Why it’s time to foster better financial habits to improve our mental health

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Like many, recently I’m finding my mood is very up and down. And it’s more difficult to stay positive.

With Mental Health Awareness Week this week, it got me thinking about how the situation we’re all in is manifesting itself - in how we think and feel and how this can impact our mental health, and our financial wellbeing.

*Financial and mental wellbeing are inseparable*

The effects of the current health crisis are set to last for the next year at least, especially on people’s mental and financial health.

We’ve already seen a rise in the use of food banks[1] and applications for universal credit[2]. Research from the great recession showed how mental and financial health are intertwined[3], so acknowledging this as soon as possible is a great way to try and mitigate the negative outcomes. If we know what the problem is, we can take steps to solve it.

The Government has moved to help people in financial difficulty with initiatives such as the furlough scheme and universal credit. However, anxiety and stress are still prevalent and may cause further issues[4]. Research has also shown that pandemics can cause long term psychological problems[5] (outside of the obvious disruption) so it’s necessary to be cognisant of these when designing plans to help people through the current chaos; short term fixes may not help.

What’s notable is mental health gets worse when familial income becomes unstable[6]. Poor financial wellbeing can cause worse overall mental wellbeing[7]. This then has the potential to become a vicious circle.

What can we do about this and is there any way to prevent future pain?

*Trauma into growth*

Out of these events, there are positives and we must focus on these if we are to pull through.

Lots of people understand and know of Post-traumatic stress disorder (PTSD) but on the opposite end of the spectrum to PTSD, there is also Post-traumatic growth (PTG)[8]. PTG is very much a sense that “what doesn’t kill us makes us stronger”. Disasters, bereavement, and infections can all have positive outcomes, which researchers break into three defined areas: changes in self-perception, changes in interpersonal relationships, and changes to life philosophies[9].

In this vein, could we start to think about how we can enhance PTG?

One academic believes it’s something that’s possible if we “allow people to understand that this could be a possibility for themselves”[10]. Make them aware of the opportunity and people will be able to take it.

This period may also present an opportunity for people to “reset” their financial position.

It is possible to spend the lockdown doing unproductive activities – working more, spending more time on social media, or watching Netflix – but individuals could try and grow from this situation.

The upheaval is the perfect time to prepare for the future and set good foundations because of the seismic change that we are experiencing. The economic fallout is going to be felt long term, so decisions now may be magnified in the future.

*Fostering better financial habits for a brighter future*

We hear talk of minimising the economic damage through Government policy, but have you ever thought about minimising your economic damage through household financial policy?

Ultimately, Post-traumatic growth can directly improve your financial wellbeing.

Changes in self-perception can be fostered now because we’re in a period where poor financial decisions are more obvious and salient; acting now can prevent poor financial wellbeing in the future.

For example, when it comes to family finances; laying everything out is a good way to get a grip on your spending[11]. It’s also a good way to lighten the load of financial pressures and encourage family members to help and understand their own money. The way we think about the world is changing - creative thinking is important in getting over trauma[12]. So it’s a good time to think about budgets and savings.

Already, commuting, office working and air travel have been shaken up. This creates the possibility for people to change their whole relationship with money and to help people better understand what they need money for.

Fostering better financial habits will not only alleviate anxiety now, but also create a brighter future. As mentioned above, financial wellbeing and mental health are intrinsically linked. Getting on top of your financial wellbeing - something within your own control - can help you deal mentally with the things you can’t control.

Personally, I’m going to spend the weekend sorting out my bank account. Being defrauded by someone in Milton Keynes buying Dominos this week has lit the fire under me to sort out the things I can: consolidate my pensions, check out savings accounts, and generally try and get my finances in order.

Let’s use this opportunity to take control!

 

 

 

[1] (Lawrence, 2020)

[2] (Booth & Rawlinson, 2020)

[3] (Wilkinson, 2016)

[4] (Corden & Hirst, 2013)

[5] (Eisma, Lenferink, Chow, Chan, & Li, 2019)

[6] (Cao, et al., 2020)

[7] (Netemeyer, Warmath, Fernandes, & Lynch Jr, 2018)

[8] (Calhoun & Tedeschi, 1995)

[9] (Tedeschi & Calhoun, 1996)

[10] (Collier, 2016)

[11] (Oleynick, et al., 2017)

[12] (Kaufman, 2020)