Money and Mental Health

How money affects our mental health and is it significant? In short, yes! It is very important, now more than ever, given the economic landscape caused by Covid-19. Money is arguably the single most important construct for civilizing the modern world. The invention of money has established the consenting relationships between buyers and sellers, but also workers and owners. This medium of exchange is understood across the globe and is the foundation of our society. These small pieces of paper dictate almost every aspect of our lives; perhaps most importantly our mental health. 

In 2017 The American Psychology Association conducted a survey named “Stress in America”. This found “money” to be ranked 2nd among prominent stressors for Americans. 1st place belonged to “the future of our nation”, while “work” ranked 3rd. It is no surprise to most that money is on this list. What may be surprising to some is the direct relationship between our mental health and money.

An individual’s financial well-being is one of the greatest indicators of their mental wellness. A study published in 2011 by the peer-reviewed medical journal  JAMA Psychiatry, compared mental health with those making under $20,000 per year to those making over $70,000 per year. This research showed that low levels of household income are associated with several lifetime mental disorders and suicide attempts. The study also showed that a reduction in household income is associated with increased risk of incident mental health disorders (anxiety, stress, depression, substance abuse).   

In the new Covid-19 world, 15 million people have become unemployed. This has created financial instability on a scale that has been unseen since the Great Depression. With millions losing their jobs every month, it is expected our nation will see millions struggle with mental health disorders. 

The trauma of losing a job can be similar to that of losing a close friend or even a loved one. It is normal to feel anxious, sad or stressed in these hard times. Having the right set of tools at your disposal can make all the difference between just a normal “rut” and a serious mental health problem. If you or a loved one has lost a job recently here is a great set of tips that may help. 

Overwhelming Bills Can Cause Anxiety

Debt and Mental Issues

Most abundant debts in America:

  • Mortgages: $9.4 trillion
  • Credit Cards: $1.08 trillion
  • Student Loans: $1.48 trillion
  • Car Loans: $1.3 trillion

On average Americans hold $38,000 of debt per capita. Mental health problems can affect our ability to organize and manage debt. This is true even when the root of the mental health issue is debt in the first place. Oftentimes debt and mental health are connected.

Being in debt can evoke emotions of embarrassment, guilt, and grievance. These feelings are amplified depending on the amount of debt, and the amount of time spent in debt. Being in debt can result in depression, anxiety, or stress-related disorders.  

Roughly 35% of Americans have one or more debts that are in collections. Meaning, 35% of Americans have their phones ringing off the hooks from debt collectors every day. This harassment itself is a source of stress and anxiety for the debt holder. 

Retail Therapy Loop

A common unhealthy practice many people have to cope with poor mental health is called retail therapy.  This is the purchasing of material items to temporarily alleviate the burdens that mental illnesses produce. 

In extreme cases, an individual will spend money on items they cannot afford which leads them deeper into problem debt. This situation creates a positive feedback loop. As it causes more mental health problems for the spender as debt grows. It then causes them to purchase more and more. Inevitably digging a deeper hole. This practice can be called stress spending, manic spending, depression spending, etc.

