How a Financial Therapist Can Help Change Your Money Mindset

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    Investing your money can be an emotional matter. On the one hand, you might look forward to creating financial stability and building wealth. On the other hand, you may feel some fear and anxiety. The latter can have long-term effects, according to a study by the Financial Industry Regulatory Authority from 2021. The study «Financial Anxiety and Stress Among US Households» found that people suffering from long-term financial anxiety and stress are less likely to plan for retirement.

    For those fearful of investing, the New Year could be a good time to find out what drives those fears. Financial therapy can help here.

    What is financial therapy?

    Financial therapy combines behavior therapy and financial coaching to improve your thoughts, feelings, and behaviors around money.

    Celia Hughes, a certified financial therapist based in Los Angeles, says financial therapy combines the two disciplines.

    «There’s this real gap between emotional health and financial health and money,» she says.

    If you’ve never heard of financial therapy, it could be because it’s a relatively new discipline. The Financial Therapy Association was founded in 2010, so it’s almost a decade old.

    What is a Financial Therapist?

    A certified financial therapist is someone who has completed all three levels of certification from the Financial Therapy Association. It’s a certification that both financial and mental health professionals can seek.

    Financial therapists can help investors understand their worries and fears about money and guide them to this lightbulb moment.

    The difference between a financial therapist and one Financial advisor is that a financial therapist will explore the feelings and beliefs behind your financial habits, while financial advisors will focus on helping you achieve your financial goals.

    For example, if you’ve saved $ 50,000 in cash and the fear of going broke is preventing you from investing some of that money in the stock market, you could speak to a financial therapist. However, if you have $ 50,000 and want to know the best investment strategies, a financial advisor is probably better suited.

    It is important to note that not everyone who calls themselves a financial therapist is a certified financial therapist. Some behavior therapists are financially focused and have no financial qualifications. Likewise, says Hughes, some finance professionals are not recognized therapists, but they do help you explore the emotions behind money.

    Financial therapists can help you with that

    Financial therapists can help with any negative feelings and limiting beliefs you may have about your finances. For example, you might be afraid to begin your investment journey. Or even though you are a high earner, you may not be investing much because you do not believe that you will be lucky enough to generate positive returns.

    If you’re curious about what working with a financial therapist might be like, Aja Evans, a licensed mental health consultant and financial therapist based in New York City, explains her approach to clients struggling to fuel their investment journey.

    “We’d dig a little and see if we could get to the bottom of the cause of this fear. Is it a lack of belief in your own worth and that you are worthy of having a financially stable future? Is it fear of the unknown? Or do you not understand how investing works and are afraid of spending your money on something that you do not understand? So we tried to do some of that root work and then work on setting small goals, ”she says.

    How to Choose a Financial Therapist

    Hiring a financial therapist can be a big decision, so you’ll want to choose the right one. You should be looking for some of the same things that you would do if you were looking for a behavior therapist. That means finding someone who specializes in your problem area and who you are comfortable with.

    If you think a financial therapist is right for you and you’re ready to get started, you can do that Association for financial therapy to find one.

    Strategies To Overcome Your Money Fears

    Limiting beliefs can delay your investment journey and prevent you from meeting your financial goals, said the therapists we spoke to. In some cases, anxiety can also prevent you from enjoying the fruits of your labor. How do you get on despite your fears? Here are a few tips the therapists shared with us.

    1. Identify your limiting beliefs and emotions

    Some people, including those who grew up in marginalized communities, have money stories that they tell themselves that were developed in their childhood. These stories can either help you achieve your goals or hold you back, say the financial therapists.

    Perhaps you grew up watching your parents try to make ends meet and now you think that money is tight and should not be spent. You may be afraid to invest because no one is in your family’s property. Or maybe you are investing but are afraid of losing money so always play it safe. According to the Wells Fargo / Gallup Investor and Retirement Optimism Index, black investors feel less comfortable than white investors when they take on high risk. They are also more likely to give financial aid to their relatives.

    Evans encourages people to ask themselves tough questions about their belief in money.

    “Feel your emotions, identify them, and then make a plan with your money and then you can move forward,” she says.

    2. Imagine retirement

    Retirement planning may seem subordinate to some investors, especially if retirement is decades away. Recurring expenses may be a priority or you may want to use your money to live in the moment.

    Hughes says that sometimes people struggle to start investing because they can’t focus on the future.

    «Some reasons are a lack of education and understanding of how compound interest works and why it’s so important to invest when you are young,» she says.

    To change your thoughts and beliefs about retirement investing, Hughes recommends thinking about someone you know of retirement age and how they currently live. This can help create a connection to the future so you can imagine what you want and then put together a plan.

    3. Start small

    Small steps can be useful in trying to change your financial habits. This might look like researching anything that makes you feel uncomfortable.

    “Take the time to say, ‘Hey, where can I get information to understand what a Roth IRA is? Or a 401 (k)? ‘ Then decide what your goals are so that you can move forward in ways that feel good, ”says Evans.

    4. Consider passive investing

    Invest passively is a way to relieve yourself, especially if you have difficulty understanding the sometimes complex financial world. It’s a handy form of investment for those who don’t want to learn the more complicated things or who don’t want to make higher risk investments. Examples of passive investing are the use of robo-advisors or investment vehicles such as ETFs, index funds or mutual funds.

    «You don’t have to be a financial professional, just let compound interest do its job,» says Hughes. «Even if you put a small amount of money into a mutual fund, when you start to see it grow, that feeling can be very stimulating and it can enable someone to move on a financial plan.»

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