Has your psychologist asked you about your financial situation? If not, they should and here’s why.
Have you had the experience of grabbing a hand full of letters from the mail box. You see one which sticks out as it looks official. You open it first with your heart sinking. It’s a letter from the debt collection service. Or have you logged into your Internet banking and opened your account only to see fewer numbers than you expected. You blink your eyes and look closely at the zeros where there should be numbers. You feel that familiar weight on your shoulders as you know you have no money till your next payday. These experiences are common and increasing in Australia and around the world.
Money and human society are deeply intertwined
Trade and barter have been around since the dawn of humanity. Money has been around since at least the 1500’s, Sapiens a book which reviews human history,
reported. Coins or other representations of money are important in most cultures for keeping a record of complex social exchanges. In our modern society money has come to rule many people’s lives. Having the psychological skills to manage your money effectively is crucial to being happy, healthy, and successful. Once you have these skills money management will become easier so you can focus on the important areas of your life such as your health and relationships.
The Holmes and Rahe stress scale puts financial difficulties in their top 40 most stressful life events. They asked 2,500 people to rate the most stressful events they had experienced. A number of finance related problems were at the top of the list including retirement, business readjustment, change in financial state, taking on a mortgage, and going through a foreclosure. You may be wondering why retirement is in there. There are a number of reasons retirement (something which people often look forward to) can be stressful but one of them is many people do not have the financial resources needed for retirement. This study shows how stressful dealing with financial matters can be.
If you are struggling to manage your money you are not alone. MEBank in its report on Household Financial Comfort found that a quarter of Australian households have less than $1000 in cash savings. Map My Plan in their paper on Financial Stress in the Australian Workplace found that 8% of people have trouble sleeping because of worries about finances. That’s almost 1 out of every 10 of your friends and family. Financial Mindfulness in their survey of 1000 Australian’s found that people from all income levels reported financial stress so it’s not just battlers feeling the pinch. If you are experiencing financial stress it is important to talk to someone.
Money and Mental Health
People who are in debt are three times more likely to have mental health problems. Depression and anxiety have been linked to poverty. Not having enough money for the food, shelter and transport can understandably make you feel anxious and down. There are often feelings of shame and guilt associated with financial problems and most people do not discuss their financial situation, so debt can be very isolating. Alongside these feelings there can also be an increase in drug and alcohol use to manage the stress of financial problems. There is a long running debate over whether financial problems or mental health problems come first. Some argue that a lack of access to money and resources can lead to mental health problems. Others would argue that when you have mental health problems managing money can be hard as maintaining consistent employment is more difficult and some mental health problems can involve excessive spending. It is possible that mental health problems cause people to get into debt or that debt causes people to have mental health problems. This debate is ongoing and not easily solved but what is important is that the two are related
Financial stress can become so overwhelming people can feel unable to solve their money problems. A review of the labour market and suicidal behaviour between 1984 and 1999 concluded that as unemployment rates increase so do suicide rates. More recent research in 2015 has found that in periods of economic downturns is an increase in suicide rates. The good news is that there are people who can help you solve your financial problems. If you feel your financial situation is overwhelming, please see our Contacts Page
Having financial problems can also lead to difficulties in other areas of your life such as your health and employment. Your health can be affected if you do not have money to visit the doctor or purchase medications. Having a health problem, even with public health care, can still cost a lot in terms of prescriptions and days off work. This can often become a negative spiral where your health and financial problems negatively impact on each other.
Another important area which can be affected by financial difficulties are relationships. At the extreme end is financial abuse which White Ribbon describes as involving someone taking complete control of finances or money, access being restricted to bank accounts, providing an inadequate allowance, forbidding someone to work, taking pay, taking the keys to the car, using a credit card without permission, and refusing to contribute financially to household expenses. Financial abuse should be taken seriously as it is often part of a broader pattern of power and control issues within a relationship. Relationships Australia found in a 2011 survey that the main cause of relationship break-down was financial stress. The impact of financial stress on relationships is such an important topic it deserves its own post in the future.
The effects of financial stress and debt on mental health are not often discussed. If you are struggling with these issues, please ensure you reach out for psychological help as there are many skills you can learn which can help you in the future. PsychHelp can teach you skills which can support you to manage your money better.
- Impulse control
You walk past a shop window and see a pair of shiny new shoes in your favourite colour. You know you will have to put the rent on the credit card this week anyway so why not just put them on there too. If this sounds familiar you may struggle to control your impulses. A famous experiment left a child alone with a marshmallow to see if they were capable of waiting a few minutes to eat it. The results indicated that an ability to delay gratification in childhood is related to better marks at school, social and emotional functioning, and a greater sense of self-worth. Impulse control is a skill which is useful in a number of areas but if you are able to develop this skill avoiding that sinking feeling when you check your bank account becomes a whole lot easier.
Warren Buffet who is considered one of the most successful investors in the world offers quotes regarding the psychological skills needed for financial success “The difference between successful people and really successful people is that really successful people say no to almost everything.”
- Long term planning
For most people it’s pretty easy to plan for tomorrow or the next weekend but planning for 10, 20 or 30 years in the future can be tricky. Long term planning can help you to make decisions now which will benefit your 50, 60, or 70-year-old self. Being able to visualise your future self and developing skills to grow into the person you want to be in the future can help you feel happier in the present.
Warren Buffet “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
- Distress tolerance
It’s hard watching your friends buy a new car or turn up in a fancy new outfit looking fabulous. Sitting with distressing, uncomfortable or aversive states is an important skill when managing money. Paying off debt, saving, not buying that new car, outfit or handbag can all feel distressing. If these uncomfortable activities are done on a regular basis they can lead to less stress in the future.
Warren Buffet “Only when you combine sound intellect with emotional discipline do you get rational behaviour.”
- Relationship skills
The importance of relationships has been discussed in a previous post. Having good relationships is vital to a long, healthy and happy life. One area of relationships which can be tricky to negotiate are financial matters. Being able to be assertive in relationships and having the confidence to say “no” can be important when managing your finances. Working out financial goals together can help strengthen relationships. Therapy can help you clarify the financial responsibilities in the household.
“I measure success by how many people love me.” Warren Buffet
Places to get financial advice
- PsychHelp can work with your financial advisors to support you during stressful times and provide you with psychological skills to help you achieve your financial goals. PsychHelp cannot provide financial advice. You should consider seeking independent legal, financial, taxation or other advice for all your financial decisions.
- Most superannuation funds have financial planners attached to the funds. You need to be careful that you understand the commission structure of anyone giving you financial advice.
- Centrelink offers free appointments with financial service officers.
- There is a National Debt Helpline which offers free financial counselling.
- The Australian Securities and Investments Commission have developed the MoneySmart website which provides an excellent overview of ways to manage your money.
