Skip to main content

Spreadsheets and budgeting tools can assist you in improving your financial management skills. However, to gain a whole financial picture, you may need to dig beyond basic figures. How you save money can be influenced by your mental health, too.

Your mental health can influence your financial decisions, especially during difficult times like the current pandemic. It’s perfectly OK if you’re dealing with a bothersome and uncontrollable repeating thought or habit. Simply recognising mental barriers can help to mitigate their impact. Mental health disorders are diverse, but some can have major financial ramifications.

Here are three common scenarios to be aware of, and how to maintain your mental health in relation to your finances accordingly:

1. When excessive spending becomes an addiction

Splurging on occasion can be enjoyable, and we often feel better when we purchase items that we do not require. At some point, you’ll have to strike a balance between your financial goals and your desire for quick gratification. However, research have determined when “retail therapy” becomes harmful.

Making excessive purchases is a symptom of compulsive buying disorder, which is characterised by tension before the purchase and a brief feeling of relief afterwards. This can lead to a further increase in credit card debt.

Here are some ideas to try if you find yourself turning to purchasing to cope with emotional discomfort on a regular basis:

  • Keep things in your online shopping cart or on a wish list for at least 24 hours. Enjoy the initial thrill of suspense if you want, then check back later to see if you still desire those items.
  • Create small barriers to make it more difficult to spend money. Some banks allow you to lock your debit and credit cards, which adds another step to your shopping experience. Consider paying with cash if you’re shopping in person.
  • Make purchasing guidelines for yourself. Set a dollar limit, so that if you buy a T-shirt for less than $10, you don’t have to worry about it. Make it a practise to check your bank balance before purchasing more expensive products.

The underlying thread running across all of these tips is to take your time while making a purchase so that you can be deliberate and self-aware. However, if you require additional assistance, consider obtaining free or pro bono financial planning.

2. When money anxiety leads to being too frugal

Anxiety and fear can help us avoid danger and live, but they can also be harmful if we experience them too frequently. Anxiety can also have a significant impact on your attitude towards money. When you have a lot of money, you’re more likely to be afraid of losing it. This is related to the concept of loss aversion in behavioural economics: losing has a higher impact than obtaining roughly the same amount.

You can have this kind of worry even if you aren’t wealthy. You may be trapped in a cycle of hoarding your savings if you feel obliged to seek out deals or otherwise adhere to a more modest lifestyle than you’d prefer. Try to deal with your money worry in the following ways:

  • Begin by putting together a fresh budget based on the previous two months’ expenses. To know where you’re going, you must first understand where you’ve been.
  • Look into the origins of your thoughts and preconceptions about money. Consider your earliest memories of money and how your family dealt with it, or the lack thereof.
  • Set aside money for self-care in a savings account. If you have problems spending money on yourself, open a new account, such as a high-yield account, and set up monthly payments from your checking account of a fixed amount, such as $25 or $100. This might help you divide your savings into separate categories.

When you’re struggling with money anxiety, praise the part of you that’s helping you avoid overspending, and relax when you have enough money to pay bills, pay off debts, and save.

3. When symptoms of depression lead to less savings

Psychological suffering, such as anxiety and depression, often has a strong impact on whether or not people are able to consistently save toward their finance goals.

Significant mental discomfort or mental health issues can reduce a person’s likelihood of having a retirement account by up to 24% and make them less inclined to take risks with investments over time. As a result of these activities, you may have less money saved up overall.

Consider the following strategies if you’re having problems finding the motivation to care about long-term savings:

  • Accept your mental health and feelings associated realistically. This is easier said than done, and lowering your expectations for yourself or your goals on any given day might be difficult.
  • Break an objective down into smaller chunks. If you don’t have much money saved and want to start saving, a good first step is to check your account balances without allowing fear to take control.
  • Don’t be afraid to ask for help. Seek assistance if you require it. A therapist can offer you with a secure environment in which to work through problems and create techniques for dealing with unhealthy thought patterns and other issues. If needed, a therapist who is also a psychiatrist can prescribe medication for severe depression.

Navigating finances during this time can be difficult if you’re feeling thrown off by the pandemic, unemployment, or other major life events. Meditating, exercising frequently, and getting enough sleep are all good methods to start working on self-care — the general view is that you should sleep at least seven hours a day to feel refreshed, and this can help to reduce stress and allow you to feel more physically balanced.

Consult a therapist or financial planner if serious concerns occur or continue – and if need be, you can also consider a financial therapist. Financial therapy is a newer and smaller area that integrates financial and mental health. A financial therapist is at ease discussing money, emotions, and the relationship between the two. It’s an aim to get to the emotional root of your money habits.

Whatever you choose to do, keep in mind that it’s fine if you’re not perfect all of the time. Because so many of us are putting our mindset into survival mode right now, it’s crucial to focus on creating balance, finding support and staying mindful of our mental health.

Reach out to a mental health professional for support if you or someone you know are experiencing these issues. Visit Lifeline Australia to speak to a professional or for more information.


Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.