Pattie Lovett-Reid: How the state of your mental health can impact your finances
The key to financial success is to create a financial plan and stick with it over the long term. Sometimes that’s easier said than done.
Stress from these three areas of your life can derail your financial plan in a heartbeat.
1. Financial or economic events. Market ups and downs, bad economic news, recessions, employment, interest rate increases, etc.
2. Life events. Death of a spouse, divorce, marital status changes, an injury, a career change, etc.
3. Physical or mental illness. There is mental health which encompasses the state of your well-being, the ability to reach potential, coping with normal stress. And then there is mental illness, which can include dementia, mood and anxiety, addictive disorders and of course psychotic disorders. Physical illnesses can also take a toll.
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 do one of three things:
Fight: We may become aggressive, react emotionally and make impulsive, short-term financial decisions.
Flight: We may disengage, deny or avoid making important financial decisions.
Freeze: We may get stuck or paralyzed to the point where we can’t even entertain making a financial 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, which can include diminished financial capacity, anxiety, depression, substance abuse, and problem gambling.
Any one of these issues could be catastrophic to your financial well-being. Large withdrawals of money, unexpected gifting and lack of financial awareness are signs to pay attention to.
However, this can be a balancing act for advisors as privacy and confidentiality are fundamental. But that doesn’t mean you don’t have a fiduciary duty to your client. Reach out to industry experts, look to firm or peer support and continuing education to assist with the detection of warning signs and not only the appropriate but legal course of action.
The best time to deal with a 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.
Today is Bell Let's Talk Day. For every tweet and retweet using the hashtag #BellLetsTalk, Bell will donate 5 cents to Canadian mental health initiatives.