Mental Health and Money Problems: How to Take Care of Both

Poor mental health affects more people than you may think. One out of every two people in the world will develop a mental health disorder in their lifetime, according to a large-scale study co-led by researchers from Harvard Medical School and the University of Queensland.

Financial stress is one of the main factors that harms mental health. According to Bankrate, 47% of U.S. adults say money harms their mental health, “causing anxiety, stress, worrisome thoughts, loss of sleep, depression or other effects.” And 34% of people indicated they have depression due to debt-related stress, according to Forbes Advisor.

“Money is one of the most common causes of poor mental health. Our research has shown more than half of people worry about money at least once a week and 25% have said their mental health has suffered as a result," Tim Perkins, CEO of Nudge Global, tells Kiplinger.

If you’re one of the many people struggling to maintain a healthy relationship between your finances and mental health, here’s what you need to know.

The neuroscience behind mental health and money problems

The stress and depression arising from financial problems can quite literally change your brain and wreck your health. And there's nothing fair about it; if you are poor or from a disadvantaged group, you're even more likely to have mental health problems, according to a study published in the journal Science. But even wealthier people may have these troubles, especially if they or a loved one faces job loss or additional mental or physical health problems. 

Depression is both a cause and consequence of financial difficulties, creating a vicious cycle. Poor mental health due to financial strain can, in turn, lead to poor financial choices — making you feel even more stuck. A study by the Money and Mental Health Policy Institute asked participants if they tend to spend more money when they're depressed, and 93% of them answered yes, as reported by The Ascent.

“Being in this mindset is what the majority of households are experiencing, especially those who identify as minorities and middle-class Americans and are barely making ends meet," Rodney Williams, co-founder of SoLo Funds shares with Kiplinger. “When you’re feeling low or depressed, you may lack the motivation to manage your finances — you can feel helpless and resort to believing that it’s not worth trying. You might also make impulsive financial decisions when you’re experiencing financial strain to escape and experience a brief high.”

He warns individuals to avoid this at all costs, as it’ll only worsen their problems in the long run. 

Financial stress can also wreak havoc on your physical well-being. If you have high levels of financial stress, you’re more likely to experience headaches, high blood pressure, sleep problems, heart arrhythmia and digestion issues. Additionally, Nuvance Health reports that prolonged exposure to stress hormones can cause inflammation and dysfunction in the brain that affect mood and memory and an increased risk of developing serious neurological conditions. Research has even found significant links between socioeconomic status and changes in brain structure.

How to take care of both mental health and finances

Strengthening your mental and financial health can be tricky "since more Americans than ever before are living paycheck to paycheck with little to no savings and are unable to take on an emergency expense," Williams tells Kiplinger. "With that said, there are things that can be done to lower the uneasiness.”

Here are six ways you can make a positive change in both your finances and mental health.

“Education empowers people to take control of their finances, build wealth, and achieve financial security,” says Perkins. For example, the Wounded Warrior Project’s financial education program is designed to help "warriors" (veterans and active duty service members) with individualized budget planning, saving and debt management.

Deborah Olvera, WWP financial education manager, tells Kiplinger that in seven months, one client "had not only completed the financial readiness program but tackled his debt, closed on a house, bought a car, put money in savings and now manages his finances independently" — showing just how valuable financial education can be. 

Once you understand your financial situation, you can begin making a budget and planning ahead. "One of the responses that we often hear from warriors is that having a plan made them feel 100 times better," says Olvera. One place to start is by using an easy-to-follow budgeting method, like the 60/30/10 budgeting method, or opting for a budgeting app to get better control over your finances.

Although there's a stigma around both financial and mental struggles, talking about your situation with your peers can help relieve some of the burden. A solid support system can help you feel less isolated and alone. These people can also assist you in sticking to your savings goals.

"Don’t be afraid to ask for help. You can reach out to a financial counselor, financial therapist, non-profit organization or even a knowledgeable and trusted friend or family member to help you connect to someone and find a financial readiness plan that fits your needs," shares Olvera.

If money problems have negatively impacted your mental health, you could benefit from financial therapy, which aims to tailor the way individuals think about and behave with money. There's a strong connection between human emotions and money, so it's important to build a good relationship with your finances. 

Chasing credit card rewards even though you're in debt? Bad idea. While chasing those rewards feels good in the short term — the section of the brain responsible for pleasure lights up when you use a credit card (drugs like cocaine and amphetamines have the same effect) — it can lead to more debt, which negatively impacts your mental health in the long run. “People with unmet loan payments are more likely to suffer from depression than those without such financial problems," says Perkins. 

Instead, focus on the mood improvements associated with paying off debt. Studies have shown that paying off debt can ease your anxiety, help you perform significantly better on cognitive tests and improve your decision-making.

Check your benefits package to see if you have access to an employee assistance program (EAP). These free, confidential services provide mental health counseling and financial coaching access. EAPs may also direct you to professionals who can help find other services to lighten your load, like caregiving for a family member or a lawyer if you are filing for a divorce.

Depression, anxiety and financial problems may be worsened by other mental health issues like attention-deficit/hyperactive disorder, frequently abbreviated as ADHD or ADD. Whether it's ADHD or another problem like post-traumatic stress disorder (PTSD), getting the correct diagnosis may be a relief.

You have goals, we have solutions. Connect with an Old National Banker for a free financial review.