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Financial Therapy: What is It and Why You Might Benefit from It

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Some money issues require financial advice from someone who understands the numbers. Other matters may be more psychological in nature and would be best dealt with through a confidant who understands emotions. Many times fixing financial woes requires a combination of financial and emotional expertise. That’s where financial therapy comes in.

financial therapy

It is easy to think that personal finance is a clear cut rational discipline like math or science, all you need is the right formula. However, while there is some science, there is also a lot of art to the discipline. 

And like art, personal finance can be extremely messy. It involves emotion, motivation, story telling, psychology, decision making, assumptions, and myriad other behavioral factors that can be difficult to quantify. 

Personal Finance is Both Financial and Behavioral

It is easy to think that personal finance is a clear cut rational discipline like math or science, all you need is the right formula. However, while there is some science, there is also a lot of art to the discipline. 

And like art, personal finance can be extremely messy. It involves emotion, motivation, story telling, psychology, decision making, assumptions, and myriad other behavioral factors that can be difficult to quantify. 

Financial therapy is a specialized field of psychology. The Financial Therapy Association defines it as: “The integration of cognitive, emotional, behavioral, relational, and financial aspects of well-being.”

In other words, financial therapists help you “think, feel, communicate, and behave differently with money to improve overall well-being through evidence-based practices and interventions.”

Financial therapy can help you identify your attitudes and values around money and how you got to be who you are. How you approach money is often driven by how you were raised and the economic conditions you have experienced. It can identify why you feel the way you do about personal finance and how to improve your relationship with money.

Your financial situation is certainly influenced by how much you earn and the overall economy. However, it is also heavily impacted by your goals, attitudes, and values. And, while there are some right answers for reducing tax expenditures or increasing returns, there are not necessarily right answers when it comes to goals, attitudes, and values. 

But, by understanding your emotions, motivations, and what shaped your attitudes you can take more rational financial actions and better identify and achieve your own financial goals. 

There is a very small group of specialized financial therapists who lean into the psychological aspects of money. And, some financial advisors have a certification in financial therapy.  For example, the Financial Therapy Association offers an accreditation program in financial therapy. It teaches how to identify behaviors that hinder financial progress. 

However, most good financial advisors will dabble in “therapy.” And, they should at least understand your motivations and values. An advisor who doesn’t ask about these factors may not be giving you the best advice for who you really are.   

The CFP Board, the gold standard for financial advisor certifications, provides training in the “soft skills” of money management. They teach their advisors, “The Psychology of Financial Planning.” The course covers attitudes, values, biases, and other topics. 

Interested in talking with a financial advisor? NewRetirement Advisors offers full access to a CERTIFIED FINANCIAL PLANNER™ for personalized advice, guidance, and maybe a little therapy too.

Try a free discovery session with a CFP® professional to discuss your needs. 

Need more focused financial therapy? You might find a therapist here.

While anyone could probably benefit from financial therapy, figuring out from what kind of resource can be tricky. It is typically those suffering from acute financial trauma or a disorder who will benefit the most from a financial therapist as opposed to a financial advisor. 

Financial therapy is more focused on really addressing the underlying reasons for certain behaviors rather than developing a financial plan, improving financial habits, and enhancing decision making.

Here are a few examples of financial therapy and the type of practitioner who would be most useful:  

Financial therapy from a therapist can be useful if you grew up with extreme financial circumstances. Imagine having grown up very poor. Watching parents struggle, feeling pangs of hunger, or coveting what other kids could afford will have a lasting impact on your attitudes toward money. 

Regardless of income level, how your parents saved and spent money is going to influence your approach to personal finance. Even world events will shape how you think and feel about money. 

Some financial advisors can help you understand how your personal history is impacting your decision making. A therapist may be more helpful in resolving or shifting your behaviors.  

Both therapists and advisors can help you identify your financial values. An advisor is probably the best resource to help you translate those values into meaningful financial action. 

For example: Some people value financial security over financial gain. And, the financial decisions that help achieve security can be different than those that achieve maximum returns. 

An advisor can help guide your financial decisions based on your financial values.

When the stock market melts down, it is not the short-term loss of money that is the problem, it is all the emotions associated with the short-term loss and the actions those emotions might trigger.  

You see, too often people sell when the market tumbles. This phenomenon explains why the average 401(k) has returned only 3% annually over the past three decades, even though the markets’ returns have been triple that amount. The psychology of greed and loss avoidance is why people sell at lows and buy at highs. 

A good advisor can help keep you focused on your money and enable you to overcome emotions and make the right financial decisions. 

Overspending is a common financial problem. A financial therapist can help you understand why you are driven to overspend and counsel you on the emotions and behaviors that are driving you to spend too much. 

Avoidance is another common issue with regards to money management. Too many people bury their heads in the sand and avoid dealing with immediate financial concerns or don’t plan adequately for their future. Financial therapy can help identify why you avoid financial issues and how to get more engaged  with your money.

Financial planning is a discipline like exercise and eating well that should be integrated into everyone’s everyday life regardless of your values and financial history.

Surveys find that among those who have done retirement planning, a full 91% say it has been useful to them, with 33% reporting it has been critical to putting them on a better path for retirement.

Other surveys report similar data. For example, Charles Schwab finds that people with written plans feel more confident and less stress. Furthermore, research finds that people with plans make better decisions, develop better financial habits, and have better financial outcomes.

The NewRetirement Planner is the best online tool for planning. Start (or maintain) your plan today.

NewRetirement Classroom

Interested in learning more about the relationship between your emotions and your finances? Join New Retirement’s Build Your NewRetirement Plan course and explore your money values. Or, enroll in Thematic Classes and discover a variety of psychological biases that might affect you. Learn more about the NewRetirement Classroom.

NewRetirement Advisors

Get connected to a CERTIFIED FINANCIAL PLANNER™ who will collaborate with you on a holistic financial plan that is suitable to your goals, values and resources.

Book a FREE discovery session with NewRetirement Advisors.  

Financial Therapy Association

Find a financial therapist

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