Money and Mental Health: The Complex Relationship Between Money and Mood

Published By Justin Baksh, LMHC, MCAP
March 8, 2024


Money: a word synonymous with ambition, security, and even happiness. Yet, its influence on our emotional wellbeing extends far beyond these simplistic associations. The reality is, our financial lives are not isolated compartments; they deeply intertwine with our physical and psychological wellbeing. This connection is a two-way street: Our mental health often influences financial decisions and, in turn, financial struggles can impact our mental state.

This is a problem for all of us, because, on any given day, 36 percent – over one in three – workers in the United States is experiencing anxiety or depression symptoms, according to the Bureau of Labor Statistics.

How Mental Health Affects Your Money

“If you aren’t taking care of your mental health, many areas of your life start to decline – including your finances. It doesn’t matter how much money you are making, eventually, these bad habits can catch up with your bank account.”

-Paula Thielen, Forbes Councils Member, Financial Well-Being and Mental Health,

Overall, people with mental health issues tend to earn less than those who do not. In addition, the decisions we make about our money can be heavily influenced by our mental health.

Characterized by impulsivity and grandiosity, the manic episodes of bipolar disorder can trigger rash financial investments or excessive spending. Impulse buying can also be a hallmark of ADHD, borderline personality disorder, and schizophrenia. Those with borderline personality disorder can also struggle with comparing options and planning ahead.

Anxiety disorders can also cloud judgment, prompting individuals to avoid necessary financial tasks or to make fear-based decisions… or even to open incoming bills.

The financial impact of having a mental illness can be wide-ranging and spiral in effect. Let’s look at depression as an example of this in motion. Individuals battling depression may experience reduced productivity – a 35 percent drop, according to one study – which can lead to many issues, including the following:

The Effect of Depression Your Finances

  • Job performance decline: Depression can hinder motivation and focus, impacting work performance and potentially leading to job loss or reduced income.
  • Inability to manage daily tasks: Difficulty concentrating and maintaining routines can lead to neglecting financial tasks like budgeting, tracking expenses, or seeking financial assistance.
  • Loss of motivation to seek new opportunities: Feeling hopeless and helpless can lead to neglecting career advancement or exploring avenues to improve financial standing.
  • Impulsive Spending: They call it “retail therapy” for a reason. To temporarily alleviate negative emotions, people struggling with depression may impulsively purchase things they can’t afford, leading to debt and regret.
  • Seeking distraction: Feeling numb or apathetic, people with depression might use spending as a form of distraction, disregarding consequences.
  • Loss of self-control: The impaired decision-making associated with depression can lead to poor spending choices even without the specific intent of retail therapy.
  • Ignoring bills: The overwhelming burden of managing finances can lead to procrastination and avoidance, accumulating late fees and penalties.
  • Trouble paying off debt: When you have depression, it can be hard to take action to get yourself out of debt – compared to those without depression, those with it are over 400 times more likely to still be in debt at 18 months
  • Denying the severity of the situation: The distorted thinking patterns accompanying depression might downplay the seriousness of financial issues, delaying essential actions.
  • Fear of dealing with creditors: The shame and guilt associated with debt can lead to avoiding communication with creditors, worsening the situation.

Maintaining orderly finances is just one more reason to take care of your mental health. Seek help from mental health professionals, get a proper diagnosis if appropriate, and stay on your treatment plan. Therapy can do a lot to improve your mental health, as well as your financial situation. Leads to better decision making, more productivity, and as studies show, boosts your income… in addition to making you 32 times happier.

Financial Stress and Mental Health

“Living under the cloud of money problems can leave anyone feeling down, hopeless, and struggling to concentrate or make decisions. According to a study at the University of Nottingham in the UK, people who struggle with debt are more than twice as likely to suffer from depression.”

While having an mental health issue can affect your finances, have financial difficulties can significantly impact mental health. Financial stress, a chronic worry about meeting basic needs, can trigger a cascade of negative emotions, including anxiety, depression, and feelings of isolation.

Studies have shown a positive correlation between financial strain and increased cortisol levels, a stress hormone linked to anxiety and depression. Further research indicates that individuals facing financial hardship are more likely to experience social isolation, further exacerbating their mental health struggles.

The constant burden of financial worry can wear down coping mechanisms and contribute to a sense of hopelessness, potentially triggering unhealthy behaviors as a means of escaping the stress.

The most concerning effect of financial distress is the increased risk of suicide. Financial stress increases the risk of suicide up to 20 times more than those who are not experiencing it. The risk is greatest for those who have experienced past homelessness, unemployment, low income. and indebtedness. If you are someone you love is experiencing suicidal thoughts, seek professional help immediately. 988 is a 24-hour crisis line for talking or texting, and there are local resources as well.

Physical Consequences of Financial Stress… that Further Impact Mental Health

Financial stress isn’t just a mental burden; it can also wreak havoc on our physical health. The ripple effects of financial worry can disrupt sleep, contribute to chronic health conditions, and trigger the body’s stress response, with significant long-term implications. All of this can also worsen our mental health.


