Updated on: June 15, 2022

Financial therapy sits at the intersection of financial advice and therapy, where its practitioners offer either financial guidance to address unproductive financial behavior or counseling for the negative emotions that drive these behaviors. In both instances, the goal is to improve an individual’s overall well-being through their finances, recognizing that financial wellness is an important piece of total wellness.

The Financial Therapy Association, founded in 2008, offers a certification for individuals who can meet educational and experience requirements in the areas of financial therapy, financial planning or financial counseling, and other therapeutic competencies.

While financial therapy is a relatively new field, it is gaining prominence as the psychology of money and wellness becomes mainstream.

Finances Are Deeply Connected to Health

Our financial situations have a direct and significant impact on our health, especially our mental health. There can often be a cyclical link between financial stress and mental health, where worries over finances negatively impact mental health, which leads to unproductive financial behaviors that then worsen financial situations, leading to more financial stress.

A recent study from the American Psychological Association (APA) showed that 72 percent of Americans feel stressed about their finances at least some of the time.¹ Other research shows that, even in the midst of the global COVID-19 pandemic, stress related to finances outpaced stress related to physical health.² In fact, financial stress proved to be the leading source of stress for Americans, topping relationships and work.

Financial stress is a common experience for those in the U.S. When this stress reaches unhealthy levels, it can lead to a number of other health issues, including but not limited to:

• Insomnia
• Weight gain (or loss)
• Depression
• Relationship difficulties
• Social withdrawal

The profession of financial therapy was born out of the recognition of the interconnectedness of finances and all aspects of health. Money is one means of addressing well-being—an essential component of physical, mental, emotional, and relational health.

Financial therapists address negative relationships with money with the goal of positively influencing other aspects of health.

People Reach out to Therapists to Manage Financial Stress

Fortunately, when people experience financial stress, most reach out to someone for advice or guidance. Research shows that people are most likely to reach out to the following sources to manage financial stress²:

• Family/friends (47 percent)
• Employer (42 percent)
• Therapist or medical doctor (42 percent)
• Financial advisor (28 percent)

These results show that financial therapists are in a great position to help people improve their health and their relationship with money. People likely see therapists as a trusted confidant for money issues, making them one of the most sought-after types of professionals for guidance on finances.

Financial professionals, on the other hand, are sought out least often for issues related to financial stress. This hesitancy could be due to the painful emotions that money conversations may trigger—emotions that may feel more appropriate to be discussed with relatives or a therapist.

Financial professionals that want to improve people’s well-being through their finances may want to align with a financial therapist.

Financial Professionals and Financial Therapists Working Together

In most instances, therapists are not qualified to give financial planning advice. In the same way, financial professionals are not qualified to provide therapy or counseling services. It’s difficult, or even unethical, for one professional to try and address both the financial and therapeutic needs of an individual.

For truly impactful improvements to an individual’s financial situation, the best financial advice and therapy comes when these two professionals work together.

Financial professionals will have the tools and know-how to gain a deep understanding of someone’s financial situation, as well as all the other personal details that impact these finances. They can then offer holistic financial advice in pursuit of well-being. At the same time, a licensed professional can address the deeper emotional issues, helping prompt positive behavioral change to increase the chances of a financial plan’s success.

Financial professionals have a vested interest in acquainting themselves with the practice of financial therapy and building a referral network of therapists, both to better serve existing clients and to find new ones.

Taking Lessons from Financial Therapy

Financial professionals, in their ever-deepening client relationships, are often put in a position to offer a kind of informal therapy aimed at uncovering and discussing unproductive financial behaviors. Planners that can effectively engage a client’s behaviors can better help them implement financial recommendations and find financial success.

In this way, there’s a lot that financial professionals can learn from the practice of financial therapy, especially in regards to identifying negative relationships with money, creating a trusting and open environment for discussing financial behaviors, and encouraging positive behavioral change.

If you want to dive deeper on this topic, check out our recent eBook “Tapping into the Emotional Side of Planning” and get tips from Dr. Joy Lere, a clinical psychologist and behavioral finance consultant, on how to have the tough money conversations.

Sources:

• 1.“Stress in America 2021: Pandemic Stress One Year On.” American Psychological Association, 2021. March 1. https://www.apa.org/news/press/releases/stress.
• 2.eMoney Financial Wellness Study. December 2020. U.S. Consumers n=2,000.

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