Hands up if you’re feeling stressed about Christmas spending, and worried that it's weeks and weeks until January payday? If so, you're not alone. More than half (51%) of us are making a New Year's resolution to focus on our finances, with the most common goal being to get better at budgeting (52%) with the intention to build up an emergency fund (38%) in second place. However, like all resolutions, it's hard to make good intentions stick – which is why increasing numbers of people are turning to financial therapists for help.
What is financial therapy?
Financial therapy is a specialised field of therapy that can help people change the way they think, feel and communicate about money. It typically combines financial coaching with behavioural therapy, and can be particularly helpful for those who are dealing with money-related anxiety, stress or trauma.
If you're someone who is frequently stressed about money, feels guilty about spending, or buys things to distract yourself from your problems, the experts believe that financial counselling could help you to transform your finances.
Unlike financial advisors, who focus on practical advice related to savings, mortgages, borrowing, pensions and debt, financial therapists can help you to untangle your emotional response to money. They tend to be financial experts with coaching or NLP training, which means they can help you to identify the psychological reasoning behind your money mindset, which is the first step to changing your behaviour.
Why is financial therapy on the rise?
The link between financial worries and mental health has long been recognised, with a poll from the Mental Health Foundation finding that one in ten (10%) people feel hopeless about their financial circumstances, more than one-third (34%) feel anxious, and almost three in ten (29%) have felt stressed about money in the past month.
Financial Coach Simone Gnessen, founder of Wise Monkey Financial Coaching, says: "Many people struggle with the day-to-day management of money. Part of the problem is money is such a taboo subject in society and even in the home. Everyone needs to understand how wrapped up money is with our emotions and behaviours."
As Simone says, polls regularly show that money is a topic dogged by stigma and fear of judgement. Many of us have internalised the belief that financial struggles reflect failure, so we avoid seeking help or voicing our anxieties, which makes it even harder to change our behaviour. This is where financial therapy can help.
How does financial therapy work?
The Financial Therapy Association describes financial therapy as a process that aims to “assist people in transforming their thoughts, emotions, communication, and behaviours related to money.” It does this by:
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Helping a person to understand and modify their behaviour related to money. This may involve exploring underlying beliefs, attitudes, and emotions that drive financial decisions.
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Assisting someone in setting realistic financial goals, taking financial constraints and emotional needs into account.
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Building financial literacy on basic financial principles and skills. This can empower people to make better-informed financial decisions.
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Supporting people through a financial crisis, such as bankruptcy, job loss, or significant debt, and working through these challenging situations.
Can therapy really improve your finances?
Thanks to numerous studies, we can see that therapy works for a range of issues from depression and anxiety to post-traumatic stress. We know that financial therapy can improve people’s finances and make them more mindful of money – provided they’re willing to address the emotional and psychological factors that influence their behaviour. This often means exploring deep-seated beliefs around money, which are often formed in childhood..
That said, financial therapy is costly and is not a substitute for traditional financial planning or advice. So if you’re looking for a specific financial product or service, then it’s best to seek the guidance of a qualified financial advisor.
What other benefits are there to financial therapy?
A study published by the Money Advice Service highlights the power parents possess to shape the money habits of their children, so we shouldn’t underestimate the effect our good (and bad) money habits will have on our children's financial futures.
How we save, spend, shop, react to a financial emergency, or discuss money are the cues that kids pick up – and will lay the foundation for their attitude to money in adulthood. So, if you want your children to have a healthy relationship with their finances, it pays to deal with any personal money-related anxiety sooner rather than later.
What about self-help financial therapy?
If you can't afford the help of a financial therapist, the self-help route can work, too.
Books like Sheconomics by Simone Genessen provide practical tips and solutions to money problems while tackling your emotional relationship with money. Experts like Martin Lewis, founder @moneysavingexp, offer a range of practical and thought-provoking money advice on TikTok, Instagram and over on Money Saving Expert. The government-backed MoneyHelper service offers free, impartial guidance to help people with various money and pension guidance options, and National Debtline is a registered charity, providing free, impartial, expert debt advice to more than 100,000 people each year.
Thanks to open banking, third-party budgeting and savings apps like Plum and MoneyBox can, with your permission, access your data and use it to help you manage your money by showing you patterns. These can help you to see how much you are spending, set up daily and monthly budgets, and show you how to put away extra savings without impacting your normal spending habits.
Finally, money podcasts, like Money Clinic with Claer Barrett can be a great source of accessible information and advice. Every week, Claer talks to a listener about their money queries and consults financial advisors and planners for guidance on a wide range of topics.
In the end, whatever route you choose to improve your relationship with money, there’s no substitute for financial literacy. That’s why we’re asking the government to #makemoneycount by making financial education compulsory in all schools from primary age. This would make a huge difference to young people’s lives, as well as driving social mobility, financial equality and supporting the Levelling Up project.
While financial therapy can help us to improve our relationship with money, financial education is the tool that gives the next generation the ability and confidence to make informed financial decisions. This, in turn, can improve their wellbeing and peace of mind around finances and money – and that really can set them up for life.
