92% of investors have a better mindset if they do this one thing, research finds

By Carol Lynde, Bridgehouse Asset Managers

Special to Financial Independence Hub

If you Google “what contributes to positive mental health?,” you’ll find helpful tips on exercise, diet, getting enough sleep and mindfulness. You’ll find advice on connecting with people, building resilience, gaining control over your life and getting help from a mental health professional. You might find mention that reducing your debt and controlling spending can reduce stress. But you’ll find very little about financial planning or that making a financial plan can contribute to positive mental well-being.

It can.

Bridgehouse Asset Managers recently released research confirming a direct link between planning your finances and positive mental well-being. The more financial planning activities you do, the better your sense of security, control, ability to bounce back from life’s challenges and positive mindset. Further, having a financial plan makes you less anxious about today’s financial issues, such as cost of living, debt levels and saving enough to retire.

The Bridgehouse national research project included focus groups and an online survey developed in partnership with the Canadian Mental Health Association (Toronto) and an advisory panel including mental health, legal and financial advisor experts from across the country. The research found that it’s not the amount of money you have, it’s doing something that counts. Planning your finances and creating a plan for the future leads to a sense of hope, security, resilience and control:  all attributes associated with positive mental health.

There’s a compounding effect: the more financial planning you do, the better your mental health. The survey asked participants how many of 10 financial planning activities they had completed and compared the results to their self-assessed mental state.

The research concluded the more activities respondents completed, the better their sense of security, control, ability to bounce-back and positive mindset. Financial planning activities included: calculating retirement requirements, calculating net worth, determining short-term goals, determining long-term goals, determining insurance requirements, establishing an emergency fund, creating a debt management plan, creating a budget, actively finding day-to-day savings and scheduling regular meetings with a financial advisor.

Of respondents who did seven or more financial planning activities:

  • 73 per cent expressed a sense of security about their financial situation.
  • 73 per cent felt in control of their financial situation.
  • 79 per cent felt an ability to bounce back if life throws tough challenges.
  • 79 per cent reported a positive mindset.

Respondents who took even small steps claimed positive mental well-being benefits. Of those who did only one-to-three financial planning activities:

  • 52 per cent reported a sense of security.
  • 54 per cent reported a sense of control.
  • 73 per cent felt an ability to bounce back.
  • 71 per cent reported a positive mindset.

According to regression analysis (a research method to rank contribution weighting), establishing/maintaining an emergency fund and scheduling regular meetings with a financial advisor were the two most important drivers of positive mental well-being and the ability to sleep at night.

Beyond taking action, having a full-written financial plan contributes strongly to positive well-being by reducing stress about today’s financial circumstances and providing hope for the future. Focus group participants considered their financial plan a road map or a path to a better future that gave them clarity, hope, options and a sense of control and security:

  • 92 per cent of investors with a financial plan described their mental well-being as excellent, very good or good.

If you’re reading Financial Independence Hub, you already know how money, investing and financial planning is critical to positive well-being. And yet, we have a national mental health crisis in Canada and money and financial planning are not even part of the conversation. Several focus group participants were grateful to parents and friends and financial advisors for talking to them about their finances and getting them started. Others without this direction or support expressed anxiety and difficulty finding people to talk to about money. Our research confirms that Canadians can improve their mental well-being by planning their finances. Let’s shout this positive message from the rooftops.

Bridgehouse Asset Managers undertook this research as part of its eight-year mental health research and education initiative (Mental Health & The Financial Advice Relationship) investigating the impact of mental health and illness on financial decision-making. The initiative was developed in partnership with the Canadian Mental Health Association (Toronto), guided by an advisory panel of mental health, legal and financial advisor experts.

Carol Lynde is President and Chief Executive Officer, Bridgehouse Asset Managers. Carol joined the firm in 2002 and has more than 35 years of experience in the financial services industry. A Chartered Professional Accountant, Carol also holds a Bachelor of Business Administration. As past Chair, Carol continues to sit on the Board of Directors of The Investment Funds Institute of Canada (IFIC) and serves on the governance and policy and research committees. She also serves as Vice Chair of the Board of Directors and Chair of the Finance and Audit Committee for the Lakeridge Health Foundation in Durham Region. Carol is a member of the Institute of Corporate Directors.

FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY. This material is not intended to provide legal, financial, medical or other advice, and may not reflect the thoughts and opinions of Bridgehouse. Information provided is not a substitute for professional advice. If you feel that you may need medical advice, please consult a qualified health care professional. Permission must be obtained if the material is to be reproduced in whole or in part. For more information and important disclosures, please visit: https://www.bridgehousecanada.com/mental-health/

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