Video Transcript of Money and Mental Health

Video Transcript
My name is Tom Richardson. I'm a clinical psychologist, and this is my point of view about the link between money and mental health. Why is it that being in financial difficulty can have such a big impact on mental health and vice versa? So we've known, sadly, for a long time that people from poorer backgrounds, low socioeconomic status are more vulnerable to different mental health problems. What I'm interested in is psychologically why that might be the case. So one of the things I did a few years ago was something called a meta analysis, where you pull together all the numbers from the research that's been done before. And I wanted to see how strong was the relationship between debt and mental health problems. So this was unsecured debt like credit cards, and car loans. And pulling it all together what I found that if you're in debt, you're more than three times more likely to have a mental health problem.
So, about 42% of people who are in debt had a mental health problem. The were relationships for specific mental health problems, like depression, problems with drink, problems with drugs and sadly greater risk of suicide as well. Now there's the classic chicken and egg situation here, which comes first? Which causes which? So, it could be for example, that if you are in financial difficulty, that has a big impact on your mental health. It could also be that if you have mental health problems it's harder to hold down a job, it's harder to handle finances. So that might also make you more vulnerable to these difficulties.
So, one of the things I've tried to do in my research, is try to look at what comes first by doing what we'd call longitudinal research, where you look at the relationships over a period of time. So for example, I looked with students. And when I found that struggling to pay the bill at the start of the study was linked with more symptoms of overwhelm, and poor mental health, anxiety, greater risk of problem drinking, greater risk of an eating disorder. But when you looked at it the other way around, those with poorer mental health and the start, they were more likely, sadly, for their finances to deteriorate over time. So, I think overall I'd say what my research suggests, is that the relationship is probably more that financial difficulties impact mental health, but it also works both ways as well.
So, why is this the case? Why is it that mental health problems can impact mental health? So there's research on a number of different factors here, and I think we still need to keep researching because it's fairly early days. One of the factors is self esteem, that I found in my research. So, if you are in debt you're not able to pay the bills. That can really impact your self esteem, you don't feel confident, and that's going to make you feel anxious or depressed. What's also important is how much sense of control or agency you have.
So if you feel like you can do something about your financial situation, that's better for your mental health. If you feel like, "it's out of my hands, I can't do anything about it", then that really can have a bigger impact. Being more active in your coping, so trying to get help, trying to get financial advice, that really helps kind of reduce the impact of financial difficulties on your wellbeing. But unfortunately what happens, is that a lot of people might financially avoid, for example, we all do it to an extent and don't want to check my bank balance. Some people do that a lot more. Especially if you're anxious, it's going to be really hard to open bills, it's going to be hard to concentrate, plan a budget. So sometimes maybe avoiding coping with the situation, and kind of burying your head in the sand might also be a factor.
What I find really interesting as a psychologist, is we all assume that the bigger the amount of debt, the more impact that's going to have on your wellbeing. Actually, the research shows that often that's not the case. What's more important is not how much debt you're in per se, is how stressed or worried you are about it. And I guess this makes sense when you think, that for some people 2,000 pounds of debt isn't a lot. For some people, 200 pounds of debt is a really big deal and they will really worry about it. So it's how you make sense of it.
There's also studies that for my research, has shown that for students, for example, actually how much tuition fees you're paying, how much student loan you've got. That's not as important as whether you can pay the bill. So the most important thing, is whether you can get by financially day to day. And when I've done research with bipolar disorder, we also found that the amount of debt you're in doesn't really impact mental health, it's how you feel about it. Do I feel like my situation is going to improve? Do I feel like it's always going to stay about like this? How stressed am I? Do I think it's going to get worse?
So, the psychological factors here around your finances are actually, probably more important than how much debt you're actually kind of in. Some research I've also been involved in supervising, we've shown that there's a really important role for hope, to how much hope you feel about the future, and also shame. Whether you feel ashamed about your financial situation. That is a really important factor that can turn financial difficulties into depression, stress, anxiety.
One of the things I've been especially interested in, is research about this complex relationship between money and mental health in bipolar disorder specifically. So, if you look in the diagnostic criteria for a manic or a hypomanic episode, when people are high and impulsive. Impulse spending is one of the actual diagnostic criteria, but there's actually not that much research out there, and I really wanted to try and work out again, why there was this relationship. So everyone assumes that when you're high, when you're manic, you spend lots, you can get into real problems, but why?
So we interviewed people and we also looked at, gave them some questionnaires, kind of a few months apart, to try and look at these factors and pull it all together into a kind of model. And what we found is overspending was often reported, and this could be separated into impulsive shopping. So kind of buying things you don't need, kind of looking at your phone late at night and just going, "Oh, that looks nice. That looks nice." But there's also a theme, which I hadn't expected, of being really excessively generous. So people saying they shower their family with gifts, or they give loads of money they can't afford to charity, maybe when they're high, to be very generous to others as well.
