When we think about money and the idea of financial security, we tend to focus on numbers: how much we make or whether we have enough saved for our financial goals, like buying a home or retiring early.
That makes sense – it’s hard to feel financially secure if your numbers aren’t where you want them to be. And if that’s the case, this is when you might turn to a financial advisor for help in putting together a plan to get on track.
But for some people, a financial plan alone may not be enough to give them the peace of mind they’re looking for. Even with a plan in place, you may still have a hard time sticking to certain money habits or feeling reassured that you’re on the right path.
So what gives?
Well, financial security isn’t just about having a plan or getting your numbers right on paper.
Our relationship with money also matters when it comes to financial wellness.
And that relationship can be influenced by a number of factors that have little to do with how much we have or earn – such as our upbringing, our values and how we were taught to feel, think and talk about money.
Just as our relationships with other people can influence our well-being, our relationship with money can impact our financial success and sense of security, too.
This is where financial therapy comes in.
It is an emerging field of practice that looks beyond numbers and figures when it comes to helping people achieve financial wellness.
Financial therapy aims to help people explore their relationship with money and the deep-rooted issues that might be holding them back from their financial goals. It’s a process that could provide people the space, support and tools they need to build a healthier mindset and develop positive habits in their financial life.
What is financial therapy, exactly?
Do you lie down on a couch and talk to someone about your feelings with money. In many ways, yes! (The lying down part is optional.)
Since financial therapy is still a relatively new field of practice, it may be helpful to start with one of the formal definitions.
According to the Financial Therapy Association (FTA), it’s “a process informed by both therapeutic and financial competencies that helps people think, feel, communicate, and behave differently with money to improve overall well-being through evidence-based practices and interventions.”
Let’s break that down a bit.
Generally speaking, a financial therapist could help you explore and work through the challenges – financial, behavioral or psychological – that may be keeping you from reaching your goals or achieving a certain peace of mind.
To be sure, building good money habits or sticking to a financial plan isn’t always the easiest. If you’ve ever found yourself struggling to cut back spending or pay off debt, you’re definitely not alone!
But certain money challenges are so personal and persistent that you may need to talk to a financial therapist in order to begin tackling them. These could include:
In other words, financial therapy isn’t just about getting your finances in order. A goal of this process is to help people gain a better understanding of their financial hang-ups by looking into the emotional, mental and relational factors that may be holding them back from developing a healthier mindset or money habits.
In this way, financial therapy may be seen as a more holistic approach to helping people achieve their financial goals.
You might be wondering how financial therapy is different from sitting down and talking with a traditional financial advisor.
That’s a great question.
Say you want to save up for something big, like a home down payment. In general, financial advisors might be great at helping you analyze your spending, savings and investments, offering recommendations on topics like mortgages, insurance or taxes.
A financial advisor may approach this savings goal by zeroing in on your budget and identifying areas where you could reduce spending and put that extra money towards your down payment.
But what if overspending is a persistent challenge for you? Just because you know what you should be doing (spend less, save more) doesn’t mean you can change your money habits overnight. Certain habits are incredibly hard to break – especially if they’re connected to some deeper issues that you may not be aware of.
If this is the case, a financial advisor may not be the right professional to help you address the psychological aspects of your personal financial challenges.
You may have to turn to a financial therapist for help – someone who could help you dig a little deeper and figure out what’s really going on. In financial therapy, you may spend time talking about your beliefs, experiences or attitude towards money and how they might be influencing your financial habits.
For example, perhaps spending money is a way for you to cope with stress (which can make it difficult for you to put money away each month). If this is the issue, your financial therapist may work with you to come up with healthier ways to manage stress and help you track your progress over time.
Another example – let’s say you do have enough saved for a down payment, and it made sense for you to buy a home. Still, you find yourself constantly avoiding the decision because for whatever reason, you just don’t trust your financial judgment.
Again, a financial therapist could work with you to untangle whatever emotional or mental knots tying you up. If you’re coming up against the same problems over and over again or just can’t seem to get yourself unstuck, it could be that certain habits and beliefs you have about money may be holding you back.
And since financial therapy aims to combine financial planning with therapeutic counseling, this approach could help you understand the cognitive or emotional hurdles keeping you from making certain changes in your financial routines.
If you’re interested in speaking with a financial therapist, the Financial Therapy Association provides a listing of professionals who are part of their network.
Generally, a certified financial therapist (or CFT-I) has to meet a series of educational and experience requirements in the areas of financial therapy, financial planning and financial counseling, and therapeutic competencies.
Keep in mind that not all financial therapists have the same level of education, training or experience. Their services, approach, client focus and fee structure may also vary. That’s why it’s a good idea to do your research before you commit, so that you find a professional who fits your needs.
And depending on your personal situation, you might find that working with both a financial advisor and a financial therapist may be necessary to help you address your concerns.
Hey, staying on top of your finances (and feeling good about them) can be challenging. If you feel like you need a little extra help, you’re not alone, and financial therapy is one potential option to consider.
This article is for informational purposes only and is not a substitute for individualized professional advice. Individuals should consult their own tax advisor for matters specific to their own taxes and nothing communicated to you herein should be considered tax advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA does not provide any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.