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Money and Mental Health: Time to Make the Connection

Chandra White-Cummings

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The average urban center in America has what seems to be more than its share of convenience stores, liquor stores, smoke shops, hair salons, and fast food restaurants. A common explanation for this phenomenon is that corporations take advantage of the assumed short-term gratification mindset of low-income people by making it convenient for them to purchase lower-quality food and other products that provide momentary pleasure and comfort. If that’s true, it raises several questions worth exploring. Why might African Americans have such a mindset that is clearly against their self-interest, and what is the relationship between mental health and spending, money, and financial status?

It seems intuitive that people who are depressed, anxious, chronically stressed or have other mental health challenges might have problems managing money. Two surveys and a study shed light on why this is so, and the results implicate important changes that can be made in the type of treatments used for mental health issues and how those with such issues understand and deal with their finances.

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The U.K.-based Money and Mental Health Policy Institute issued Overstretched, Overdrawn, Underserved: Financial Difficulty and Mental Health at Worka report that documents relationships between mental health and money. An analysis of data from 40,000 households revealed that 25% of people with mental health problems also had personal problem debt (defined in the report as “being persistently in arrears on credit payments or essential bills”), and that 50% of people with problem debt also self-reported at least one symptom of a mental health problem. This suggests that money problems have a greater effect on mental health than mental health has on financial difficulties. The report described several effects of money problems on mental health: guilt/shame, low self-esteem, and self-harm; anger and frustration; anxiety, fear, and panic attacks; and low mood, lethargy/apathy, and substance abuse. Conversely, a previous Institute report, Money on Your Mind, mapped the following impact of mental health problems on finances: carrying debt and bankruptcy; deprivation of life needs, including unstable and insecure housing; and loss of savings and possessions. These results also highlight the cycle created by the relationship between money and mental health which traps people in years, even generations, of poverty and poor mental health because their financial struggles chronically put pressure on their mental state and pre-existing mental and emotional issues persistently drive behavior that hinders resolution of money problems.


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The Institute reports are based on data from citizens in the U.K. but data on similar issues involving Americans is also available. The 2015 Stress in America report—an annual measure of the sources and outcomes of stress issued by the American Psychological Association-- stated that 72% of those surveyed said they were stressed about money and financial issues, with almost 1 in 4 extremely or severely stressed. This result is in line with results from previous years. In fact, money and finances have been the number one stressor reported by Americans every year since the survey began. The 2015 results further indicated that 20% said their financial problems impacted whether they sought a doctor’s care for health concerns, demonstrating the aforementioned cycle of money problems and mental health issues. Pressures, stress, and resulting effects on mental health and soundness related to money, providing for self and family, and one’s overall financial state affect decision-making in those very areas.

But how does one’s mental state affect decision-making and how does that dynamic affect decisions about money?

The American Psychological Association’s paper Willpower, Finances, and Spending sheds some light. Describing what could be called the willpower factor, the paper explains that people who must, because of life circumstances and status, constantly exert willpower to make decisions can actually deplete their willpower reserves. Having to make many high-pressure decisions regarding money and finances depletes this reserve faster than other types of decisions. Add to the mix the chronic stress of individualized racial discrimination and a generally racialized society, and it's not hard to see why a low-income family in Philadelphia, constantly choosing between paying the electric bill, taking a child to the doctor, making the car payment, and replacing outgrown clothes might periodically or even frequently choose McDonald’s for dinner or use a credit card to pay for any of those expenses.

A 2011 study, Decision-Making and Depressive Symptomology, identifies additional characteristics of people with depression that can impact financial decision-making: pessimism, expectations of negative emotions like regret and disappointment; risk aversion, passivity, and hopelessness. A Black family might initially have the willpower to save for a home but over time might decide it’s hopeless to actually apply for a loan because they believe they won’t get approved anyway. Or a single mother might desire to have a better life for her family, but finds herself consistently spending money in ways that are unlikely to help her reach her goal because she is just tired and worn out from all the struggling. As a result, she learns to expect no different positive outcomes from whatever decisions she makes. Spending $8 on chips and drinks at the corner deal becomes no big deal and gives a little relief from the stress and depression she feels.

There is a great need to address the roots of this money/mental health connection. Here are a few suggestions:

Add information about mental health to personal finance education. Typically courses on budgeting and getting out of debt are offered without any discussion of how people’s mental health affects their spending decisions.

Include financial mentoring in established mentoring programs, and/or create separate programs focused on money. Allow young people to hear presentations from and have exposure to other Blacks who have successfully overcome mental health and emotional challenges and can be living proof that it is possible to make sound financial decisions despite those obstacles.

Add mental health education and coaching to supportive housing, job training, and relationship programs .  Program participants would benefit from targeted information about the link between money and mental health. While the link might be intuitive, being educated on specific ways in which mental health impacts decision-making could have a great impact on program compliance and future sustained success.


Chandra C.Comment