How mental health affects managing money

Living with a mental health condition can affect your money management because it impacts the way you feel, think and act. It can also influence your decision-making, planning, spending behaviours, coping strategies, and communication. It can also lead to more debt; research by MoneySavingExpert found that around 36% of people living with poor mental health have severe or crisis debts compared to around 6% of the general population.

Mental health and money management

If you have a pre-existing mental health condition, or you begin to experience mental health problems, it can impact your financial situation and how well you manage money.

How a mental health condition can affect someone's ability to manage money can be different from person to person. Even if those people have the same mental health diagnosis. However, there are five common signs to look for:

• Impulsivity: If you are experiencing an episode of mania, or if you struggle with impulse control, you could buy things on impulse.
• Avoidance: Putting off making decisions if you are living with an anxiety disorder such as speaking to your bank, managing debts, or applying for benefits.
• Harmful coping mechanisms: Spending more money than you can afford on short-term coping strategies (i.e. alcohol, clothes, food, cigarettes, drugs) if you have depression or low mood disorders.
• Motivation: If you’re depressed, you may struggle with the motivation to manage your finances. For example, not opening your post, paying bills, or making important financial decisions.
• Concentration, learning and memory: Some mental illnesses such as schizophrenia might affect your ability to concentrate, learn and remember things. This might make it harder for you to develop the skills you need to manage your money.

Financial Capacity in Serious Mental Illnesses (SMI)

Studies have shown that serious mental illnesses (SMI) such as schizophrenia often include impaired financial capacity. Financial capacity is a term meaning the fundamental ability to manage your finances independently and is often used in legal cases to determine whether someone is able to live independently. In the case of schizophrenia, people living with schizophrenia often never acquire basic skills in managing their finances, perhaps due to the age of onset being in early adulthood.

This might mean that, if you or someone you know lives with schizophrenia or another serious mental illness, extra support may be needed in order to successfully manage finances. Below, you can find some information on how to understand and manage your patterns of spending money. You can also read about how to get support managing money or find somebody to manage your money for you.

Understanding patterns in the way you spend your money

The first step to understanding how your mental health affects your money management is to find patterns in your financial behaviour to identify any potential habits.

You may already have some insight into this and be aware that you manage your money differently depending on how your mental health is at certain times. It may also be useful to ask family members or professionals that know you well if they have any awareness.

The exercise below is a proactive and practical way of taking control of your spending and safety netting for the future. It is an excellent way to see how your mood can trigger different situations, or lead you to behave differently to managing your money.

Exercise: Monitor your mental health and spending

To gain a further understanding of how your mental health affects the way you spend money, it may help to:

• Keep a diary of your mood, and rate it out of 10 at multiple points in the day.
• Make a note of any situations that are connected to money management. This could include; buying something, receiving a bill, visiting the bank, having a conversation about money, budgeting.
• Each time you spend money record how you were feeling both before and after.
• Keep this diary for a few weeks and see if you notice any patterns emerging.

Tips for managing your money with a mental health condition

Now that you understand a bit more about your mental health and how it impacts on your money management, here are some tips you may find helpful.

Managing impulsive spending with a mental health condition

Mental health conditions such as Bipolar disorder can lead to impulsive spending if you are experiencing an episode of mania or hypomania, where you are not able to consider if you can afford it.

Dr Thomas Richardson, who has researched Bipolar disorder and financial difficulties, found that the greater the impulsivity in someone, the more money problems they had.

If you have identified that your mental health condition leaves you vulnerable to impulsive spending, try these strategies:

• Write things down or talk things through with someone you trust. This can help ground you and slow down your thought process.
• Give yourself breathing space before making any decisions or buying things by setting a date to finalise a purchase or decision (a day, a week or a month).
• Remove contactless payment options from your phone or card. If possible, buy things in cash rather than using a card. This will make impulsive purchases more difficult.
• Ask a trusted friend or family member to look after your credit cards if you notice your warning signs have been triggered.
• If you find not buying something makes you feel worse, you can buy the item but keep the tags on and keep the receipt. This again will leave you with a breathing space, and you can return the items once you are out of your manic phase.

Understand why you avoid managing your finances

Mental health conditions can mean you avoid managing your finances. There may be many causes for this, including:

• You are feeling overwhelmed.
• You find it hard to remember information.
• You are struggling with motivation.
• You find it difficult making decisions.

Avoidance is a short-term protective function as it can give you a sense of relief and make you feel better. However, the problem doesn’t go away and can get worse the longer you leave it.

An example of this could be receiving an unexpected charge to your bank account. Avoiding facing this problem may lead to additional charges, or for it to happen again, without you knowing why.

If you have identified that your mental health condition means you avoid managing your finances, try these strategies:

• Write down the thing you are avoiding and then write the steps you need to do to face it.
• Make each step as small as possible, as you are much more likely to face a task if it is easily achieved. Concentrate on short-term goals.
• Assign each step to a day and a time. We are much more likely to complete an action if we have dedicated a set time-slot.
• It can be helpful to tell somebody about your plan. If you don’t want to do this, make sure you write tasks down - it helps to bring them to reality.
• Try to think about the ‘SMART’ tool when considering each step:
  • Specific: think about all of the details.
  • Measurable: how will you know if you have done it or not?
  • Achievable: don’t set yourself up to fail.
  • Relevant: think about what will make a difference to the task.
  • Time-based: schedule when you want this to be achieved.

Managing harmful coping mechanisms related to money and mental health

When living with a mental health condition, you are more likely to fall into harmful coping mechanisms to manage the way you feel. These are ‘short-term fixes’ to enhance your mood but can create more problems long-term.

For example, if you are hungry while food shopping, you are more likely to buy sugary items to provide you with a quick fix of energy and a feeling of fullness. More than likely, once the sugar rush has gone, you will regret it. Whereas, if you went food shopping on a full stomach, you are more likely to make healthier, more balanced choices.

It is difficult to recognise a connection to harmful coping mechanisms when you are in the situation. But once you have found a pattern or trigger, you can reduce the risk of relying on these coping strategies in the future.

If you have identified that you use harmful coping mechanisms, try this strategy:

• Create an ‘If-then’ plan. Once you become aware of triggers - thoughts, feelings or behaviours - which lead to unhelpful behaviour, make a plan of what you need to do if you notice these triggers.

For example, when Sara begins to feel low, she will often go to bed and spend time online and buy items she knows she can’t afford.

She feels a bit better, and it gives her something to look forward to. However, afterwards, she feels guilty, ashamed and stressed at how much money she has spent. These feelings cause her to avoid friends and family, making the coping mechanism worse for her in the long run.

Sara’s ‘If-then’ plan could be:

“If I begin to feel low, then I will ring a friend, so I have company and a distraction. I know it’s not what I feel like doing at the time, but it always makes me feel better afterwards and stops me from spending money.”

Problems with concentration, learning and memory

You may find that your mental health condition means that you have problems with:

• Planning a budget and sticking to it.
• Understanding your options relating to money.
• Remembering to pay bills on time.

If you find the above tasks difficult, you might want to ask a trusted friend or family member to help you with these tasks. You may also have access to a healthcare professional such as a support worker or navigator who can help you with these things.

If you find it very difficult to manage your money at all, even with help, you might need to ask a friend or family member to look after your money and bills for you.

Next steps

This guide has looked at known problems for people managing money with a mental health condition.

It can be difficult and stressful to consider finances if you are experiencing poor mental health.

However, seeking the right support and being aware of your potential unhelpful behaviours can help you better manage your money.

Now you understand how your mental health can affect the way you manage your money, you should learn how to manage your money better, and if you are in debt, what the options are available to you.