Life Money
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The key to financial success is to create a financial plan and stick with it over the long term. Sometimes, this is easier said than done.

How mental health impacts financial planning

Stress from three areas of your life can derail your financial plan in a heartbeat

Financial/economic events

  • Market ups/downs, bad economic news, recessions, employment, interest rate increases, etc…

Life events

  • Death of a spouse, divorce, marital status changes, injury, career change, etc…

Physical/mental illness

  • There is mental health (i.e. state of well-being, reaching potential, coping with normal stress and there is mental illness), dementia, mood and anxiety, additive disorders and of course psychotic disorders, etc…

Stress from these three areas can have an impact on your mental health and affect your financial decision-making.

When faced with stress, we tend to fight, flight or freeze.

  • FIGHT: We may become aggressive, react emotionally and make impulsive, short-term decisions
  • FLIGHT: We may disengage, deny or avoid making important decisions.
  • FREEZE: We may get stuck or paralyzed to the point where we can’t even entertain making a decision

All of these reactions can interfere with the success of your financial plan.

It is so important as a financial planner to recognize some of the common health issues facing Canadians today. They include:

  • Diminished financial capacity
  • Anxiety
  • Depression
  • Substance abuse
  • Problem gambling

Any one of these issues could be catastrophic to your financial well-being.

Duty of financial advisors

The balancing act for advisors between privacy and confidentiality are fundamental. But that doesn’t mean you don’t have a fiduciary duty to protect your client sometimes from themselves. Reach out to industry experts, look to firm/peer support and continuing education to assist with the detection of warning signs and legal boundaries.

Dealing with financial crisis

The best time to deal with a financial crisis is five years before it happens. Now is the time to talk about the potential issues that could be ahead for both clients and advisors and document how a potential mental health issue could be dealt with should one arise.