How your finances affect your mental health

We’ve all heard the phrase “Money can’t buy happiness”. And there is some truth to that. But there is also another side to that coin: our financial habits do actually play a big part in our mental health. In this article we take a closer look at the money-mind connection and what you can do financially to ensure greater mental health.

If you’re concerned about how to make ends meet, how you’re going to settle your credit card debt or, in very dire circumstances, how you’re going to feed your family, it’s likely you’ll find yourself in a negative headspace. And, of course, the converse is true. If you don’t have those concerns, it’s a considerable burden off your shoulders.

These were the findings of an article by CNBC. In this enlightening read, the author states that “Statistically speaking, household income is strongly related to both emotional wellbeing and a person's evaluation of their own quality of life”. According to this view, a higher income can, in fact, lead to a significant reduction in negative emotions (such as sadness, hopelessness and anxiety) and can improve your overall mental wellbeing up until a point: an annual salary of R1 million. After that, the psychological benefits of a higher income are a lot less significant.

In simple language, money can make you happier up until a point—you won’t necessarily have a sunnier outlook on life because you’re earning R30 million a year as opposed to R20 million. But the difference between a couple of thousand a year and over R1 million can make the world of difference to your mental health. And we are not just referring to surface level happiness; studies conducted have found that it’s very likely that there is a direct correlation between an increase in income and a reduced incidence of serious mental illnesses.

Everyone wants to feel that they can provide for their family, and anyone who has experienced financial insecurity knows that this kind of stress can certainly trigger anxiety, panic or depression. If you have more debt than you can easily pay off or you don’t know how you’re going to feed your family from month to month, it’s going to affect your mental health. The only exception to this is a mortgage.

A 2004 study published in Housing Studies found that homeowners have lower levels of psychological distress compared to renters. Of course a mortgage only lowers the risk of mental health if you can make your mortgage payments without putting yourself under strain.


Being aware of the link between financial and psychological stress might help you to better monitor your financial and mental wellbeing and set you on a path to greater health and happiness. As with most things in life, the best approach is a balanced and informed one. If you do take out a loan or sign up for a credit card, it’s important that you do so for the right reasons and that you can meet your debt commitments without stretching yourself financially. Approach your money matters with a thoughtful and mature approach, and you’ll have a far greater chance at lasting happiness and security.