Americans have money on their minds—and not in a good way. The 2024 Financial Angst Report by NerdWallet found that 28% of respondents experience financial anxiety and 84% experience financial stress. Unfortunately, anxiety can have long-term effects: The Global Financial Literacy Excellence Center found that people experiencing financial anxiety are also less likely to be planning for retirement to secure their future financially. However, there are ways to confront and unpack your financial anxiety to minimize the stress you experience with regard to money.
Managing money anxiety isn’t always just a matter of making a budget or choosing the right investments. Money is interwoven with our emotions, from happiness to concerns, and these emotions affect the decisions we make.
What’s a financial therapist?
Financial therapists help people navigate their feelings about money. According to the Financial Therapy Association, the field is “a process informed by both therapeutic and financial competencies that helps people think, feel, communicate and behave differently with money to improve overall well-being through evidence-based practices and interventions.”
These certified therapists can approach the field from different perspectives. Some may be certified financial planners or other types of financial professionals, while others may be licensed counselors first. Each becomes a certified financial therapist to inform their practice and add tools they can use to help their clients navigate the complex relationship between money and emotions. As Simi Mandelbaum, founder of Prospr Financial Wellness, says, “I marry spreadsheets with the therapy couch.”
What does a financial therapist do?
Mandelbaum says as a financial therapist she takes a step back from budgeting worksheets to talk to clients about their money personalities—and about how their approach to finances, such as spending or saving, impacts the subconscious ways they make decisions. “Studies show that [decision-making] is 90% emotional and 10% logical,” Mandelbaum says. “We are emotional beings.” She gives the example of walking by a bakery, smelling something delicious and buying it—regardless of any previous commitment to not eat out that week. “When people don’t understand their own money mindset, their thinking is just a numbers game. And very few people… actually stick to logical components… it’s often not a long-term result because it can’t be. We’re not driven by numbers,” she says.
That’s not to say there’s no place for spreadsheets in financial therapy. “Numbers are super important… because the numbers represent what your values are today,” she says. Knowing where her clients spend reveals whether their expenses line up with what’s important to them. With these values in mind, she can help them develop a budget. “It’s all going to help us create a personal cash flow system that works for you, as opposed to a system that’s just a lot of good points and makes sense, but will not work in reality,” she says.
She guides clients through identifying their money personalities and values via a series of thought games that distance them from their particular (and stressful) circumstances. For example, she may ask if when dining out they feel the need to pay for others, have others pay for them or split the check—to help identify whether they feel drawn to care for others, be cared for or be independent with money.
She says departing from what clients have seen and heard about money in their childhood or through adult experiences is difficult. “Creating our own path is not natural. It’s hard,” she says. “If you don’t have a mentor to look toward, you don’t know where you’re headed; you’re grasping at something.” Financial therapy helps people “realize where they’re at and where they want to go to create a better future for themselves,” she says.
Key sources of financial anxiety
Mandelbaum has personally experienced financial stress. Her time as a single mother and breadwinner for five children caused anxiety and taught her about her own money mindset. Her desire to share her real-world lessons inspired her career pivot from the health field into financial wellness. She says she hears three causes of financial anxiety most commonly from clients:
- A shift in income, up or down
- High debt
- A new phase of life, such as getting married, having a baby, or retiring
Confront your changing income
Money equals happiness, right? Not necessarily. More money can also be stressful. A Princeton University study published in 2010 found that, on average, emotional well-being increased as income increased—to a point. At around $75,000 per year, it seemed to plateau. A subsequent 2021 University of Pennsylvania study found that as income grows, happiness continues to grow for some, well beyond the $75,000 threshold. But a more recent study from both teams of researchers identified numerous complexities reinforcing that money just doesn’t buy happiness for everyone. “It’s not just how much money [they have], but how they feel toward that money that’s going to make the difference,” Mandelbaum says.
Drops in income can also lead to anxiety. She walks clients through potential debt solutions to find ones that will cause the least stress for them. Some people feel more comfortable trying to earn more, while others wish to cut back. Money mindset determines the best tactic for that individual.
Learn how to rethink debt
Mandelbaum says managing debt requires looking at the cause: Is it debt someone has carried for a long time, or is it revolving debt from impulse spending? Is it debt from a medical or other type of emergency or a student loan or debt from overspending? Determining these factors affects the approach not only to paying off debt but to keeping it off. “We first want to see the person’s personality, see how they are, see what would be the best approach to handle that debt,” Mandelbaum says.
Manage the stress of combining finances
Mandelbaum’s clients often come to her for help at one particular phase of life—when combining finances with a partner—which can cause conflict and, you guessed it, stress. “I always say there’s no way that my husband can be my head. It’s never gonna happen. If I have that expectation, we will never be happy,” she says. The key to less stressful financial interactions with a partner involves recognizing that each has a separate reality—and often a separate money personality—but that they share goals.
Each of these sources of financial anxiety share a cause: uncertainty. Mandelbaum says uncertainty in any area of life is one of the hardest things humans confront. She helps clients navigate uncertainty by having them identify areas of their life they can control—and those they can’t. “At some point, you realize you think you have more control than you actually do,” she says.
She also coaches clients not to ignore or banish their worries, but to accept the presence of these thoughts while lessening their impact. She even advises talking to the part of themselves that feels anxious. “Once you realize that it’s not you, it’s part of you, but it’s not you, then you can talk to [the] worry… and the judgment zone in your head,” she says. She teaches clients to try to identify if the source of their anxiety is real—or if it just feels that way. “We don’t always have to take those feelings seriously,” she observes.
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