Emotional health and financial wellness are two topics that we don’t talk about enough, and even less often speak of together. But emotional health and financial wellness should be spoken of regularly, and they have a relationship. Difficulties with emotional health can lead to difficulties with financial wellness.
Emotional health is not a prerequisite for financial wellness or financial success — there are many very wealthy people who appear to lack emotional comportment. But problems with emotional health can create roadblocks to financial wellness.
Emotional health is a component of the much broader arena of mental health. Emotional health is the ability to control or deal with our thoughts and feelings.
In some cases, there are specific diagnoses associated with emotional health problems. These include ADD/ADHD, addiction, anxiety, and depression. In many cases, there is not a specific diagnosis; some of us face challenges dealing with thoughts and emotional issues, without necessarily having a diagnosable condition.
Financial wellness requires the ability to objectively deal with financial problems in the present and to make decisions favoring long-term finances over immediate gratification.
Some people may not know they have emotional health issues. Not being aware that you have a problem makes it unlikely that you will deal with it appropriately. In the context of financial wellness, there are three areas that stand out as potential problems.
Emotionally healthy people are resilient. They are able to look at problems with a high degree of objectivity and make decisions based on the facts of the situation. They are able to be intentional with their money, which is the foundation for financial wellness — acting with intent regarding your finances.
Those who suffer emotional health issues are less likely to act intentionally with their money; they are more likely to react based on their thoughts and feelings. This is less likely to result in a sound financial decision.
Safety and Security
Safety and security are important in building a solid financial foundation, but can be a problem when taken to extremes. Rationally, there’s a balance, a middle ground where some risk is appropriate, but not too much. It is those tails — too little risk, and too much risk — where the difficulties lie.
Inability to deal with emotional issues can push people into one of those two extremes.
Some people have an unreasonable amount of fear of losing their money or facing some one-in-a-million financial calamity. They may be unwilling to take a reasonable amount of risk that would be appropriate for their financial situation.
Most people need some degree of investment risk so their investments can outpace inflation in the long run — the only way to increase your dollar’s future purchasing power. An excess need for safety and security, driven by unrealistic fears or concerns, can preclude someone from becoming financially well.
Likewise, a lack of concern for risk can doom a person’s financial future. Some people fail to access risk and instead make speculative investment after speculative investment, never accumulating any significant resources.
Appearance and Significance
Many people are worried about what other people think of them. Some people make financial decisions based on how they think they will appear to others, and this can be detrimental to their financial health.
It always seems interesting to me; someone thinks that if they buy a very expensive luxury car others will look up to them — yet they don’t look up to others with the same car. It’s really not a rational thing at all.
Appearance and significance in this case refer to fundamentally the same thing; using our financial resources to make us look like something we are not — which is to say trying to have an appearance of significance.
This is not an emotionally healthy action; it is based in insecurity — that we need to appear to be something more than we think we are. And it doesn’t work, so it has no end. Buying a house that you can’t afford doesn’t eliminate the insecurity, so next you buy a truck you can’t afford, and so on.
The end result is being debt ridden or even facing bankruptcy.
Steps to Take
There are many options for dealing with emotional health issues. There is professional help, including doctors, counselors, and therapists. There is nothing wrong with taking advantage of this assistance; seeking help has made many people’s lives better and will undoubtedly continue to improve the lives of countless others.
It’s not having the thoughts or feelings that’s the problem; it’s not being able to manage them in perspective of life’s larger picture. We all have things that we may have trouble working through. Help is out there for a reason.
In addition to those who can help with emotional issues, there are financial professionals who can help with money management.
Systematizing your finances, having savings for future goals made automatically and into appropriate investments can alleviate quite a bit of pressure. Financial professionals typically help systematize finances, as well as help making appropriate investment decisions.
A simple pause can do a lot. Emotion-based decisions may not look so attractive after a day or two to cool off. Putting a space in front of a decision by waiting a day or two can improve decision-making by softening the emotional response.
Many expensive things people “have” to have don’t seem so important after a day or two to think about it.
That’s one reason car salespeople (and other salespeople) often don’t want you to take a day or two to think about it — you’re less likely to make a decision based on emotion — which also means you are less likely to overspend.
A lot of marketing is geared toward getting you to take immediate action. They know you might not do it if you take the time to think it through.
The Bottom Line
Emotional health and mental health need to be destigmatized, as do financial problems. No one causes problems for themselves intentionally. The world, both the financial world and the emotional world, have become very complex.
Sometimes we need a little perspective from outside ourselves. It is better to ask for help and find out you didn’t need to have it than it is to need help and not get it because you didn’t ask.
Emotionally healthy people tend to be honest, positive, balanced, connected, hopeful, and intentional — all admirable characteristics. Being emotionally healthy is not a guarantor of financial health, but lack of emotional health is commonly an impediment to financial wellness.
Many of us would make better financial decisions if we simply took more time. Money and emotions are inextricably linked; we can’t separate them — we need to deal with them as a package.
Important financial decisions rarely require immediate action; more often we would make far better decisions if we took the time to think through the pros and the cons of possible outcomes to a decision. If we did, we would act in a more emotionally healthy fashion and get a better financial outcome — and that’s a double win.