A Closer Look at Psychologists’ Economic Health

Collin Davidson, PhD - Ohio River Region Representative

Psychologists often work closely with other professionals who make high salaries such as primary care physicians, psychiatrists, and lawyers. And while a career in psychology can certainly result in reasonable financial security, there are obvious reasons for concern about our collective financial health. Notably, Doran, Kraha, Marks, Ameen, and El-Ghoroury (2016) estimated the anticipated educational debt of psychology graduate students at a median of $110,000, which led many to consider putting off life milestones such as marrying, buying a home, or having children. A more recent estimate demonstrated that PhD students accumulated an average debt of $122,000 and PsyD students had an average debt of $231,000 (Wilcox, Pietrantonio, Farra, Franks, Garriott, & Burish, 2022). Both studies highlighted that the increased cost of psychology graduate education is not matched by increased entry-level salaries in the field. This increased financial strain puts psychologists at risk for poor financial health. 

While various definitions of financial health exist, a comprehensive definition based on a survey of financial professionals (Joo, 2008) contains both objective (low debt, ongoing savings plan, and following a plan) and subjective components (being highly satisfied with one’s financial position and reporting low levels of financial stress). In the first attempt to understand the financial health of mental health professionals (MHPs; including psychologists, counselors, marriage and family therapists, and social workers), Klontz and Britt (2012) found MHPs to more financial avoidance beliefs and engage in more financial denial behaviors than financial planners. In a follow-up study, Britt, Klontz, Tibbetts, and Leitz (2015) demonstrated that compared to other professions (e.g., financial planner, business professional, educator), MHPs had poorer global financial health assessed by items such as (“I have adequate insurance to cover my property,” “I have money set aside for emergencies,” and “I am investing money for the future.”).

Potential solutions to psychologists’ poor financial health lie in a two-pronged approach: Increasing basic financial literacy and addressing the habitual and emotional factors that drive psychologists to engage in maladaptive financial behaviors. Ideally, these solutions would be implemented at a systemic level such as in graduate training and continuing education courses; however, individuals can also seek help on their own.

The marrying of financial and therapeutic fields is at the heart of the creation of financial therapy, wherein a financial professional gets additional training in psychotherapy or a mental health professional gets additional training in the world of finance. The resulting certified financial therapist is well-positioned to help those with psychological issues related to money such as financial avoidance, overspending, financial anxiety, or arguments with a partner about money. Financial therapists can provide foundational financial knowledge, review budgets, and make some financial recommendations. Financial therapists with more advanced financial training can provide more advanced financial services such as a comprehensive financial plan or investment management.

As with those seeking help for more standard mental health concerns, not all need the help of a professional and can seek out self-help. Within the domain of financial literacy, many resources exist, but I am partial to Personal Finance for Dummies (Tyson, 2023) because it is very accessible and covers the full range of personal finance topics. Another well-regarded option is  The Index Card: Why Personal Finance Doesn't Have to Be Complicated (Olen & Pollack, 2017). Both resources contain foundational financial education that helps people understand their spending, create budgets, pay off debt, create and maintain savings, save for retirement, fund education, obtain insurance, and estate plans.

As psychologists, we are more aware than most that information and facts are not enough to make lasting behavior changes. Just as we would not stop at providing a pamphlet on the dangers of smoking when helping a client quit, making changes in our financial lives requires self-reflection, monitoring, skills, and support. Books such as Money Mammoth (Klontz, Horwitz, & Klontz, 2020) and Mind Over Money (Klontz & Klontz, 2009) can offer a strong introduction to financial therapy. 

As a brief foray into the realm of financial therapy, let us consider money scripts which are posited to be unconscious, deeply held beliefs related to money that drive financial behaviors (Klontz, Britt, & Archuleta, 2015). Research has elucidated four types of money scripts: Money avoidance, money worship, money status, and money vigilance. Money avoidance is the belief that money is inherently negative, leading to fear and disgust, avoidance of financial responsibility, and blaming others for financial issues. Money worship is the conviction that money can buy happiness, driving the relentless pursuit of wealth and material possessions. People with money status beliefs associate self-worth with wealth, leading to conspicuous displays of money and competitiveness. Finally, money vigilance is characteristic of those who are cautious and secretive about finances, prioritize saving over spending, and are driven by fear of financial insecurity. Research has demonstrated negative financial outcomes for people holding any of the first three money scripts, while those with money vigilance often have better financial outcomes. The Klontz Money Script Inventory-Revised (Klontz, Britt, Mentzer, & Klontz, 2011) is a reliable and valid measure that is freely available online if you would like to assess your money scripts.

Additional financial therapy approaches include tracking situations, thoughts, emotions, and behaviors related to financial habits and starting to challenge money-related beliefs; thinking about how parents modeled financial behaviors, and considering important money-related memories. These approaches help to increase one’s understanding of the emotional factors that create and maintain unhelpful financial habits and how to interrupt and change them. Given the potentially precarious financial health of psychologists and the fact that many are also small business owners, we likely stand to benefit from taking a bit of our own medicine.

References

Britt, S. L., Klontz, B., Tibbetts, R., & Leitz, L. (2015). The financial health of mental health professionals.  Journal of Financial Therapy, 6, 17-32.  doi: 10.4148/1944-9771.1076

Doran, J. M., Kraha, A., Marks, L. R., Ameen, E. J., & El-Ghoroury, N. H. (2016). Graduate debt in psychology: A quantitative analysis. Training and Education in Professional Psychology, 10, 3-13. doi: 10.1037/tep0000112

Joo, S. (2008). Personal financial wellness. In J. J. Xiao (Ed.), Handbook of consumer finance research (pp. 21–33). Springer.

Klontz, B., & Britt, S. L.  (2012). How clients' money scripts predict their financial behaviors. Journal of Financial Planning, 25, 33-43.

Klontz, B. T., Britt, S. L., & Archuleta, K. L. (2015). Financial therapy:Theory, research, and practice. Springer.

Klontz, B., Britt, S. L., Mentzer, J., & Klontz, T. (2011). Money beliefs and financial behaviors: Development of the Klontz Money Script Inventory. Journal of Financial Therapy, 2, 1-22. doi: 10.4148/jft.v2i1.451

Klontz, B., Horwitz, E., & Klontz, T. (2020). Money mammoth: harness the power of financial psychology to evolve your money mindset, avoid extinction, and crush your financial goals. Wiley

Klontz, B., & Klontz, T. (2009). Mind over money: Overcoming the money disorders that threaten our financial health. Crown Currency.

Olen, H., & Pollack, H. (2017). The Index Card: Why Personal Finance Doesn't Have to be Complicated. Penguin.

Tyson, E. (2023). Personal finance for dummies. Wiley.