. There is a financial stigma around debt or credit scores, and it is not always so black and white. Financial journeys may change at different life stages, which is okay. If there is a time when you feel you aren’t where you want to be, it’s important to identify that and explore tools to get you to a better place.
Practicing Tools for Building Financial Wellness
We will now discuss some mindful tools to explore while shifting your relationship with financial wellness. These tools should be specific to your needs, as each person’s situation will look different. Pairing these tools with a mindfulness mindset will make them even more successful.
Budgeting with Compassion: Budgeting is one of the most beneficial tools when trying to gain control of your financial situation. It’s important to avoid a restrictive budget because there will be more opportunities for you to fail, therefore perpetuating a shameful relationship with money. Instead, highlight your values and goals and allow your budget to reflect and support those goals. It may mean that there needs to be some cutbacks in some areas of spending, but your budget still supports the areas that are the most important to you. For example, if you are an extremely extroverted food lover living in an expensive city but looking to put away money for a big vacation, wedding, or downpayment on a house, it would be essential to include in the budget room for at least one night out a week to fulfill that foodie bug, and maybe pull-down spending in another area like clothing or beauty. The idea is for you to respect your budget while your values and goals are being met.
Mindful Spending: First, to be mindful of your spending, you need to track and be aware of the amount of money coming in and the amount of money going out. It sets the scene for a certain awareness of where your money is going. It’s also important to identify spending triggers. If you recognize that after a stressful day or a fight with a friend, you often turn to spending to regulate your emotions, it’s important to be aware of that. Impulsive spending can be a coping skill that helps us navigate and manage uncomfortable feelings/stressors. When you recognize that as happening, you can ask yourself what an alternative coping skill would be to address the emotions, like a long walk, a hot shower, listening to your favorite music, or even cooking your favorite meal.
With mindful spending, it’s also imperative to identify your needs versus what you want. Of course, sometimes it is nice to treat yourself to something you want, but if it is conflated with a need, that can be a slippery slope to overspending. Ahead of putting together your monthly budget, highlight things that are classified as a need. It would include all the items you must spend money on to survive. Common needs are rent/mortgage, insurance policies, car/phone payments, utilities, medical expenses, miscellaneous payments, and groceries. Identifying that everything above is a want is essential in prioritizing where your money can go. When it comes down to treating yourself to something in the want category, go for the 1, 2, 3 rule. You have thought about purchasing the item for at least 1 month. You have visited a store to try it out at least twice in that month and confirmed at least three ways it will enhance your life. It highlights that the purchase significantly adds to your life and prevents impulsive spending habits.
Cultivating a Healthy Mindset
A healthy mindset about finances is the most significant skill in your toolbox when addressing financial wellness. To achieve this, we will highlight self-compassion for your position in your financial journey and focus on abundance, even when finances are limited.
From Scarcity to Abundant Mindset: It is prevalent to view finances and money from a scarcity standpoint, mainly if your money story includes financial strains. A scarcity mindset is rooted in a fear of not having enough or never feeling like you will have enough. Individuals with a scarcity mindset often focus on their deficits or what they want instead of highlighting what they have. It can perpetuate feelings of insecurity, anxiety, and low self-esteem. If you can switch your mindset to a place of abundance and highlight gratitude for what you do have, this can shift the narrative that your worth is associated with things you want. In highlighting that you are pleased and thankful for the financial situation that you are in, you can give yourself space to practice kindness and feel joy in any situation.
It leads nicely into the next aspect of a successful mindset: self-compassion around your specific financial situation. It is a very common situation that negative self-judgments towards yourself increase feelings of shame and guilt, preventing growth or changing your position in life. It is specifically relevant to the topic of money. Many people experience shame and guilt because of their financial situation, whether it be due to debt or not feeling wealthy enough. By positioning these views from a place of self-compassion, you can see your financial journey as a learning process instead of a failure. Highlighting self-compassion allows you to forgive yourself for that misstep when you got a credit card with a high limit at age 19 and move forward from a place of understanding and structure for next time.
Final Notes
Fostering a healthy relationship with money, reflect on your reality, including your financial situation and your emotional relationship with money. By understanding your money story, you can unlock the ability to anticipate specific patterns in relationship to money, including spending and saving, and tweak them so that they work in fulfilling and authentic ways. It can be helpful to partner with a mental health professional to understand, process, and organize your plan forward.
