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Financial therapy combines behavioral therapy and financial coaching.
A certified financial therapist should meet specific requirements in the areas of financial therapy, planning and counseling.
A financial therapist can help improve your thoughts, feelings, and behaviors around money.
Investing your money can be an emotional affair. On one hand, you might be excited about creating financial stability and building generational wealth. On the other hand, you might feel some anxiety and fear, especially in light of the recent volatile stock market and sky-high inflation.
Those concerns — and how you approach them — can have long-term effects, according to a 2021 study by the Financial Industry Regulatory Authority. The study, Financial Anxiety and Stress Among U.S. Households, says people who experience long-term financial anxiety and stress are less likely to plan for retirement.
For those who have fears around investing, financial therapy might be a good option to explore what’s driving those feelings.
Financial therapy definition
Financial therapy combines behavioral therapy and financial coaching to help improve your thoughts, feelings, and behaviors around money.
Celia Hughes, a certified financial therapist based in Los Angeles, says financial therapy marries the two disciplines.
“There’s this real gap between emotional health and financial health and money,” she says.
If you’ve never heard of financial therapy before, that could be because it's a relatively new discipline. The Financial Therapy Association was established in 2010.
What is a financial therapist?
A certified financial therapist is an individual who meets specific requirements in the areas of financial therapy, financial planning and financial counseling, and therapeutic competencies. The certification, from the Financial Therapy Association, is one that both financial and mental health professionals can pursue.
Financial therapists can help investors understand their worries and fears around money, guiding them to that lightbulb 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 fear of going broke is keeping you from investing some of that money in the stock market, you might speak to a financial therapist. However, if you have $50,000 and want to know the best strategies for investing the money, a financial advisor would probably be a better fit.
It’s important to note that not everyone who calls themselves a financial therapist is a certified financial therapist. Some behavioral therapists focus on finance and don’t have financial qualifications. Likewise, Hughes says, some financial professionals aren’t credentialed therapists, but they help you explore the emotions behind money.
What financial therapists can help you with
Financial therapists can help with any negative feelings and limiting beliefs you have around your finances. For instance, you might be carrying some generational financial trauma, and you're terrified of starting your investing journey. Or, despite being a high earner, you might not invest much because you don't believe you'll be fortunate enough to see positive returns.
If you’re curious about what working with a financial therapist could look like, Hughes explains her approach with clients struggling to kick-start their investing journey.
“We would do some digging and see if we could get to the root cause of that fear. Is it a lack of belief in your own worth and belief that you’re worthy of having a financially stable future? Is it fear of the unknown? Or you don't understand investment and how it works so you’re afraid to give your money to something you don’t understand? So, we would try to get into some of that root work and then work on setting small goals,” she says.
How to choose a financial therapist
Hiring a financial therapist can be a big decision, so you want to choose the right one. You should look for some of the same things you would when seeking a behavioral therapist. That means finding someone who specializes in your problem area and who you feel comfortable being vulnerable with.
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 one.
How a financial therapist can help you overcome your fears
Limiting beliefs can stall your investing journey and keep you from reaching your financial goals, the therapists we talked to said. In some cases, fears can keep you from enjoying the fruits of your labor, too. How do you move forward despite fears? Here are a few tips the therapists shared with us.
1. Identify your limiting beliefs and emotions
Some people, including those who grew up in marginalized communities, have money stories they tell themselves that are developed in childhood. These stories can either push you toward your goals or hold you back, the financial therapists say.
Perhaps you grew up watching your parents struggle to make ends meet and now you think money is scarce and shouldn't be spent. Maybe you’re afraid to invest because nobody in your family owned assets. Or maybe you invest but are afraid of losing money, so you always play it safe. According to the Wells Fargo/Gallup Investor and Retirement Optimism Index, Black investors are less likely than white investors to feel comfortable taking on a lot of risk. They’re also more likely to give frequent financial help to relatives.
Aja Evans, a licensed mental health counselor and financial therapist based in New York City encourages people to ask themselves hard questions about their money beliefs.
“Feel your emotions, identify them, and then make a plan with your money, and then you can move forward,” she says.
2. Envision retirement
Retirement planning might seem like a low priority for some investors, especially if retirement is decades away. Recurring expenses may take priority, or maybe some want to use their money to live in the moment.
Hughes says sometimes people struggle to begin investing because they struggle to focus on the future.
“Some reasons are a lack of education and understanding how compound interest works and why it’s so important to start investing at a young age,” she says.
Compounding interest will help grow your money. That's a biggie because of that inflation we just mentioned — money's value erodes over time. The longer you save for retirement, the better.
If you have trouble thinking about retirement, Hughes recommends thinking about a person you know who is at retirement age and how they’re currently living. This can help create a connection to the future, so you can envision what you want for yourself and then put a plan together.
It could also be beneficial to think about future generations. What steps can you take now to help your children and grandchildren be better set up for success?
3. Start small
It might be good to take baby steps when trying to change your financial habits. This could look like doing research about whatever is creating 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 feels good,” says Evans.
4. Consider passive investing
Passive investing is a way to take pressure off yourself, especially if you’re struggling to understand the sometimes complex finance world. It’s a hands-off form of investing for those who don’t want to learn the more complicated stuff or who don’t want to take on investments with greater risk. Examples of passive investing include using robo-advisors or investment vehicles such as ETFs, index funds or mutual funds.
“You don’t need to be a finance expert, just let compound interest do its work,” Hughes says. “Even if you put a small amount of money into a mutual fund, when you start to see it grow, that feeling can be really energizing, and that can enable someone to move forward with a financial plan.”
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An earlier version of this article misattributed a quotation about a financial therapist’s approach and misstated the requirements to become a certified financial therapist. This article has been corrected.