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Struggling with financial management? Begin by looking at your mental health

MHAI

Woman with hand to her forehead looking with concern at her bills and cash

Like it or not, money plays a significant role in our lives and our mental health. And this can work from both sides. Not having access to enough financial resources can lead to increased household tension, arguments, and depression. 


Americans who live in poverty claim to feel worry and anxiety at higher rates than average. Not only do 19.4% report regular anxiety, but there is a correlation between lack of finances and an increased risk for chronic disease.


On the other side of the coin, if an individual is already suffering from mental health issues, this can affect our ability to effectively manage our money. Even individuals who are, by common metrics, well off may struggle to control their finances the more their mental health declines. 


This opens up the possibility for individuals to fall into a vicious cycle of inadequate finances leading to depression, which leads to poor financial decisions. Take for example the issue of gambling addiction. Individuals who engage in compulsive gambling are almost certainly going to exhibit some kind of mental health tendencies, whether substance misuse problems, personality disorders, depression or anxiety. This kind of gambling may also be associated with bipolar disorder, obsessive-compulsive disorder (OCD) or attention-deficit/hyperactivity disorder (ADHD).

Dealing with financial management issues

Issues with mental health and financial management is one of the more difficult problems to deal with. For drugs, alcohol, or other substance abuses, there is the possibility of reaching full abstinence. But we need money to live – we simply can’t do without it. In this way, it’s a lot like eating disorders


So, instead we need to look for ways to better manage our money.  This means developing a plan to help you regain control, while also seeking outside support. Here are a few strategies to get you started. 

Let’s look at the financial side

Focusing solely on practical financial advice may not alleviate deeper issues entirely. That said, it can certainly help, particularly if you feel your mental health problems stem almost entirely from poor financial habits. 


This is useful for everyone, but can be particularly valuable for younger people who are just starting out and haven’t established a financial plan yet.

The power of good habits

Good habits are the building blocks of change. Getting started is always challenging, but once you have a plan in place it can help you to avoid falling into traps when you feel vulnerable. 

Begin tracking your spending

Before we can make a change, we need to know what we’re working with. The simple act of keeping track of your spending can help you identify problem areas. Nowaday, with online banking and mobile banking apps, it is much easier to do this. Many banks automatically categorize your purchases, allowing you to see where you are spending too much. 

Create a budget

Budgets provide structure, allowing us to understand exactly where our money should go. If you struggle with spreadsheets or more “traditional” tools, remember that there are many different options available nowadays.


For the most simple method, simply open an account for ongoing purchases and transfer your monthly amount to that account from your “main” one. This can help you to keep track of your budget and to adjust your spending when you see your balance getting low. 

Look at your emotions

The way we spend is tied to our emotions. Do you spend when you’re happy? Is it a way to cure your anxiety or give you a lift after a hard day? Knowing when you are more likely to overspend can help you plan for these eventualities and regain control. 


How do I begin with a budget? 

Creating a budget doesn’t have to be a huge challenge. If it gives you anxiety, begin with the easiest method possible that works for you and stick to it. Over time, you can adjust as necessary. That said, we do recommend using a tool if possible as it gives you greater oversight. 

Step 1: Define your essential expenses

Every month, we have expenses that we simply can’t avoid. These are generally rent or mortgage, food expenses, utilities, and transportation. It should also include paying off any debt you have, which should be done before you take any more out. This is the first number you need to establish – and try to be as accurate as possible. 


Once you have the amount, try physically moving it to a separate account or space on your app as this will help you gauge how accurate the number is during the month. Alternatively, you can use a tool to record your spending. 

Step 2: Begin saving!

It doesn’t matter if you start with 50 dollars a month, if you don’t save – begin now! Ideally you would save more a month, but the act of saving anything is a positive habit in itself.


You should treat this as the second most important part of your budget as it should be as much of a non-negotiable as your essential expenses. A mistake many people make is treating savings as whatever they have left after the end of the month. This is a good way to accidentally spend everything you have. 

Step 3: Work out other expenses

This will change from person to person, but one approach is to look at recurring expenses that aren’t necessarily every month, and to set aside a little for each. Will the kids need new clothes in a few months? Begin putting money into that kitty every month. Even if you have to spend more out of pocket, the money saved will act as a discount. This works for any recurring expense – your own clothes, car expenses (services, etc.), household bits and bobs. You can also use this tactic to alleviate financial strain during the holidays, provided you begin setting money aside now!


Once you have all these expenses figured out, anything left over can be considered “fun money”. We all have different financial realities, but if possible, try to factor in discretionary spending as it is important to treat ourselves, as long as we do it wisely. Set yourself a weekly amount, and if you don’t spend it one week, allow it to roll over to the next. 

Don’t neglect your mental health

Improving your financial handling skills will go far in alleviating feelings of anxiety and depression, but don’t be surprised if this doesn’t cure everything.


Even the most sensible and simple advice can be difficult to follow if you aren’t feeling right mentally. Don’t worry and don’t feel like a failure – but do make sure you get help! 


By taking active steps to address your mental health, you will be able to do a lot to regain control of your financial health. At Mental Health America, there are resources available to help you manage your money. 


If you feel like you’re struggling, please contact us directly at MHAI and we will put you in touch with the right person to help.


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