Are Financial Wellness and Mental Health Linked?

You might be wondering what financial planning and mental health have to do with each other?

And you might be right if the picture in your mind of financial planning is successful financial planning, a picture of the house you wanted, an income that maintains your lifestyle and your financial goals being well catered for.

The problem however is that the vast majority don’t plan our finances perfectly, financial planners included. Sometimes, things go wrong and life often throws us curve balls. The effect of these curve balls is what I feel is worth discussing.

So, let’s look at some of the research says: 

The Money and Mental Health policy institute in the UK has conducted significant research into this area and its worth highlighting some of their key findings.  They would maintain that Money and Mental Health are cyclical and intrinsically linked.

Their survey findings are stark too in that they point to financial problem leading to and exacerbating stress, anxiety and loss of confidence as ongoing symptoms.

Closer to home, the ESRI tell us that individuals having financial problems who also have depression are 4 times more likely to still be in financial difficulty 18 months later. Startling reading.

Furthermore, research from the U.S. has identified that Acute Financial Stress is now a recognised disorder with similar symptoms to PTSD. Led by chief science officer Dr J. Galen Buckwater, it is estimated that this condition affects 23% of Americans today.

While it may be obvious to suggest that a difficult financial event can lead to symptoms such as blame, sleepless nights, stress, worry and relationship challenges. Getting a sense of the various degrees of stress is a very personal thing and hard to measure.

At Employee Financial Wellness we regularly encounter employees can be worried sick when they have a small amount of credit card debt that they are struggling to clear. We also frequently see employees who owe millions to banks and vulture funds, with no means of repaying these debts, and they don’t miss a wink of sleep over it!

The level of stress and anxiety caused is entirely individual to each and every one of us. We must start to get a more in depth understanding as to the type of financial events that cause stress and the impact they have on us to help us prepare for these events.

Financial Surprises are what tend to cause stress. So, what type of events are they? Well, here are some examples. And most are very common and occur in most households.

  • Falling behind on mortgage payments
  • Loss of earnings through loss of employment.
  • Inability to pay regular bills.
  • Kids expensive hobbies putting parents under pressure.
  • Ill health resulting in loss of income.
  • Insufficient savings for a life event.
  • Significant debt problems.
  • Gambling or alcohol abuse.

To name but a few!

So, what are the solutions?

Well, the solutions come in two types, one we favour and one we don’t.

  1. Reactive

Given that very few employees have robust financial plans from when they start their careers all the way through their working lives, the vast majority will have some financial mishaps along the way. Quite often we only realise there is a problem when that financial events is upon us. We can take measures to react to those problems, but often reactive solutions are expensive and problematic. Let’s take for example kids college costing significantly more than what was planned for. In a case like this a family will either have to borrow or significantly reduce their monthly spend. Either way the solutions is reactive and often undesirable as it has it has a negative financial effect on the household.

  1.  Preventative 

A far more appropriate and planned solution is to take a preventative approach. Employee Financial Wellness is built on this principal. To prevent financial stress from happening in the first place, future financial events need to be highlighted, recognised, accepted and targeted. These events can be split into short medium- and long-term events and a portion of household income every month assigned to each goal.

This means that as events in an employee’s life approaches, they are prepared for it, have funds set aside for it and the potential associated stress has been eliminated.

In Summary, we now know that Money and Mental Health are inextricable linked. They will be forever.

We feel that to offer a solution, that is preventative, not reactive must be delivered before employees are even aware there is a problem.

This is why we feel that educating employees on how to identify their own future financial events, is crucial to ensuring that they don’t run the risk of encountering a difficult time financially in their own financial future.

Happy healthy and stress-free employees!

Nick  

Nick Lawlor

Managing Director

Nick is a Certified Financial Planner, Qualified Financial Adviser, Specialist Investment Adviser and the Managing Director of New Beginning Financial Services.   Nick leads the Employee Financial Wellness team and is responsible for all elements of the service from tailored programme design to implementation.

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