Managing money presents challenges for many individuals, primarily when little to no education is provided on financial literacy throughout childhood or as an adult. Personal financial management may be even more difficult to champion for those struggling with mental health concerns.
Several obstacles can complicate one’s financial picture, from problems with executive functioning and memory to reliving past experiences of a parent or caregiver and their money woes. Similarly, mental health concerns may also impact total earnings, as the ability to work consistently and at the highest level could be challenging.
When struggles with mental health make it difficult to manage personal financial matters, it can feel like a never-ending cycle. Due to mental health issues, poor financial habits compound feelings of stress, anxiety, and depression. These feelings can lead to debilitating mental health, continuing the cycle.
In order to break that uncomfortable sequence, it is helpful first to understand how mental health impacts money management. Then, it is necessary to know what can be done to improve personal finance over time.
3 Mental Health Obstacles that Impact Money Management
No two people are the same when it comes to their finances. The same is true for those with mental health issues. Not everyone goes through the same challenges, nor does everyone have the same driving force behind mental health concerns.
Many different factors can impact one’s mental health, but understanding some of the common drivers of mental health concerns can help identify potential money issues.
1. Adverse Childhood Experiences and Implications for Financial Stability
Early trauma and adverse experiences in childhood can and often do have lasting impacts on individuals as they grow older.
Childhood Trauma
Trauma, defined as an emotional response to an extreme or terrible event, may immediately affect someone’s state of mind, making it difficult to process the incident or cope with similar incidents in the future.
For example, witnessing or experiencing abuse, losing a loved one, substance abuse by a parent or caregiver, or poverty may be sources of childhood trauma.
When trauma occurs, children often hold onto those feelings of overwhelming emotions. As a result, they may ultimately cope with future stressful events in a negative or unhelpful way. These coping mechanisms could lead to chronic health issues, mental illness, finding and maintaining relationships, and substance abuse challenges.
When it comes to personal finance, experiencing childhood trauma and the unhealthy coping mechanisms that come with it may result in an inability to earn or responsibly manage money over time.
2. Neuro-Diversity Effects on Personal Finance
While childhood trauma is a prevalent factor in mental health concerns as an adult, other mental health conditions could impact one’s relationship with money.
Neurodivergent Individuals
Neurodivergent individuals – those who receive and process information in the brain differently – do not necessarily have a mental health illness or something wrong with how they operate.
Instead, neurodivergent is a broad term that encompasses brain function and certain behavioral characteristics that impact how a person functions. Some common neurodivergent conditions include ADHD and autism, although neurodivergence can manifest in several ways.
With neurodivergent individuals, the traditional methods suggested and used for managing money may be difficult or even unrealistic to abide by.
Because the brain processes and retains information differently than a neurotypical brain, individuals who are neurodivergent may struggle with executive functioning; these are activities that involve memory, planning, organization, and self-control.
Without the proper tools and systems to sustain healthy executive function, personal finance could take a significant hit among neurodivergent individuals.
3. Anxiety, Depression, and Money Management
In addition to neurodivergent conditions and trauma, mental health concerns could revolve around depression or anxiety.
Depression
Depression is defined as a mental condition causing sadness, resulting in individuals feeling less interest in the things they used to care about.
Anxiety
On the other hand, anxiety is characterized by uneasiness and apprehension that manifests as consistent feelings of worry or nervousness.
Both conditions, when left undiagnosed and untreated, could be debilitating.
Money Management
For individuals living with depression or anxiety, poor financial management can be both a symptom and a cause. As a symptom, routine tasks like paying bills and saving could fall by the wayside.
However, when the consequences of those actions come to fruition, depression and anxiety can worsen. This cycle can lead to long-term financial impacts that are hard to dig out from.
Common Issues with Finances Related to Mental Health
While several sources of mental health issues impact an individual’s life, the financial implications are just as varied. However, many financial problems can arise related to mental health. The most prevalent include the following:
- Impulsive spending without considering budget or available funds
- Shopping to improve mood
- Failing to save for the future
- Missing payment due dates or other financial obligations
- Disorganized recordkeeping
- No semblance of processes or systems in place to help manage money
- Running out of funds well before the next payday
- Anxiety around spending or saving money
- Rash decision-making when it comes to investments
- Accruing significant consumer debt
Each of these common obstacles individuals with mental health concerns can face regarding their finances can be exacerbated by feelings of shame or guilt. This perpetuates the cycle of poor money management.
In addition to these challenges, individuals may also struggle with consistently earning an income or find it hard to keep up with treatment due to financial limitations.
Missing work due to mental health symptoms or doctor’s appointments can deepen financial worries or create new or heightened feelings of anxiety and depression that only further the issues.
Overcoming Mental Health and Money Challenges
Some may suggest that overcoming the challenges with money present for those with mental health conditions is as simple as following the basic tenets of financial management.
However, knowing what needs to be done, like creating a financial plan, saving money for a rainy day, and managing debt wisely, is often not enough to improve outcomes. It requires more than recognizing these foundational principles.