There's also this assumption that it's only when you're manic, it's only when you're high that you spend lots. But we found actually that when you pit the symptoms of depression, stress, and anxiety in bipolar disorder, they lead to impulsive spending over time. And for anxiety it worked both ways. So, people spend too much because they were anxious, and then that just made them feel more anxious, sadly. One of the reasons I think those kind of negative emotions are linked to it, is something we picked up called comfort spending. So people report that they bought themselves stuff to make themselves feel better when they're down. Might end up backfiring in the long run, because another theme is that people maybe feel guilty.
So there's this whole kind of cycle where people feel down, they spend money to try and make themself feel better, and then they regret it. We also fall into mindfulness is something that a lot of people talk about. It's being more aware of what's going on, and we found the people who weren't as mindful, they weren't paying attention as much to what was going on. They were more prone to kind of impulsively spending, if you're kind of not aware of what's going on. Maybe you just kind of run an autopilot and spend more than you mean to.
Another thing was how people saw you was important. So people who were kind of worried about how people saw them, that was linked to spending more, but also this desire to achieve. So people with bipolar disorder can have quite high standards and set the bar quite high. And we found that having these thoughts that, "I've got to achieve, I've got to meet with these goals", that was linked with this kind of spending as well.
So, I think what really stands out for me for bipolar disorder, is that people often assume that when people are manic, when they're unwell, they buy just whatever they see and it's random, and impulsive, and there's no method. And that might well be the case, but I think what my research showed was actually, sometimes there is a reason for it. Sometimes is to try and mend a relationship with someone, or meet a goal. And I think for some people it can be a case of, I'm broke, I develop a get rich quick scheme, or an idea to get me out of this financial hole, and then I spend money to make money, and it might be an overly optimistic idea, so that it can be a vicious cycle.
So, I'll give you an example from my own life. I have bipolar disorder. When I was 18 and I had a manic episode, I went into a shop and I bought five African Djembe, the big drums. And from an outsider that might look like a completely random thing to buy, but in my mind it wasn't random. It was linked very clearly to a goal I had, a business idea I had, which was to try and get me out of a financial hole. Now that was a very unrealistic business plan, but it was for a reason.
So I think in summary, it is complicated. There's lots of different reasons why money impacts mental health, and poor mental health impacts how you handle money. We do need more research, but as a psychologist, I can't change people's financial situations. I can't get rid of their debt. But what really gives me hope, is that the research shows that financial variables, they are really important factors that turn financial difficulties into distress. So, as a psychologist, if I can work with those factors, help people being more aware, help people face their fears, then this can hopefully break the link.
Video Transcript
My name is Tom Richardson. I'm a clinical psychologist, and this is my point of view about the link between money and mental health. Why is it that being in financial difficulty can have such a big impact on mental health and vice versa? So we've known, sadly, for a long time that people from poorer backgrounds, low socioeconomic status are more vulnerable to different mental health problems. What I'm interested in is psychologically why that might be the case. So one of the things I did a few years ago was something called a meta analysis, where you pull together all the numbers from the research that's been done before. And I wanted to see how strong was the relationship between debt and mental health problems. So this was unsecured debt like credit cards, and car loans. And pulling it all together what I found that if you're in debt, you're more than three times more likely to have a mental health problem.
So, about 42% of people who are in debt had a mental health problem. The were relationships for specific mental health problems, like depression, problems with drink, problems with drugs and sadly greater risk of suicide as well. Now there's the classic chicken and egg situation here, which comes first? Which causes which? So, it could be for example, that if you are in financial difficulty, that has a big impact on your mental health. It could also be that if you have mental health problems it's harder to hold down a job, it's harder to handle finances. So that might also make you more vulnerable to these difficulties.
So, one of the things I've tried to do in my research, is try to look at what comes first by doing what we'd call longitudinal research, where you look at the relationships over a period of time. So for example, I looked with students. And when I found that struggling to pay the bill at the start of the study was linked with more symptoms of overwhelm, and poor mental health, anxiety, greater risk of problem drinking, greater risk of an eating disorder. But when you looked at it the other way around, those with poorer mental health and the start, they were more likely, sadly, for their finances to deteriorate over time. So, I think overall I'd say what my research suggests, is that the relationship is probably more that financial difficulties impact mental health, but it also works both ways as well.
So, why is this the case? Why is it that mental health problems can impact mental health? So there's research on a number of different factors here, and I think we still need to keep researching because it's fairly early days. One of the factors is self esteem, that I found in my research. So, if you are in debt you're not able to pay the bills. That can really impact your self esteem, you don't feel confident, and that's going to make you feel anxious or depressed. What's also important is how much sense of control or agency you have.
So if you feel like you can do something about your financial situation, that's better for your mental health. If you feel like, "it's out of my hands, I can't do anything about it", then that really can have a bigger impact. Being more active in your coping, so trying to get help, trying to get financial advice, that really helps kind of reduce the impact of financial difficulties on your wellbeing. But unfortunately what happens, is that a lot of people might financially avoid, for example, we all do it to an extent and don't want to check my bank balance. Some people do that a lot more. Especially if you're anxious, it's going to be really hard to open bills, it's going to be hard to concentrate, plan a budget. So sometimes maybe avoiding coping with the situation, and kind of burying your head in the sand might also be a factor.
