Psychologist, one of the highest-paying social science careers, is a lot more nuanced than you might think. Not all psychologists spend their time in clinical practice, conducting cognitive-behavioral therapeutic interventions. The specialized field of financial psychology applies the study of thought and behavior to the management of money.
Beliefs and Behavior Patterns When It Comes to Money
When you think about money, it’s easy to get lost in numbers and dollar signs, gains and losses, debits and credits. In real life, though, money – and how it’s managed – is so much more than a number. Why do some people spend while others save? How does spending, or wasting, money bring about feelings of internal guilt? Does shopping as a form of “retail therapy” really help improve a person’s mood?
There’s a hidden but substantial psychological aspect to financial management. Financial literacy can and should play a part in how you handle your money, but what you know about finance is far from the only element that drives your financial behavior. Factors like your emotions, your past personal and family experiences with money and unhealthy cycles of emotionally driven behaviors also influence your relationship with money, according to Forbes.
Positive emotions can arise from financial dealings, like the euphoria of a big gain in the stock market or the relief of paying off a longstanding debt. However, unpleasant emotions like guilt, fear, envy and shame are the feelings that primarily impact how people manage their money, Forbes reported. Too often, consumers get stuck in cycles of overspending or underspending – or both – out of guilt or a cycle of anxiety and avoidance.
These emotions don’t just impact how you feel and think about money. They affect how you manage your finances, such as whether you’re too afraid of normal losses to invest money, too eager to see unrealistic gains to comply with sound financial advice or too impulsive to rein in spending.
What It Means to Be a Financial Psychologist
If you want to help clients confront their emotional issues surrounding money and reframe their thinking to make better financial choices, a career as a financial psychologist or financial therapist could be for you. Financial therapists and psychologists talk to clients about their financial goals and troubles, their feelings and beliefs about money and their past experiences, good and bad, with money.
The therapist helps the client understand the emotions and cognitive errors that drive their relationship with money. By changing and challenging these ways of thinking and responding to money, individuals – with the help of their financial psychologists and therapists – can change longstanding behaviors toward their finances. Although financial psychologists and therapists must understand matters of financial planning, credit management and more, their role isn’t to replace a financial advisor or credit counselor but instead to focus on this unique aspect of the emotional side of money management.
To become a certified financial therapist, you need a degree, specialized competency training, 500 hours of experience and a passing score on an examination. Although financial therapists can come from either a finance background or psychology and mental health practitioner background, they must develop competence in both of these disciplines.
Who needs financial therapy? Someone who routinely deals with negative emotions or depression through impulsive buying behaviors might be making mistakes that both hurt their finances and keep them from feeling better in the long run. A person who has been traumatized by their past experience of poverty could be so unhealthily frugal that they aren’t living their life due to an irrational fear of spending money. Someone who has recently inherited money may feel paralyzed by the question of how to use it the right way. In any situation in which a person feels anxiety or depression related to their finances or has struggled to change financial behaviors or to understand why they have money issues, financial therapy could help, the Asbury Park Press reported.
You don’t have to have symptoms of a mental illness or a major financial problem to benefit from financial therapy. Understanding how emotions drive money management can also help anyone who has a tendency to make financial decisions reactively rather than proactively and with intention.
Coursework in Financial Psychology
If you decide that formal study in financial psychology is the right choice for you, you will complete a series of specialized classes in this field. Financial psychology programs often start with an introduction to financial psychology class, which covers topics like financial therapy, financial coaching, financial planning and more. In a course on applied behavioral finance, you will delve into the topic of how thoughts and feelings affect financial decisions and the theories at play in this field.
Students of a financial psychology program look at money management practices and beliefs for individuals, in a course like personal financial psychology, and for family groups, through courses in the psychology of family finances. Financial communication, including client interviewing, is an important area of study for financial psychologists and financial therapists. Talking about financial matters, as well as emotional matters, is crucial for being able to carry out therapeutic interventions.
Courses in financial psychology combine studies in the disciplines of psychology and business and finance. Some such coursework can lead to a Master of Business Administration (MBA) degree.