Sleep Disturbances

One of the first things impacted by financial stress is often sleep. The constant worry and rumination over money troubles can seriously disrupt sleep. This can lead to sleep disturbances like insomnia. Research indicates a strong association between financial stress and poor sleep quality, with individuals in debt reporting significantly more sleep problems.

Sleep deprivation, however, isn’t just a personal inconvenience; it carries significant health risks, both physical and mental. Ongoing sleep disruptions have been linked to a higher risk of several chronic conditions including heart disease, obesity, and type 2 diabetes. In the mental realm, a lack of sleep can lead to risk-taking behavior, depression, and even suicide.


The Biological Stress Response

When faced with financial problems, our bodies go into “fight-or-flight” mode, causing the release of stress hormones, mainly cortisol and adrenaline. While this acute response is designed to help us deal with immediate threats, chronic stress keeps this system in overdrive, leading to numerous negative consequences, including a weakened immune system, increased inflammation, and elevated blood pressure.

Here’s the catch: The less sleep we get due to financial stress, the more stressed we become.

When we are over-stressed, or stress becomes chronic, we are at greater risk for mental health issues as well. These issues include substance use disorders, anxiety, and depression.

“When stress becomes overwhelming our prolonged, the risks for mental health problems and medical problems increase. Long-term stress increases the risk of mental health problems such as anxiety and depression, substance use problems, sleep problems, pain and bodily complaints such as muscle tension.”

Nutrition and Mental Health: The Impact of Diet on Mood

It’s well-established that what we eat influences how we feel. Economic factors impact our dietary choices, with many people facing challenges in maintaining a healthy diet. This, in turn, effects mental health.

The food we eat alters our brain chemistry, impacting mood, cognitive function, and even energy levels. Research highlights the positive effects of consuming fruits, vegetables, and whole grains on mood and energy, while other studies by demonstrate how processed foods high in sugar and unhealthy fats can contribute to depressive symptoms.

This link isn’t just theoretical; it’s rooted in the influence of nutrients on neurotransmitters like serotonin and dopamine, crucial for regulating mood and motivation. A diet high in vitamins and minerals can help stabilize these neurotransmitters, promoting positive mental wellbeing.

Those trying to maintain a healthy diet can also face real-world obstacles, however. Socioeconomic factors can play a significant role, with research highlighting the correlation between lower income and limited access to nutritious food. The prevalence of “food deserts,” communities lacking access to fresh produce and grocery stores, further exacerbates this issue.

Finally, being stressed affects how you eat – causing you to either too much or too little, according to the American Dietetic Association. Overeating can lead to weight gain and diabetes, while undereating can leave you feeling depleted. We also tend to make less nutritious food choices when we are depressed or under stress. So we may reach for the Cheetos instead of making a salad. And, that, in a vicious circle of events, can make you feel even worse.

Cultivating Financial Wellbeing and Mental Health

“Financial therapy is another type of counseling that can aid people in understanding their thoughts an beliefs around money, especially when they’re feeling stuck. ‘The question becomes: ‘What’s going on internally? What unfinished business from the past needs to be finished?’ Rick Kahler [co-founder of the Financial Therapy Association] said.

For example, one of his clients insisted on spending all of the money that came into his checking account. During financial therapy, he realized that he developed this behavior because he didn’t trust that his money would be safe if he set it aside. This stemmed, in part, from his childhood, when his parents had taken all of the money out of his savings account after having lost their own money during a bankruptcy. “

-Christina Caron, ‘I’m Always Worrying’: The Emotional Toll of Financial Stress,” The New York Times

The connection between money and mental health is clearly complex. However, there are practical strategies people can adopt to strengthen their financial foundations and safeguard their mental health.

5 Steps to Financial Wellness

  • Building Supportive Networks: Surrounding oneself with supportive individuals who offer encouragement and guidance can improve emotional well-being and provide accountability for financial goals.
  • Financial Education: Building financial literacy equips us to make informed choices, manage funds, and plan for the future. Resources like workshops, online courses, and budgeting apps can help people take control of their finances.
  • Debt Management: Developing a structured plan to tackle debt can alleviate stress and anxiety. Exploring options like debt consolidation, negotiating lower interest rates, or seeking credit counseling can provide practical support and a sense of progress.
  • Mindful Spending: Reflecting on values and needs before making purchases can curb impulsive spending and promote conscious financial choices. Techniques like creating spending plans and tracking expenses can enhance awareness and control.
  • Prioritizing Mental Health: Seeking professional help when mental health issues arise is vital. Therapy can help people learn coping mechanisms to manage stress, build resilience, and develop healthy relationships with money.

Hope and Possibility

While the journey to financial stability and better mental health might seem daunting, it’s filled with opportunities for growth and empowerment. Understanding the deep connections between how we manage our money and how we feel can be the first step toward profound personal development. By embracing financial education, mindful spending, and effective debt management, we can begin to untangle the complex web that links our financial decisions to our emotional wellbeing.

Prioritizing our mental health by seeking support when needed and building a community of encouragement can transform our approach to life’s challenges. This journey is not just about achieving financial freedom, but also about fostering a sense of inner peace and resilience. As we navigate the intricate relationship between money and mood, let’s remember that each step forward, no matter how small, is a step toward a healthier, more fulfilling life.

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