People stressing over money go as far back as money itself. Until recently, this stress was historically attached to recessions or bear markets. Like what we’re experiencing now with rising inflation, increasing interest rates, and the war in Ukraine. Under these circumstances, it’s no surprise people worry about finances. Things have changed. Individuals are now experiencing financial stress despite market circumstances. It’s this change that prompted the introduction of Financial Therapy.
What is Financial Therapy?
Financial therapy, like many other forms of therapy, focuses on emotions and psychology. Financial therapists, instead, focus on finances rather than personal life. Both financial and mental health professionals offer Financial Therapy
This is a somewhat new therapy. The set of standards used by the industry was set by the Financial Therapy Association (FTA) in 2010. Now certifications are obtainable for those looking to get involved in the practice. The FTA offers varying degrees of certification. A provider’s level of education and training determines what level of certification they have. Different certifications correlate with differing degrees of help.
This form of therapy is for those incapable of managing their money. It is also used for couples who fight about money. This form of therapy is also beneficial for more serious matters like gambling addiction.
Many go to a certified financial planner when handling their financial issues. Financial therapy is more about what is getting in the way of you making a budget than how to make it.
Most people believe they deal with money rationality. Financial therapy states relationships with money are instead connected to emotions and psychology.
During the 1970s, psychologists Amos Tversky and Daniel Kahneman identified consistent judgment biases. They state that investors view gains and losses differently, known as prospect theory. They found that investors are more averse to losses than potential gains. Through these findings, they established the foundation of behavioural economics. This foundation is what financial therapy now stands on.
Financial therapy is a unique option that combines financial planning services and mental health treatment. With this combination, people can start processing their underlying feelings about money. By understanding their feelings about money, they can begin planning for the future.
What does a Financial Therapist do?
The function of a financial therapist comes down to your therapist and what you are seeing them for.
Due to the volume of different types of therapists, it could be challenging to know which is right for you. Some have family and marriage money issues. In this case, you should look for a therapist specializing in family and money issues.
It is essential to make a distinction between an advisor and a therapist. Advisors can work in therapy and give better answers regarding retirement and investments. A financial adviser shouldn’t be assisting with mental health issues like depression. Part of the training is to direct clients towards the help they need. The opposite is also true. A therapist should not be providing financial advice, such as where to invest.
It’s worth noting that financial therapy is not yet regulated. Those with the FTA certification uphold their own standards.
First level FTA certified therapists don’t provide psychological therapy. They do, however, have a more informed position on the emotional aspects of money. Only those with training in mental health can receive the higher-tier certification. This applies to social workers, psychologists, or family and marriage therapists.
These therapists teach financial competencies and also help deal with financial stress. They can also help with managing your financial health.
Who can benefit from financial therapy?
Financial therapy is for those who have experienced financial trauma. The stress around personal finances can turn into a form of PTSD if these issues aren’t dealt with. Those with financial trauma can be uncomfortable when talking about money. This can lead to them feeling undeserving of voicing their financial aspirations. This is one of the most common reasons someone seeks a financial therapist.
Trauma isn’t the only reason someone will seek out a financial therapist. Financial therapy’s focus is on the relationship a person has with money. This relationship is often based on things like their upbringing, gender, or religion. A person’s background has a big impact on how they view money.
Even if someone is financially literate, it isn’t always enough. This therapy even helps those who do know how to manage their money. It can help them address factors that prevent them from forming good money habits.
Financial therapy isn’t connected to how much income you make either. Some financial therapy clients are well off but still have persistent stress around money. Though they have their finances in order, there is a disconnect, and the stress persists. Financial therapy can help them learn how to overcome this stress.
Food for thought
The Financial Consumer Agency of Canada released the results of a recent survey they conducted on financial well-being. The results were eye-opening. The survey revealed that almost a quarter (23%) of how financially confident a person feels relates directly to their financial behaviour, not how much money they make.
This makes the field of Financial Therapy all the more important.
Financial Therapists work specifically with people on finding out what’s stopping them from inhabiting good financial behaviours. With that addressed, the results of the survey indicate that people that have struggled can look forward to a financially strong future.
How do you find a Financial Therapist?
The FTA provides a directory that lists financial therapists. Not everyone on the website is a financial therapist. Anyone can list themselves on the FTA website by paying a fee, so doing research is essential. You should look at each therapist’s discipline to find what best suits your situation.
The FTA website offers biographies of therapists so you can get a sense of who they are and the services they offer. After finding the right therapist for your situation, you can try a session with them and see how well you mesh. It is best to take a trial and error approach to find someone who will fit you.
If you have a lot of stress about finances, particularly debt, the team at Consolidated Credit can help. They can help you plan your path to a debt-free life. Get in touch today for your free consultation.