What I find really interesting as a psychologist, is we all assume that the bigger the amount of debt, the more impact that's going to have on your wellbeing. Actually, the research shows that often that's not the case. What's more important is not how much debt you're in per se, is how stressed or worried you are about it. And I guess this makes sense when you think, that for some people 2,000 pounds of debt isn't a lot. For some people, 200 pounds of debt is a really big deal and they will really worry about it. So it's how you make sense of it.
There's also studies that for my research, has shown that for students, for example, actually how much tuition fees you're paying, how much student loan you've got. That's not as important as whether you can pay the bill. So the most important thing, is whether you can get by financially day to day. And when I've done research with bipolar disorder, we also found that the amount of debt you're in doesn't really impact mental health, it's how you feel about it. Do I feel like my situation is going to improve? Do I feel like it's always going to stay about like this? How stressed am I? Do I think it's going to get worse?
So, the psychological factors here around your finances are actually, probably more important than how much debt you're actually kind of in. Some research I've also been involved in supervising, we've shown that there's a really important role for hope, to how much hope you feel about the future, and also shame. Whether you feel ashamed about your financial situation. That is a really important factor that can turn financial difficulties into depression, stress, anxiety.
One of the things I've been especially interested in, is research about this complex relationship between money and mental health in bipolar disorder specifically. So, if you look in the diagnostic criteria for a manic or a hypomanic episode, when people are high and impulsive. Impulse spending is one of the actual diagnostic criteria, but there's actually not that much research out there, and I really wanted to try and work out again, why there was this relationship. So everyone assumes that when you're high, when you're manic, you spend lots, you can get into real problems, but why?
So we interviewed people and we also looked at, gave them some questionnaires, kind of a few months apart, to try and look at these factors and pull it all together into a kind of model. And what we found is overspending was often reported, and this could be separated into impulsive shopping. So kind of buying things you don't need, kind of looking at your phone late at night and just going, "Oh, that looks nice. That looks nice." But there's also a theme, which I hadn't expected, of being really excessively generous. So people saying they shower their family with gifts, or they give loads of money they can't afford to charity, maybe when they're high, to be very generous to others as well.
There's also this assumption that it's only when you're manic, it's only when you're high that you spend lots. But we found actually that when you pit the symptoms of depression, stress, and anxiety in bipolar disorder, they lead to impulsive spending over time. And for anxiety it worked both ways. So, people spend too much because they were anxious, and then that just made them feel more anxious, sadly. One of the reasons I think those kind of negative emotions are linked to it, is something we picked up called comfort spending. So people report that they bought themselves stuff to make themselves feel better when they're down. Might end up backfiring in the long run, because another theme is that people maybe feel guilty.
So there's this whole kind of cycle where people feel down, they spend money to try and make themself feel better, and then they regret it. We also fall into mindfulness is something that a lot of people talk about. It's being more aware of what's going on, and we found the people who weren't as mindful, they weren't paying attention as much to what was going on. They were more prone to kind of impulsively spending, if you're kind of not aware of what's going on. Maybe you just kind of run an autopilot and spend more than you mean to.
Another thing was how people saw you was important. So people who were kind of worried about how people saw them, that was linked to spending more, but also this desire to achieve. So people with bipolar disorder can have quite high standards and set the bar quite high. And we found that having these thoughts that, "I've got to achieve, I've got to meet with these goals", that was linked with this kind of spending as well.
So, I think what really stands out for me for bipolar disorder, is that people often assume that when people are manic, when they're unwell, they buy just whatever they see and it's random, and impulsive, and there's no method. And that might well be the case, but I think what my research showed was actually, sometimes there is a reason for it. Sometimes is to try and mend a relationship with someone, or meet a goal. And I think for some people it can be a case of, I'm broke, I develop a get rich quick scheme, or an idea to get me out of this financial hole, and then I spend money to make money, and it might be an overly optimistic idea, so that it can be a vicious cycle.
So, I'll give you an example from my own life. I have bipolar disorder. When I was 18 and I had a manic episode, I went into a shop and I bought five African Djembe, the big drums. And from an outsider that might look like a completely random thing to buy, but in my mind it wasn't random. It was linked very clearly to a goal I had, a business idea I had, which was to try and get me out of a financial hole. Now that was a very unrealistic business plan, but it was for a reason.
So I think in summary, it is complicated. There's lots of different reasons why money impacts mental health, and poor mental health impacts how you handle money. We do need more research, but as a psychologist, I can't change people's financial situations. I can't get rid of their debt. But what really gives me hope, is that the research shows that financial variables, they are really important factors that turn financial difficulties into distress. So, as a psychologist, if I can work with those factors, help people being more aware, help people face their fears, then this can hopefully break the link.

