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In light of Mental Health Awareness Month, let's delve into a rarely discussed - but crucial issue - in the world of finance.

And that is the rise in mental illness and its correlation with poor financial outcomes.

As a financial advisor, understanding this connection is vital for effectively planning for your clients and their families – especially as this trend seems to be worsening.

In short, financial stability is a key pillar that supports mental well-being. Having a nest egg and securing income allows for better sleep and hopefully contributes to lower anxiety levels.

But remember, this relationship goes both ways. . .

When mental health struggles take root and begin to fester – for various reasons - they can significantly impact the ability to plan and save for retirement.

This is why taking care of mental health is important for finances and planning.

So, here's how to understand this complex connection and what you can do about it.

The Vicious Cycle: Mental Health and Financial Woes

Financial stress is a major contributor to anxiety and depression.

Things such as an increasing debt burden, worries about affording basic needs, or fear of running out of money in retirement can be constant stressors. This stress can further impair your judgment, leading to impulsive spending, difficulty making financial decisions, and increased vulnerability to scams.

The cycle deepens when mental health issues affect your ability to manage finances effectively.

·         For instance, according to 2017 research by experts from Cornell University and the Medical Research Institute1, individuals with anxiety and depression are nearly 25% less likely to have a retirement savings account. The research also found that individuals with psychological distress had retirement savings up to 67% lower as a proportion of their overall financial assets compared to those without these psychological symptoms.

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Now, this due to several factors – such as difficulty focusing on long-term goals, challenges with budgeting, or the inability to work due to illness.

And of course, it’s difficult to identify whether mental health conditions caused a poorer financial outcome, or the other way around (where financial stress leads to diminished mental health).

·         It’s a “what came first? The chicken, or the egg?” situation.

But regardless of where it began, this can create an amplifying feedback loop with the two – financial stress and mental health - feeding off each other into a downward spiral.

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According2 to Psychologist Brad Klontz – a certified financial planner and expert in financial psychology and behavioral finance - there’s a correlation between financial strain and anxiety and depression.

·         For example, the Money and Mental Health Policy Institute3 survey found that financial issues drastically reduce recovery rates for common mental health conditions. In fact, individuals with depression and problem debt are 4.2 times more likely to still experience depression 18 months later compared to those without financial difficulties.

·         The same research showed that according to the national polling, nearly four in ten (39%) people with a mental health problem reported that their financial situation had worsened their mental health issues.

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Furthermore, according to FundaMental Health4 - a mental health non-profit in San Diego - the high cost of mental health care exasperates this vicious cycle. Financial stress from paying for care worsens mental health conditions and financial stability, ultimately preventing access to needed treatment.

In the U.S., 4 in 10 adults cannot afford necessary mental health treatment. In California, 42% of therapists do not accept health insurance, forcing many to pay out of pocket. Additionally, 2 in 5 Americans cannot afford an unexpected $1,000 expense, while those with major depression spend an average of $10,836 annually on mental health costs.

The irony is that the very costs associated with obtaining mental health care can drive individuals deeper into the mental health crises they are trying to escape. 

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This all – and more - creates a perplexing problem that should be addressed as mental illness has risen significantly over the last 15-odd years.

To put this into perspective, according to data from SAMHSA, about 18.1% of US adults had a mental illness in 2009, which rose to 20.6% by 2019.

Now that may not seem like a huge jump, but it becomes more alarming when you break it down by age groups.

·         Young adults aged 18 to 25 have seen the largest increase in mental illness rates, from 18% in 2009 to 29.4% in 2019. Additionally, mental health among children and teens has become a growing concern, with the CDC declaring a crisis in teen mental health.

With the rising cost of living, a dire housing situation, and political uncertainty in the U.S. – it’s not hard to see why younger adults are growing increasingly anxious and suffering mental illness.

But, if mental health trends are worsening, and mental health plays a key role in financial outcomes, then it isn’t a stretch to say that financial well-being may also worsen for the next generation of savers and retirees. 

Breaking From The Mental Shackles: Strategies for Improving Financial Wellness

Remember, by helping clients address their mental health and take proactive steps to manage their finances, you can potentially improve their future outcomes - as well as those of their families.

Fortunately, there are effective strategies to break this cycle and better manage both mental and financial well-being.

Here are some proactive steps you can guide your clients to take:

Prioritize Self-Care: It's crucial to take care of mental health. Clients should practice relaxation techniques like meditation or deep breathing, engage in regular exercise, and prioritize quality sleep. Seeking professional help from a therapist or counselor when needed is also important. A healthy mind is better equipped to handle financial challenges.

Start Small, Stay Consistent: Clients shouldn't overwhelm themselves by trying to overhaul their finances overnight. Instead, they should start with small, achievable goals, such as setting up automatic transfers to a savings account or tracking their spending for a month. Consistency is key to building healthy financial habits.

Encourage Financial Guidance: Financial advisors can help clients create personalized retirement plans, manage investments, and make informed decisions about their financial future. Clients, especially those facing mental health challenges, should consider seeking guidance from a professional.

Embrace Financial Education: Knowledge is power. Clients should educate themselves on financial basics like budgeting, debt management, and investing. Numerous online resources, financial literacy programs, and workshops are available to assist in this learning process.

Communicate Openly: Encouraging clients to talk openly about money with friends, family, or a financial therapist can be beneficial. Sharing concerns and experiences can provide support and accountability as they work towards their goals.

So, even when the road ahead seems challenging, prioritizing mental well-being is key to achieving financial stability.

**FundaMental Health is a 501(c)(3) non-profit organization on a mission to improve access to mental healthcare. The organization provides financial grants, case management, and referral services for individuals in need, with the belief that improving mental health will fundamentally improve communities. FundaMental is starting locally in their home community of Greater San Diego, with plans to expand programs to Los Angeles and beyond as they grow.


1.      Anxiety, depression can diminish retirement savings | Cornell Chronicle

2.      The connection between mental health and retirement, emergency savings (

3.      The-Facts-updated-2021-3.pdf (

4.      About Us - FundaMental health


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