In many cases, creating the right systems and processes can make a significant difference in the success achieved in managing money. Here are a few ways to accomplish this daunting task.
a. Get Familiar with Your Cash-Flow Numbers
First, it is necessary to know one’s cash flow –the difference between what is coming in versus what’s going out each month or pay period. Add up the basics, like housing costs and utilities, then estimate the extra expenses like dining out, entertainment, and hobbies.
Looking back at recent bank or credit card statements can help with this task. With these figures added up, subtract expenses from total income to see if cash flow is positive (there are funds leftover) or negative (spending exceeds income).
Positive Cash-Flow
When cash flow is positive, those dollars can be used to create a savings or debt repayment plan. Individuals may also want to build in a buffer for those moments when impulse spending or spending more than anticipated on a specific category occurs.
Negative Cash-Flow
It is crucial to go back to expenses with negative cash flow and see what can be reduced. This may involve establishing hard limits for ancillary spending or extras. It may also involve reduced fixed expenses like housing costs or debt payments.
b. Create – and Stick to – a Budget
Once cash flow is calculated, whether positive or negative, it is necessary to establish a budget.
The 50/30/20 Rule
A good rule of thumb to follow is the 50/30/20 rule. This means spending 50% of income on needs, 30% on wants, and the remaining 20% on saving and investing. If any spending category from the cash flow exercise is above these thresholds, consider what can be done to bring those amounts down from month to month.
Sticking with Your Budget
It is equally important to stick with the established budget once it is laid out. Individuals with mental health issues may need to check in with themselves more often than those without these concerns, particularly given the obstacles they face in managing money.
Set a date each week or each pay period to check in on the numbers. If missteps have occurred, work to get back on track for the next week.
c. Use Technology to Your Advantage
If the thought of calculating cash flow or creating a budget seems overwhelming, several technology tools can help reduce stress around these tasks.
Personal Finance Apps
Personal finance apps and some personal accounting software programs take most if not all the hard work out of the equation, automatically adding up income and expenses.
Some provide budgeting help by categorizing transactions and keeping tabs on spending each day. Others also provide a down-to-the-penny view of what can be spent on extras each month.
Technology tools like personal finance apps and accounting software can also provide necessary reminders on when bills are due, helping individuals manage their payment schedules better.
Also, these platforms can offer related features, like credit monitoring, debt repayment strategies, and recommendations for saving or investing. They can be a lifesaver for those with mental health conditions struggling to maintain a financial management system independently.
d. Automate Everything
One common issue among those with mental health concerns, particularly neurodivergent conditions, revolves around executive function. Organization and memory may be lacking, making it incredibly challenging to keep up with a financial plan or pay bills.
Fortunately, automation can help tremendously for those struggling to keep up. Setting up bills to be paid each month automatically takes away the need to remember when a bill is due or to transfer funds to cover it.
Automation is Mostly Free
Nearly everything, from car loans and rent to student loan payments and credit card bills, can be automated for free directly through the financial institution’s online banking or mobile app, or through a bill pay program with a bank or credit union.
Automating Savings and Investments
Similarly, automation can be used to help with savings and investment goals. For example, creating automatic transfers or direct deposits to an emergency fund or a retirement plan can help ease the burden of sticking with a financial plan over time. Doing so also removes the need to manually set money aside for specific goals, and the worry that may come with that task may diminish.
e. Set Reminders
Individuals with mental health issues may benefit from a reminder system for transactions or other tasks that can’t be automated. For example, setting up calendar reminders on a smartphone or online calendar can do wonders for staying on top of financial matters each month.
Payment and Evaluation Reminders
Reminders may be used for bill payments and due dates, and regular check-ins on cash flow and budgeting tasks. Creating reminders that automatically occur on specific days of the month or week helps remove the need to remember countless important financial dates over time.
f. Get an Accountability Partner
Managing money often takes equal parts understanding what needs to be done and help from outside sources. Technology, reminders, and automation can help to a certain extent, but getting personal help can also be beneficial in staying on the right financial track.
Ask Friends and Family to Help
In some cases, a friend or family member can work as an accountability partner each week or each month. In addition, setting up regular meetings to check in on progress toward financial goals, like saving, debt repayment, or budgeting, can make a significant, positive difference over time.
Find a Trusted Professional
If a friend or family member is unavailable or doesn’t feel like the best choice, other professional help is available. Experts ranging from financial planners to credit counselors can lend a necessary hand in holding individuals accountable for their money goals.
Some professionals offer pro bono work, like a basic financial plan or financial literacy education to those in need. Others charge a fee for their service, but they can offer skilled guidance and additional assistance along the way.
Final Thoughts on Mental Health Issues and Money Management
People living with mental health conditions, from depression and anxiety to ADHD or past trauma, often find money management challenging. Ignoring the issues that arise with personal finance, like overspending, missing due dates, and general guilt around mismanagement can perpetuate a cycle of poor money behaviors.
It is helpful to know what issues are common among those with mental health concerns to overcome these challenges. Then, it takes both grit and perseverance to create the systems and processes necessary to champion the money management game.
Fortunately, individuals living with mental health conditions are not left to overcome their financial obstacles alone. Several tools exist to make the task less overwhelming, from technology tools and budgeting programs to expert help in the form of a counselor or advisor.
Those with mental health conditions can be successful in their financial lives when they recognize what they need to help them achieve their goals.
