Financial Planning & Mental Health: Does Money Make You Happier?

The Answer is Compelling, But Not Exactly Clear-Cut

Does money make you happier? It’s a great question that has plagued philosophers, psychologists, economists, and investors for centuries. Like all great questions, the answer isn’t clear cut or easily identified, but it’s certainly a compelling topic to discuss, especially since May is Mental Health Awareness Month.

At Aviance Capital Partners, we know that nearly 1 in 5 Americans currently live with a mental illness.[1] And we also believe that these conditions do not care who you are or how much money you have in the bank. They affect people of all ages, ethnicities, religions, and financial standing.

If you have ever struggled with your mental health and thought “If only I had “X” amount of money, all my problems would be solved!” You are not alone. Many Americans believe their life satisfaction and happiness are directly related to how much money they have.

Though more money can reduce stress about how to meet the demands of everyday financial obligations, we believe that it’s not the money that makes you happier, but rather the peace of mind that comes from financial security and proactive financial planning. Here are 3 ways financial planning can benefit you and your mental health.

[1] NIMH » Mental Illness (nih.gov)

Planning Ahead Means More Choices

One of the biggest benefits of proactive financial planning is that can offer you more financial choices. Think about it. The earlier you plan for something, whether it’s retirement, buying a house, or going on vacation, the more options you tend to have available to make your goal a reality. Research also shows that the more flexibility and autonomy a person has, the more likely they are to be happy and feel satisfied with their life. [1] Though this is commonly linked to earning more money, it can also be applied to those who choose to plan ahead with their funds.

Here are just a few of the financial planning strategies that require anywhere from a couple of months to several years to properly implement:

  • Backdoor Roth conversions
  • Special Needs Trusts
  • ABLE accounts
  • 529 plans
  • Incentive stock options
  • Qualified dividends
  • Tax-loss harvesting

Starting early is never a bad idea if you want to maximize your long-term earning potential and minimize your tax liability.

Planning Ahead Reduces Stress

Along with more choices, planning ahead also reduces stress by allowing time to work in your favor. This occurs through the power of compound interest which is the idea that the value of money is based on time. It stands for the proposition that a dollar received today will be worth more than a dollar received tomorrow both because of the potential to invest that dollar and earn interest and because inflation is constantly degrading your purchasing power.

Each day that your funds are left invested, you can earn interest on the original investment and the interest already earned. And the earlier you invest, the longer you will have to let your money grow.

Through proactive financial planning, clients come to realize that they can put their money to work for them rather than working nonstop in pursuit of money. Financial planning can help alleviate the burden of constant financial worry and this sense of control can help reduce stress and improve your overall health and wellbeing.[2]

Planning Ahead Gives Your Money a Greater Purpose

Another mental health benefit of financial planning is the mindset shift that occurs when your money becomes more than just something that you need to survive. Money is a powerful tool. When people have an abundance of money, they may think their lives are fulfilling just because of how much they have. Conversely, when money is tight there can be a perception that it is a never-ending trap of living paycheck to paycheck.

But the truth is, money can be both of those things no matter how much or how little you have. Proactive financial planning is the mechanism by which you can start making effective financial decisions, positioning your money as a tool to achieve your goals whether you want to pay down a credit card or buy a second home.

Research suggests that living a purpose-filled life is strongly linked to improved physical health and increased life expectancy,[3] so it makes sense that giving your money purpose will also contribute to a greater level of life satisfaction. Purpose can come in many forms: donating money or assets to a charity of your choice, spending money on hobbies or items that spark true joy, traveling with family and friends, or leaving a legacy for your loved ones after you pass.

No matter which financial goals you work toward, there is always room to be more purposeful in your financial decisions.

ACP Can Help You Plan Ahead

At Aviance Capital Partners, we can help you plan ahead. Whether you are working through a challenge or celebrating a win, we will help you navigate your financial journey through proactive financial planning. Take the first step in reducing financial stress with our free What’s Your Risk Number? quiz. To learn more about our Aviance WealthPlan™ Process, reach out to us at (239) 598-4747 or email us at wealthrelations@aviancepartners.com.

Aviance Capital Partners, LLC (“ACP”) is an SEC registered investment adviser located in Naples, Florida. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that ACP has attained a certain level of skill, training, or ability. While information presented is believed to be factual and up-to-date, ACP does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Not all services will be appropriate or necessary for all clients, and the potential value and benefit of the ACP’s services will vary based upon the client’s individual investment, financial, and tax circumstances. The effectiveness and potential success of a tax strategy and financial plan depends on a variety of factors, including but not limited to the manner and timing of implementation, coordination with the client and the client’s other engaged professionals, and market conditions. The tax and estate planning information provided is general in nature, which should not be construed as specific financial planning or tax advice tailored to an individual reader. ACP suggests that readers consult a financial professional, attorney or tax advisory professional about their specific financial, legal or tax situation. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by ACP, will be profitable or equal any historical performance level. Additional information about ACP, including its Form ADV Part 2A describing its services, fees, and applicable conflicts of interest and its Form CRS is available upon request and at https://adviserinfo.sec.gov/firm/summary/146597.

[1] Making more money really does make people happier, study says (studyfinds.org)

[2] Op-ed: Why financial planning improves your health (cnbc.com)

[3] Association Between Life Purpose and Mortality Among US Adults Older Than 50 Years | Cardiology | JAMA Network Open | JAMA Network

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