Financial Counseling: How Money And Debt Management Can Improve Mental Health
According to Forbes, 45% of Americans experience financial stress. Financial strain can take a significant toll on a person’s mental health and overall well-being. It can also affect relationships between couples and within families. However, financial counseling can significantly reduce stress.
Below, we’ll discuss how financial counseling can help with stress and improve overall mental health. For further mental health support, consider scheduling a therapy session with a licensed mental health professional.
What is financial counseling?
Financial counseling generally refers to an advisory service that helps people manage debt and improve their spending habits. Financial counselors may work independently or with a financial organization. They often help people with budgeting challenges, credit card problems, and difficulty with other forms of debt.
Credit counseling and debt management: Help with credit card debt and credit report improvement
Many people seek a specific type of support called credit counseling. People often pursue this service when they have excessive credit card debt, which can affect their credit reports and ability to obtain loans. Credit card debt can significantly affect a person’s stress levels and mental health.
Credit counselors can help individuals reduce financial stress by forming a debt management plan. This may involve negotiating with creditors to reduce balances and create a debt consolidation plan. Although this can affect a person’s credit score, it can sometimes be a viable solution when someone has significant debt and no foreseeable way to get out of it.
Money management
Financial counseling isn’t just about debt management. It can also help people establish a budget, create strategies for adhering to it, and invest more wisely. Financial counselors may be able to identify areas where people can reduce their spending so that they can pay off debt or save more money. In addition, those who have savings may not have their money invested in the most beneficial way. A financial counselor might offer strategies to maximize interest or dividends on a person’s savings, which can improve stress levels and provide a sense of financial security.
Housing counseling
Financial counseling services often involve helping people make decisions about housing. Some people may have trouble paying rent on their current salary. Others may owe more on their home than what it is currently worth. This can limit their ability to obtain a home equity loan or move to a new home if they must move for a new job. Housing counseling may help people find solutions to get out of these situations and establish a housing budget that allows them to live comfortably.
What happens during an initial counseling session?
During an initial counseling session, the counselor typically asks individuals to explain the challenges they’re experiencing. The counselor often asks about a person’s income, debt, housing expenses, equity, and assets, such as cars or other vehicles. With this information, counselors can establish a personalized action plan.
What’s in a financial counseling personalized action plan?
A personalized action plan from a financial counselor may include various money management strategies, such as ways to reduce unnecessary spending across various budget categories. A personalized action plan may also include debt management strategies. For example, a financial counselor might recommend strategies to lower a person’s interest rates on credit cards. They may also offer advice on which cards or loans to pay off first.
How can financial counseling reduce stress?
Financial challenges can be a significant source of stress, and this can have real effects on a person’s physical and mental health. Financial counseling can sometimes help people find a way out of seemingly impossible situations. Some people may not know that there are ways to reduce their debt and monthly expenses, and financial counseling can be an opportunity to identify solutions.
For some people, financial stress may be related to the cost of housing. Some people may be paying too much in rent or mortgage costs, which can leave less money for food. Food insecurity can significantly affect a person’s mental health by causing chronic stress, and an inability to nourish the body with nutritious food can also contribute to mental health challenges.
Chronic stress, in turn, can have a major impact on physical health, including increased inflammation throughout the body. It can lead a person to sense that they’re in constant fight-or-flight mode.
A financial counselor may suggest strategies to lower a person’s monthly housing payment, which can free up money for food and other necessities. This can reduce stress levels and improve both physical and mental health over time.
Mental health support for financial stress
Aside from financial counseling, individuals facing financial stress may benefit from speaking with a licensed mental health professional. A therapist can offer personalized strategies to reduce stress while you work toward improving your financial situation. This may also improve your physical health by reducing your body’s stress response.
Online therapy for financial stress
Some people might live in an area with few therapists. Others might not feel comfortable discussing their financial difficulties in person with a therapist. In these cases, online therapy can empower individuals to receive mental health support from home through electronic communications, such as audio, video, or live chat. Online therapy also tends to be more affordable than in-person therapy without insurance.
Over the last decade, numerous researchers have studied online therapy and found it to be an effective form of treatment for several mental disorders, as well as concerns like chronic stress. According to a 2022 meta-analysis, online therapy can be just as effective as its in-person counterpart.
Takeaway
Financial counseling can provide practical solutions to improve financial health, which can ultimately reduce stress and improve mental health. A financial counselor may provide financial education and help people develop personalized financial goals. If you’re experiencing financial difficulty and stress, you may also benefit from speaking with a licensed mental health professional in your local area or through an online therapy platform.
Frequently asked questions
Below are some common questions related to financial counseling and stress.
How can financial problems cause stress?
Financial problems can lead to constant worry about meeting financial obligations. This can lead to difficulty sleeping and low energy levels, among other concerns.
How can financial problems affect mental health?
Financial difficulty may lead to a variety of emotions, including anger and frustration. Some people may experience a sense of despair if they believe they have no way out of debt, which may lead to depression. People may also experience low self-esteem and embarrassment if they have financial problems.
Who can I talk to about financial advice, money questions, and credit counseling?
Some banks and financial institutions offer free financial advice, as they typically don’t want to see people default on their loans. You might also find help through the Financial Counseling Association of America (FCAA) and its member agencies.
Where can I get help with debt management, information about my credit report, and assistance with credit card questions?
If you’re seeking help with debt consolidation, you might search online for companies that advise people on their options for debt relief. These companies often have staff members who can provide a free assessment and information on what your new monthly payment would be. However, debt consolidation typically affects a person’s credit score.
What is the link between financial health and mental health?
People who experience financial challenges may be more likely to experience mental health challenges. In addition, people who experience a mental health condition may be more likely to face financial difficulty. There is help available for both financial problems and mental health challenges, both in person and online.
What is the role of the financial counselor?
A financial counselor helps an individual make healthy financial decisions and build a budget to obtain or keep financial stability. A certified credit counselor, for example, may help a person by offering debt counseling, credit advice, and support in waiving or paying late fees. They may help people organize their finances, open credit cards, find resources, and pay off debt to increase their credit score. These programs can sometimes refute charges or contact debt collectors over the phone to get some of one’s debt resolved or negotiated.
What is the goal of financial counseling?
The goal of financial counseling depends on each individual client. Some people go into counseling to improve their credit, whereas others may ask for support in budgeting. Whatever your goal, a financial counselor can point you in the right direction.
What's the difference between a financial advisor and a financial counselor?
Financial advisors tend to offer generalized support to any client, including those who are financially well off. They may help these people budget or choose where to put their money. Financial counselors primarily support people who are going through financial challenges, such as low credit or debt.
What happens in financial counseling?
In financial counseling, your advisor will ask questions about your financial goals, current financial situation, and credit. They may also ask about your debt and create a financial profile about you to understand your situation more in-depth.
What is the day in the life of a financial counselor?
Each financial counselor is different, but many will have a caseload of clients they support and may also accept new clients periodically. In sessions, they advise clients on financial choices and help clients with financial challenges make more positive decisions for their future to help them get out of debt or improve their credit.
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