How a Financial Therapist Can Help Shift Your Money Mindset

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Investing your money can be an emotional affair. On the other hand, you may be passionate about achieving financial stability and building wealth. On the other hand, you may feel some anxiety and fear. The latter could have long-term effects, according to a 2021 study by the Financial Industry Regulatory Authority. The study, Financial Anxiety and Stress among American Households, says that people with long-term financial anxiety and stress are less likely to plan for retirement.

For those with investment concerns, the new year may be a good time to explore what drives those concerns. Financial therapy can help with this.

What is financial therapy?

Financial therapy combines behavioral therapy and financial training to help improve your thoughts, feelings, and behaviors regarding money.

Celia Hughes, a certified financial therapist based in Los Angeles, says financial therapy marries the two specialties.

“There is a real gap between emotional health, financial health, and money,” she says.

If you haven’t heard of financial therapy before, it may be because it is a relatively new discipline. The Financial Therapy Association was founded in 2010, so it’s shy of a decade.

Who is the financial processor?

A certified financial therapist is an individual who has completed all three levels of certification with the Financial Therapy Association. It is a certification that financial and mental health professionals can pursue.

Financial therapists can help investors understand their concerns and fears about money, and guide them to that moment.

The difference between a financial therapist and a financial advisor is that a financial therapist explores the feelings and beliefs behind your financial habits, while financial advisors focus on helping you reach your financial goals.

For example, if you have $50,000 saved in cash and the fear of bankruptcy is preventing you from investing some of that money in the stock market, you can talk to a financial therapist. However, if you have $50,000 and want to know the best strategies for investing money, then a financial advisor is probably the right fit for you.

It is important to note that not everyone who calls themselves a financial healer is a certified financial healer. Some behavioral therapists focus on finance and have no financial qualifications. Likewise, says Hughes, some financial professionals are not certified therapists, but they help you explore the feelings behind money.

What financial therapists can help you with

Financial therapists can help eliminate any negative feelings and reduce the beliefs you have about your money. For example, you may be terrified of starting your own investment journey. Or, despite being a high income earner, you may not invest much because you don’t think you will be lucky enough to see positive returns.

If you’re curious about what it might look like to work with a financial therapist, Aja Evans, a New York City-based certified mental health and financial therapist counselor, explains her approach to struggling clients to start their own investment journey.

We were going to do some digging and see if we could get to the root cause of this fear. Is it not believing in your own worth and believing that you deserve to have a financially stable future? Is it fear of the unknown? Or you don’t understand investing and how it works, so you’re afraid to give your money to something you don’t understand? So, we’ll try to get into some of that drastic work and then work on setting small goals.

How to choose a financial processor

Hiring a financial therapist can be a big decision, so choose the right option. You should look for the same things that you would when looking for a behavioral therapist. This means finding someone who specializes in your problem area and who you are comfortable with being vulnerable.

If you think a financial therapist is what you need and you’re ready to get started, you can search the Financial Therapy Association to find a therapist.

Strategies to Overcome Your Money Fears

The therapists we spoke to said that limiting beliefs can derail your investment journey and prevent you from reaching your financial goals. In some cases, worries may prevent you from enjoying the fruits of your labor as well. How do you move forward despite the fears? Here are some of the tips therapists shared with us.

1. Identify your limiting emotions and beliefs

Some people, including those who grew up in marginalized communities, have financial stories to tell themselves that developed in childhood. Financial therapists say these stories can either push you toward your goals or hold you back.

Perhaps you grew up watching your parents struggle to make ends meet and now you think that money is scarce and shouldn’t be spent. Perhaps you are afraid to invest because no one in your family owns the assets. Or maybe you are investing but you are afraid of losing money, so always play it safe. According to the Wells Fargo/Gallup Index of Investors and Retirement Optimism, black investors are less likely than white investors to feel comfortable taking on too much risk. They are also more likely to provide frequent financial assistance to their relatives.

Evans encourages people to ask themselves tough questions about their financial beliefs.

“Feel your feelings, identify them, then make a plan with your money, and then you can move on,” she says.

2. Retirement visualization

Retirement planning may seem a low priority to some investors, especially if retirement is decades away. Recurring expenses may take priority, or perhaps you want to use your money to live in the moment.

Sometimes people struggle to start investing because they struggle to focus on the future, Hughes says.

“Some of the reasons are a lack of education and an understanding of how compound interest works and why it is so important to start investing at a young age,” she says.

To change your thoughts and beliefs about investing for retirement, Hughes recommends thinking about someone you know who is of retirement age and how they are currently living. This can help establish a connection to the future so you can visualize what you want for yourself and then make a plan together.

3. Start small

It can be a good idea to take small steps when trying to change your financial habits. This may sound like doing research on everything that causes uncomfortable feelings.

Take the time to say, ‘Hey, where can I get some information to understand what a Roth IRA is? Or a 401(k)? ‘Then decide what your goals are so you can move forward in a way that makes you feel good,” says Evans.

4. Consider passive investing

Passive investing is a way to take the pressure off yourself, especially if you struggle to make sense of the sometimes complex world of finance. It is a form of laissez-faire investing for those who do not want to learn more complex things or who do not want to make investments with higher risks. Examples of passive investing include the use of automated advisors or investment tools such as ETFs, index funds, or mutual funds.

“You don’t need to be a financial expert, just let compound interest do its work,” says Hughes. “Even if you invest a small amount of money in a mutual fund, when you start to see it grow, that feeling can be really energizing, and it can empower someone to move forward with a financial plan.”

The article featured how a financial therapist can help change your money mindset on NerdWallet.

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