What is Financial Therapy?

Recently, both the topics of mental health and financial health have become more and more popular. Because it exists at the intersection of these two worlds, it makes sense that the idea of financial therapy is also gaining popularity. But what is financial therapy? Is it financial coaching? Is it therapy? Is it a combination of the two?? Because financial therapy is such a new and emerging field, it is important to understand what financial therapy is (and what it is not), and how it could benefit you. In this post, I’ll define what financial therapy is, why it is important, clarify what financial therapy is NOT, and give some examples of how financial therapy can help someone like you.

What is Financial Therapy?

Financial therapy is a type of therapy or counseling that helps people improve their financial health by addressing the emotional and psychological factors that affect their financial behaviors. I like to define financial therapy as a specialized area of psychotherapy that focuses on helping people develop a healthy relationship with money. The goal of financial therapy is to help people understand and change how they think, feel, and behave with money. Financial therapy is part of a holistic approach to financial well-being, in which you get support with both your money psychology as well as your financial behaviors.

Why is Financial Therapy Important?

Financial therapy is crucial to building financial success. Historically, the personal finance industry has focused on providing financial literacy and education, but has largely ignored the psychological and emotional components of making good financial decisions. Although financial literacy is important and obviously necessary, financial education is just one part of the solution.

Understanding your psychology and emotions around money is essential for you to make sustainable changes that can lead to financial success. Research shows that 90% of financial decisions are made in the emotional part of our brains. Although we’d like to think that our financial decisions are made in the logical portion of our brains, we typically use the logical part of our brain to justify the emotional decisions we make. For example, think back to the last time you signed a new lease or bought a new house. Did you make that decision purely based on logic? Probably not – which is actually a good thing! You likely factored in your feelings of safety, pleasure, and pride of ownership, among others.

A financial therapist can help you identify and address the root causes behind your financial behaviors and help you build a positive relationship and healthy behaviors with money by using evidence-based therapeutic practices. A financial therapist will also help you define your personal beliefs and core values and how those connect to your sense of success, and help ensure that your financial goals align with these values.

If you have been feeling as if you can’t quite break through old financial habits or behaviors, or continually find yourself right back at where you started with your finances, financial therapy is likely the missing piece you’ve been looking for.

What Financial Therapy is NOT

Financial therapy is not financial advice or planning. While some financial therapists will also hold a CFP® (Certified Financial Planner) or AFC® (Accredited Financial Counselor) designation, the focus of financial therapy is to address how you think, feel, and behave with money. In other words, your relationship with money. Many people who choose to work with a financial therapist do so because they have tried working with a financial planner, but find themselves unable to stick to the plan that they develop. For example, many people have fear around investing, and this fear keeps them from opening an investment account and putting money in it. A financial therapist can help you identify what may be the root cause of that fear – Is it a lack of self-worth, that deep down you don’t believe that you deserve a financially secure future? Is it the fear of the unknown? Fear of making a mistake (perfectionism)? Or is it rooted in a distrust of government systems?

A financial therapist will help you figure out the reasons behind this inability to consistently follow a financial plan and help you equip yourself to move forward in a way that aligns with your values. 

It is important to be aware that certain individuals are NOT licensed mental health professionals but still refer to themselves as psychotherapists. These individuals use terms such as "Your Financial Therapist" or "Your Money Psychologist" that can be very misleading to the public. Currently, the Financial Therapy Association and the Trauma of Money groups are making significant efforts to prevent people from falsely claiming the title of therapist without the appropriate qualifications.

Work with a Financial Therapist

Financial therapy is a crucial part of achieving mental, emotional, and financial health. This emerging field is bridging a gap that has existed between mental health and financial health. Many mental health professionals do not yet have training in addressing how money affects their clients’ well-being, and therefore many of them tend to avoid delving too deeply into their clients’ financial situations. Financial planners and advisors aren’t trained to diagnose or treat the emotional and psychological reasons behind poor money management. Financial therapists are experts in both financial literacy and psychotherapy, so they are able to bridge this gap – helping people identify and shift their unhealthy feelings and beliefs about money, so that they can achieve financial success.

Want to work with a financial therapist who is passionate about helping people heal their relationship with money? If you are ready to explore working with a financial therapist, click here to get started with a free consultation call.