Does Mental Health Affect Financial Health?

Money is a necessary resource to function in the modern world. This has been true for hundreds of years, and with every passing year, the costs to maintain a stable life increases unabated. According to the Institute of International Finance (IIF), global debt levels have reached a staggering $296 trillion as of June 2021. This debt includes households, governments, and corporations. 

That is an unimaginable amount of money. Everyone, from the worker to the government official, is feeling the pinch. In the US, the second quarter of 2021 saw household income rise to $15 trillion on the back of increased mortgage and refinancing debt. The average cost of living in most big cities in the US has become difficult for many Americans to manage. According to the 2018 GOBankingRates analysis of the Bureau of Labor Statistics’ Consumer Price Index, living costs have increased 14% in the past three years.  

Rising costs and the uncertainty brought on by economic hardships and the global COVID-19 pandemic are taking their toll on the minds of citizens everywhere. Financial distress has been a critical problem in mental health for decades and does not show signs of easing. Research shows that mental health and financial wellbeing are directly linked. 

This article will discuss how mental health issues affect financial wellbeing, and how you can attempt to manage your finances.

How Does Mental Health Affect Financial Health?

Declining mental health is a vicious cycle that affects every part of one’s life. When an individual feels the effects of mental health problems, their financial stability can be compromised. Numerous studies show that individuals who suffer from anxiety or depression are three times as likely to find themselves in debt. What’s more, even a minor decline in mental health links to financial stress. 

Here are some factors brought on by mental health that can negatively impact your financial situation: 

  • Decreased energy levels — When mental health declines, quality of sleep tends to decline, too. Poor sleep quality leads to fatigue and a drop in concentration and focus. When you are tired, it can be difficult to keep up with work obligations or focus on ways to pay off debt. 
  • Clouded thinking — Thinking about your spending habits or even your financial goals is tough if you’re dealing with mental issues. Making decisions, planning, and organizing can seem like an impossible task from within a compromised mental state.
  • Not feeling in control — If you start feeling that you are not in control, you might lose sight of your finances amid the perceived chaos. Motivation can drop, and you can lose hope in the future, which impedes your ability to prioritize saving for the future. Instant satisfaction seems more important at the moment, which leads to overspending and impulse buying. 
  • Avoiding money issues — Following a budget or trying to tackle a significant amount of debt requires a lot of mental discipline. Increased anxiety and bouts of depression can make it incredibly difficult to adhere to routines and budgets or to deal with the stress around debt. Rather than dealing directly with financial problems, this may cause procrastination and avoidance of important financial topics. 
  • Making bad financial decisions — Many people dealing with mental health issues seek out coping mechanisms to find some relief. In some cases, these may be positive coping mechanisms like exercise or therapy. In other cases, people may turn to more harmful ways to cope, which may include increased spending on unnecessary items.  

The Link Between Mental Health and Financial Health 

Financial health and mental health go hand-in-hand. Either one can start the cycle, but they feed off each other, and if not kept in check, mental and financial health can both spiral out of control.

Different mental health issues can lead to behavior that can negatively affect an individual’s financial situation. For example, someone with bipolar disorder may spend impulsively and rack up debt to the point they cannot cope. The looming debt can then cause anxiety and lead to further depression. They might attempt to ease the pain by going on another spending spree which worsens the cycle. 

A person dealing with long bouts of depression that impairs their ability to work may lose their income, which can create financial strain. The added stress may lead to unhealthy coping mechanisms, which may create unnecessary debt. Unfortunately, it can be easy to fall into a cycle of depression, financial strain, and debt.  

Another factor to consider is that mental health treatment can be expensive. This can also contribute to the cycle of financial issues and mental health issues that are exacerbated by each other.  

These cycles can be triggered by the mind or the pocketbook. We’ve explored how mental health can kick off financial issues, but financial strain can also lead to decreased mental health in the following ways:  

  • Debt that accumulates unexpectedly — perhaps from a health emergency or unforeseen home repairs — can cause increased stress and anxiety. 
  • Financial troubles can spur insomnia or other sleep issues, which may lead to fatigue and deepening anxiety issues.
  • The loss of financial stability may cause people to cut corners on health and well-being, which can lead to poor health. 
  • A loss of income or mounting debt can put a strain on relationships. Isolation and depression can develop when you don’t interact with family and friends. 

How to Manage Money While Dealing with Mental Health Issues

Every individual has a unique financial situation, and there are various ways to manage your finances if you are dealing with mental health problems. Here are some ideas and options:

1. Seek Help or Advice

Find someone you can trust or a reputable financial advisor to help you through your financial situation. For mental health issues, a good therapist can provide the necessary support to keep you feeling your best.  

2. Start a Money Management Routine

Creating and sticking to a money management routine can help you maintain control of your finances, even when the going gets tough. Routines can provide stability for both financial and mental well-being.  

3. Be Kind to Yourself

Nearly everyone deals with financial issues of some shape or form, and many may also struggle with mental health issues. Navigating these challenges can be difficult, but remember you’re not alone. Choose to be kind to yourself rather than indulging in guilt and shame.   

4. Tap into Technology

In today’s digital era, there are thousands of apps and other technologies that can make dealing with finances easier, from obtaining financial advice to budgeting. Tap into technology to help keep you on track.


It is clear from years of research that mental health and financial health are undoubtedly linked. Financial issues plague many people in society and cause mental health problems that feed a vicious cycle. Understanding the triggers of mental health on your finances can give you the means to tackle the issue and achieve more stability with your money.

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