What is Financial Therapy?

Despite finances ranking among the top stressors in the lives of Americans, many people have poor financial literacy, do not know where to turn for help, and have difficulty making changes to their financial habits. Often people are not saving any of their income, overspending on unnecessary items, fighting with a spouse about budgeting, or are unwilling to even look at their financial statements. Money is definitely on their mind, but they can’t seem to approach the topic to make any positive changes.

Professional Solutions?

Even if someone reaches out for help from a professional, they may feel their needs are not being fully met. This absence of holistic guidance stems from financial professionals often lacking the knowledge of how emotions and beliefs drive unhelpful money habits and psychotherapists avoiding the topic of money entirely.

A Crisis and the Psychology of Money
The seeds for a proposed solution to this gap were sown in the wake of the 2008 financial crisis when financial professionals were experiencing clients understandably upset over their losses and having difficulty trusting financial advice. Meanwhile, therapists noticed that all many clients wanted to discuss was their finances. Eventually, a solution was proposed: Financial therapy.

A financial therapist is a person who has competency in the domains of finance and psychotherapy so they can address the broader context of financial issues. With these dual competencies, financial therapists provide a unique approach to resolving money problems.

The Limits of Knowledge

Most people are well aware that knowledge of facts and direction from a professional are often not enough to change behavior over the long term. If facts were all that were required, people could quit smoking after reading a pamphlet from the health department and switch to a healthy diet by listening to a podcast about the dangers of processed foods.

Similarly, people’s behaviors related to money are informed by unconscious lessons learned in childhood, conflicting emotions, deeply held beliefs about money, and societal pressures to spend. Financial therapy aims to help a person better understand what they believe about money, why they have certain financial habits, and to help them increase their motivation to make changes that are in line with what is important to them. Financial therapy is often shorter-term and more goal-oriented than standard psychotherapy and can address a range of issues including financial anxiety and stress, conflict about money with a loved one, issues with inheritance, over or underspending, excessive gambling, and avoiding financial decisions. Further, it can be useful for younger people who want to understand fundamental financial knowledge and their approach to money before they begin to make important financial decisions

Financial therapy can be an effective way to change unhelpful financial habits that have caused distress and created problems in multiple life domains. If you have struggled to make positive changes in your financial life, consider taking a new path with a trained expert.