Money and Happiness

“Money can’t buy happiness” – although it is cliche, it remains true. Being rich will not necessarily make you happier. But It will increase your standard of living, and evaluation of life. What can help make an individual happy is making good financial decisions. 

Your financial situation and mental health go hand-in-hand. If you are able to keep yourself from needlessly facing major financial issues, you are less likely to face mental health issues. 

Tips To Take Control Of Finances & Mental Health

10 Tips to Take Control of Your Finances & Mental Health

  1.  Create a Budget: Know your income and restrict your spending by paying more attention or using a budgeting tool.
  2. Make Dinner at Home: Spending money eating out is one of the most expensive luxuries a household can subject themselves to. The grocery store is a much cheaper alternative.
  3. Exercise: Participating in some kind of physical health activity an hour each day is one of the most beneficial things you can do for your mental health. 
  4. Sleep: Getting too little or too much sleep can be detrimental to your mental health. Being able to sleep for 7-8 hours will improve your overall quality of life.
  5. Talk with a Financial Advisor: A financial advisor gives you access to expert advice on how to deal with money problems. They can help you manage your budget and help with a plan to become financially healthy now and in the future.
  6. Put the Credit Cards Away: Use cash or debit card when possible to elimiate debt build-up.
  7. Try to Cut a Deal with Debt Collectors: Never pay the full amount of debt if it has gone to collections. You can make a deal with the collector which often results in you paying less than 50% of the original amount.
  8. Meet with Family/Friends:  Humans are naturally social creatures, so socializing with those close to you will help stabilize mental health issues.
  9. Refrain from Drinking/Smoking:  Too often do people with mental health problems cope with drinking/smoking. This can make mental health problems worse and can lead to chemical dependancy or worse, addiction.
  10. Seek Help from a Professional: The mind can often seem like a complex puzzle that is missing the corner pieces sitting on a table in the middle of the room. Sometimes it’s best to receive help from trained professionals.
Citations

Kahneman, D., and A. Deaton. “High Income Improves Evaluation of Life but Not Emotional Well-Being.” Proceedings of the National Academy of Sciences, vol. 107, no. 38, 2010, pp. 16489–93. Crossref, doi:10.1073/pnas.1011492107

Ratcliffe, Caroline. “Delinquent Debt in America.” Urban Institute, 28 July 2014, www.urban.org/research/publication/delinquent-debt-america/view/full_report

Sareen J, Afifi TO, McMillan KA, Asmundson GJG. Relationship Between Household Income and Mental Disorders: Findings From a Population-Based Longitudinal Study. JAMA Psychiatry. 2011;68(4):419–427. doi:10.1001/archgenpsychiatry.2011.15

Smith, Melinda, et al. “Job Loss and Unemployment Stress – HelpGuide.Org.” Help Guide, Apr. 2020, www.helpguide.org/articles/stress/job-loss-and-unemployment-stress.htm