Financial stability means mental well being

THE global economic crisis is expected to have negative consequences on the mental health of nations. Already, some countries have reported an increase in suicides and mental health problems.

Since Brunei is a relatively affluent nation and the influence of the global economic crisis is barely evident here, one might believe that there's no need to worry about increased stress and anxiety.

In fact, in Brunei it is still extremely easy to get loans and buy most of the luxuries one wants. While this may appear to be a blessing, it can lead to greater problems.

Research indicates a strong relationship between mental well being and financial capability, regardless of how much money one actually has.

So, regardless how much you earn and whether or not you've been affected by economic changes, your mental health will be influenced by how you think about money and manage your financial situation. Easy credit, lack of savings, difficulty making payments, lack of financial knowledge and lack of a financial plan all work together with other factors to significantly reduce mental well being.

If reports that consumer debt is extremely high and savings are relatively low in Brunei are correct, then one can expect that many people here are suffering with reduced well being.

The trend observed here in Brunei appears to be global. Research in the US indicates that Americans' personal savings rate has declined each year since 1982, becoming negative for the first time in April 2005. The past 20 years show decreasing attention to asset accumulation. People's attitudes toward finances have changed, with a shift toward greater spending and less savings, and increased comfort with larger debt loads. Within this global trend, however, individuals have varying attitudes towards finances, with some people feeling very insecure or apprehensive about finances and others feeling confident and knowledgeable.

One's attitude towards finances also influences well being. Research indicates that individuals with more positive financial attitudes are happier and have higher financial literacy. While researchers had expected to also find that higher financial knowledge leads to more happiness, the link between financial attitudes and happiness appears stronger than the link between financial literacy and happiness.

Common sense suggests that part of the value of increasing financial literacy may be changing people's attitudes about money. Specifically, people who are financially literate are also more likely to believe that: (1) They can successfully manage their finances; (2) Their financial decisions reflect their personal values and choices; and (3) Financial resources are valuable mostly because they can create and sustain community and interpersonal relationships.

These researchers also found that older respondents had more financial knowledge, a greater sense of financial autonomy, more intrinsic financial goals (e.g., retirement, an emergency fund, and donations to charity), and fewer extrinsic financial goals (e.g., to be wealthy, to own expensive possessions, to be financially successful) than did younger respondents. Financial capability is also strongly related to psychological well being. Higher financial incapability is associated with higher mental stress, lower reported life satisfaction, and health problems associated with anxiety or depression. Estimates indicate that people's financial capability is a strong predictor of their psychological well being. Moving an individual with relatively low levels of financial capability to an average level of capability improves their psychological well being by about six per cent and life satisfaction by 2.4 per cent. It also decreases the likelihood of suffering from anxiety or depression by 15 per cent. In the divorced and unemployed, this effect is even greater.

The results from this information from many different sources should lead one to conclude that financial attitudes, knowledgeable and capability all have a relative large and statistically significant impact on psychological well being.

This would suggest that improving your financial management knowledge and skills would likely lead to improved attitudes toward finances. Improvements in all three factors should therefore contribute positively to mental health — and hopefully to financial health as well.

Next week: Improving financial attitudes, knowledge and capability.

Todd McPherson is a psychologist and therapist at Riverview Medical Clinic, Bandar Seri Begawan. Tel: 8637750. Email: counsellingbrunei@hotmail.com The Brunei Times