Financial Therapy: What it is and how it got its foothold

Small-business owner Nora Herting made her decision to go into financial therapy in the early days of the pandemic. She had already heard about it but had no idea precisely what it was. Business owners like herself were brought down heavily by lockdowns, so finding ways to cope was necessary.

With the dilemma of choosing between her financial security and that of her 14 employees, Herting, who lives in New York, went to Amanda Clayman, a financial therapist in Los Angeles. Instead of offering financial advice, Clayman asked Herting to create a timeline of her relationship with money. After a few more sessions, they developed a plan.

Herting saved a huge chunk of her money for emergencies and retirement. She was then tasked to determine how much she needed to self-fund her company. This was what created the visuals for their meetings.

The two talked it through, and Herting realized that she felt good about the money that she was willing to lose on her business potentially. Herting’s company did a rebound and is currently running with all her employees.

What is Financial Therapy?

Financial therapy has been around for years, but little was known about it. Amanda Clayman was one of its first practitioners and became a licensed clinical social worker in 2006. With financial therapy, she aims to integrate financial and emotional wellness. 

Clayman claims to see a clear need for it but found no institutional path or system that addressed it. Constantly asking why it didn’t exist, she later discovered that she wasn’t alone. Brad Klontz, a psychologist and a certified financial planner, also asked the same question as Clayman.

Klontz was researching the overlap between his two disciplines in the early 2000s. In the 2008 financial crisis, he saw no recognition of this field when financial and mental health professionals formed the Financial Therapy Association. 

The organization aimed to spread awareness of the connections between personal finance and psychology. The financial crisis helped the mental health profession to learn and understand that money is a source of deep concern to their clients. The main hurdle was the therapists that weren’t ready yet to talk about it, Klontz said. 

A Different Problem for Financial Advisers

On the other hand, financial advisers were facing the opposite problems. According to Megan McCoy, head of the financial therapy graduate program at Kansas State University, financial advisers saw their clients melting down during the Great Recession. They were distraught during their sessions, she added.

Financial professionals can come up with clear solutions when it comes to money but can’t deal with the emotions related to it. McCoy further stated. What they need are tools that weren’t available back then.

Today, these much-needed tools now exist. In 2019, the Financial Therapy Association introduced an accreditation program created explicitly for financial and mental health professionals. This program lets them get certification in financial therapy.

This program covers topics such as estate planning and budgeting and therapeutic techniques that pinpoint behaviors and attitudes related to financial progress. 

In the Time of Covid

The 2008 financial crisis started the financial therapy flame, but the COvid-19 pandemic was what fanned the fire. It was during this time that financial therapy boomed. The previous taboo about discussing mental health has decreased while the students of the discipline have increased.

Board-certified psychologist Traci Williams said that not all certified financial therapists are licensed mental health workers. You need to verify those who are licensed to practice it. Williams added that many financial coaches claim to be financial therapists when they really are not.