Break the cycle of your finances affecting your mental health

During Mental Health Month it is also important to recognise how our finances (or lack of it) affect our mental health.

Research shows that even high-income earners battle to repay their debts, which means that people who earn less worry even more and are prone to serious financial stress affecting their mental health.

After another tough economic year, a spike in mental health issues has been exacerbated by job insecurity, remote work stress, the rising cost of living and the blurred lines between work and personal life, Ross McMillan from Momentum Financial Planning says.

“The reality is that money problems and mental health are deeply connected. Financial stress can trigger anxiety, panic and even depression, making it difficult to manage your daily life.

“Taking proactive steps to enhance your financial security is a crucial first step towards improving your mental well-being and regain a sense of control.”

McMillan says you can break the cycle and foster a healthier balance between your money and your mind when you recognise the link between money and mental health, create a budget, seek professional advice early on, access mental health support and take small steps to regain control.

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Recognising the link between money and mental health

Understanding that your finances are probably affecting your mental health is the first step towards breaking the cycle.

Many people feel overwhelmed by debt, bills and other financial obligations, but they do not always realise the magnitude of the toll it takes on their emotional wellbeing.

“Acknowledging this connection can help you approach both your mental health and your finances with more clarity,” McMillan explains.

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Creating a budget is about control, not restriction

Budgeting is often viewed as limiting, but McMillan says it is really about taking control of your finances.

“A budget is a roadmap for your money. By knowing where your money goes, you reduce the uncertainty that causes stress and anxiety.”

A well-structured budget can help you prioritise necessities, manage debt and set aside money for savings while giving you peace of mind.

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Seeking professional advice early

Many people wait until they are in deep financial trouble before seeking help, but addressing these issues early can prevent anxiety from escalating, McMillan says.

“Talking to a financial adviser can help you to develop a plan to tackle debt, build savings and manage expenses. Even the act of discussing your finances with an informed neutral party will provide some sort of relief, giving you a clear vision of the way forward.”

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Accessing mental health support

Mental health professionals can help you to navigate the emotional triggers behind your financial habits.

“If anxiety or depression is causing your impulsive spending or financial avoidance, professional help can provide the tools to manage these behaviours. You should never hesitate to seek support.

“If you do not tackle the psychological aspect of financial stress, the effects can be far-reaching and can compound quickly to create long-term issues, which can be extremely difficult to resolve.”

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Taking small steps to regain control

When your mental health as well as your finances are overwhelming you, it is important to start small and work your way forward, McMillan says.

“Focus on manageable actions, such as paying off smaller debts or setting a weekly budget for discretionary spending. These small wins can build momentum and give you the confidence to tackle bigger financial challenges.”

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Breaking the cycle for better wellbeing

Tackling your financial issues proactively will not only improve your bank balance but also contribute to better mental health.

“When you understand the connection between money and mental well-being, you can take meaningful steps toward improving both,” says McMillan.

“Seeking advice, budgeting effectively and accessing mental health support are all powerful tools that can help you regain financial control and provide a cushion for your overall mental wellbeing.”