What is Financial Therapy and How Does it Differ from Financial Advisement?
You have the best of intentions, you want to contribute to your savings account each month or make a larger payment towards your credit card debt. However, you continue to find that you don’t have enough to fulfill the financial goals you have set for yourself.
It could be more than just your lifestyle that’s preventing you from achieving financial well-being. How you approach your finances and spending, in general, can have a big impact on how you’re able to achieve your personal monetary goals. If you find yourself with spending habits that keep you from living the life you’re wanting, financial therapy could offer solutions that might work for you.
Financial Therapy vs. Financial Advisement
According to the Financial Therapy Association, financial therapy “is a process informed by the therapeutic and financial competencies that helps people think, feel and behave differently with money to improve overall well-being through evidence-based practices and interventions.”1 This differs from financial advising since it incorporates your behavior, thoughts and feelings about money into your financial planning rather than simply examining your assets.
Financial therapy explores your behavior concerning finances to develop a comprehensive financial plan that works for you so you can succeed in the long run. This can include identifying your stressors when it comes to money, how you may be using money as a reward and other behaviors that can put an extra strain on your personal finances.
Is Financial Therapy Right for You?
Generally thought to be a taboo subject, you may not have the opportunity to discuss money with family and friends very often. You may not know what healthy habits are concerning money or how your family or friends have approached finances in the past. And at times it can be difficult to determine what is appropriate in relation to saving and spending money. Financial therapy can be the answer for those who are looking to discuss ways to budget, save and spend in ways that support their needs and lifestyle.
Additionally, financial therapy can be helpful to those who have what could be considered extreme behavior when it comes to spending money. In the last few years, close to 96 percent of Americans have reported impulse shopping either in-store or online.2 If you find yourself as one of the many people who tend to over-shop to the point that you’re not able to achieve your monetary goals, financial therapists can work with you to determine where this impulse is coming from and how to address it.
On the opposite end, financial therapy can also be helpful for those who tend to hoard money to the point where they are foregoing addressing their basic needs. People who save and dismiss spending money on necessities like healthcare, fresh food, and other similar items can be operating from a fearful motivation of scarcity. Financial therapy can help individuals and couples to address where this fear comes from and how to spend in a healthy way.
Saving money and achieving financial well-being may be more possible for those that take a behavioral finance approach. If you find that you’re not able to meet your financial goals even after having a “financial plan”, financial therapy may provide you with the help you need. When seeking out a financial therapist check to be sure that they are licensed specialists and can address the various financial barriers you may be facing.