Are Your Finances Impacting Your Mental Health?
With so many of the country’s conversations focused on mental health, it’s important to address something that could be a key factor in contributing to anxiety and/or depression.
According to recent surveys, one-third of Americans say they're more anxious about their personal finances for 2022 than they were in 2021. Another one-third says that they're just as anxious about this year as they were last. That's two-thirds of Americans who feel anxious when they think about money. (Source)
As someone who has been in the financial industry for 23 years, I’ve witnessed a lot of stressful moments with my clients. Here are some of the most common stressors:
Worried about running out of money.
Throughout the years, I’ve had many clients come to me who are seriously concerned about running out of money. These tend to be people who have had the rug pulled out from them at some point – unexpected death, divorce, job loss, etc. Usually, these are the same people who have put themselves into a fantastic financial position. When I see this disconnect, I know it’s time to dig deeper and figure out why they are thinking this way.
They don’t know where they stand financially.
The second stressor I see is people who don’t know where they are financially. We are told to pay down debt, buy a house, keep some cash in the bank and put money in retirement accounts. But how do you know if you have enough for retirement someday? Guidelines are just guidelines. People want/need to know where they personally stand.
Dealing with debt.
The third stressor is debt. There are a couple of ways that people usually get into debt.
- An emergency happens that they weren’t prepared for. This wipes out their cash reserve and then some. These are the people who usually fight their way out the fastest.
- People who have gradually worked themselves into a bad place by not paying attention. These are the people who I am concerned about. Generally, this group doesn’t have one thing that they can point to, and they don’t understand why they keep on ending up where they do. They don’t feel like they are spending out of control.
Here are a few things YOU can do to help.
If you’re dealing with financial stress, it’s time to do some soul searching.
"When money triggers anxiety, it can push us into a subconscious state of chaos where our feeling brain overrides the decision-making process. We still think we are making smart decisions when, in fact, we aren't really in control…. When we control the trigger, we control the anxiety." (Source)
If you are truly concerned about running out of money or wondering where you stand financially, there are some basic calculators you can find on the web to use as a starting point to see where you truly stand.
If you’re in debt, pull out your credit card and bank statements and take a hard look back at the last several months. As a financial advisor, I am careful not to judge the way that others spend money, as their values are different than mine. What I do pay attention to is the total outflow. If you look at your statements and recognize that you are making multiple trips to coffee shops each week, maybe it’s time to limit yourself to two trips a week instead of three. It’s often a huge surprise to people when they see what they’re spending through mindless, small dollar amount charges.
Here's how a financial advisor can help.
A financial advisor can help with the mental burdens in so many ways. For example, with my clients who are concerned about running out of money, we run illustrations to show them whether or not they really do need to be concerned. Sometimes, we put guarantees around portions of their incomes.
For those who don’t know where they stand financially, we work to develop long-term goals and figure out what they will need to support those goals. From there, we look at everything that they’ve already done and figure out what needs to be done to close the gap.
Finally, for those in debt, we do the analysis and look first to small areas that can be changed without feeling overwhelmed. Many people think that refinancing the debt or taking money out of the house is the way to go. I’m actually not a fan of that because I have seen people time and time again not address the issues that led them to debt in the first place. When that happens, they run the credit cards up back to where they were. We need to change long-term habits.
At the end of the day, I think that it is taking action toward what is causing the anxiety that ultimately eliminates the stress. As Walt Disney so famously said “Worry is a waste of the imagination.”