8 min read 

Financial Health Vs Mental Health. Which one should we prioritise? What can we do to care for them?

Exploring the relationship between financial health and mental health, as well as tips on how we can look after ourselves better.

Our world is evolving at an alarming rate. Today’s society is vastly different from that of a decade ago. At present, unforeseen circumstances and societal issues may pose significant disruptions to the norm, therefore impacting our mental health and finances directly or indirectly. Thus, it is advisable that necessary precautions are taken so that the youths are prepared when adverse situations befall.  

According to the National Survey on Drug Use and Health from 2008 to 2017, researchers found that the greatest increase in psychological distress occurred among younger adults aged 18-25 (Twenge et al., 2019)

Moreover, studies from Lee (2020) highlighted the rise in youth unemployment among 20-24 year-olds, particularly in urban areas. This dilemma stems from structural issues such as deficiencies in the quality of education, graduate and skills mismatch in the labour market as well as the lack of quality jobs in recent years. 

As youths, these questions may come to mind when we are in our working years: “Why do I still have such little savings after years of working” or “How am I going to pay off my debt!”. Therefore, it’s worth exploring how various questions related to our financial life could affect us moving forward.

Ultimately, this article aims to examine the academic literature on the correlation between mental health and financial wellbeing, as well as the ways to find a balance between these two extremities. Further along the article, we will also be discussing the solutions pertaining to government interventions that can help alleviate poverty among the B40 community.

Here’s how our finances and mental health correlate

The association between mental health problems and financial issues was found in the study by Money and Mental Health Policy Institute (2019), whereby 46% of those who are in debt have a mental health diagnosis; 86% of persons who have mental health issues and are in debt believe that their debt is worsening their mental health condition. Thus, these research findings demonstrate that debtors are more likely to suffer from mental health disorders, and that poor financial management will exacerbate their health problems.

Furthermore, the research indicated that approximately one-fifth (18%) of people with mental illnesses are in debt. People with mental health issues are 3.5times more likely to be in debt than people who do not have mental health issues. Moreover, 72% of respondents reported that their mental health issues had further deteriorated their financial situation. 

The mental health challenges faced by people who are in debt 

Like any other source of overwhelming stress, financial problems can take a huge toll on our mental and physical health, relationships, and overall quality of life.

According to HelpGuideOrg (2021), financial stress can potentially lead to:

  • Insomnia or other forms of sleep deprivation. Worrying about overdue debts or a loss of income will keep you awake at night more than anything else.
  • Weight gain (or loss). Stress can affect your appetite, leading to overeating or meal skipping to save money.
  • Depression. With reference to a study conducted at the University of Nottingham in the United Kingdom, living in a financial quagmire may make anyone feel sad, despondent, and unable to concentrate or make decisions. Thus, people who are in debt are more than twice as likely to suffer from depression.
  • Anxiety. Money may provide a sense of security. However, we may feel insecure and anxious without it. Therefore, worrying about overdue debts or a loss of income can induce symptoms of anxiety such as sweating, shaking, heart palpitations or even panic attacks. 
  • Relationship issues. Money is regarded as the most common source of conflict between spouses. Financial stress, if left uncontrolled, may make you irritable and furious, resulting in the erosion of trust, loss of intimate interest, and communication breakdown in a relationship.
  • Withdrawal from social situations. Financial troubles can lead you to withdraw from friends, limit your social interactions, and retreat into your “shell”, all of which will exacerbate your stress levels.
  • Physical illness. For instance, headaches, gastrointestinal symptoms, diabetes, high blood pressure, and heart disease. As universal health coverage may not be provided in every nation, financial concerns may drive those who are unable to afford healthcare to delay or avoid seeing a doctor due to the incurrence of high medical charges.
  • Indulgence in unhealthy coping mechanisms, such as alcohol and drug abuse, gambling, or overeating. Financial difficulties might even lead to self-harm or suicidal intentions. 

Prevention is better than cure 

To not get caught up in the vicious cycle of financial predicaments and mental health suffering, we must first acknowledge the importance of financial education and awareness, especially among the youths.

Here are some of the tips given by the American Psychological Association (2020) to deal with financial stress:- 

  1. Take it one step at a time when it comes to making financial decisions. People’s willpower can easily be sapped when they are faced with several, back-to-back decisions that put their willpower to the test. Instead of making too many decisions at once and being overwhelmed, spread out your financial decisions.
  2. Keep in mind what’s vital. The actual spirit of the holiday season might be overshadowed by commercialism. Scale back when your holiday cost list exceeds your monthly budget. Remember that family, friends, and connections are more important than material possessions.
  3. Create a plan and stick to it. 
  • Determine the sources of your financial stress. It’s possible that you have too much credit card debt, not enough money, or that when you’re stressed or concerned, you overspend on unneeded goods. Or it could be a combination of issues. Make a different strategy for each one.
  • Come up with a solution. Consult a free financial counselling service or brainstorm solutions with your family or a trusted friend.
  • Make your plan a reality. Be precise about how you’ll implement the solutions you’ve come up with. Cutting up credit cards, networking for a new career, registering at a local food bank, or selling items on several online platforms to pay off bills are all examples of ways to do so.
  • Keep an eye on your progress. With the spike of Covid-19 pandemic, we’ve all experienced that there are events that can impact our financial health in a sudden way. Therefore, it is critical to check our financial strategies implemented on a frequent basis. 

All in all, setbacks should not hinder your progress. We’re all human, and no matter how well-planned our strategy is, we may wander off or be derailed by the unexpected. Don’t be too hard on yourselves, but get back on track as soon as you can.

The role of the government in breaking the poverty cycle among the poor

It was observed that Malaysians who emphasised on savings as one of their financial strategies are effective in escaping poverty as compared to those without this capability. Furthermore, income savings was found to contribute to lasting gains in net worth over a seven-year period and that 81% of household wealth accumulation is attributed to savings (Gopal and Malek, 2015). 

As a result, the economic outlook of a household or an individual can improve with proper financial education and effective financial management. In addition, the provision of financial education is supported by the Chief Executive Officer of Credit Bureau Malaysia, K.C Wong, who accentuated the need for structured financial literacy programmes to be incorporated into the Malaysian education system, specifically the Sijil Pelajaran Malaysia (SPM) curriculum.

According to a 2020 Star Newspaper report by Chonghui, most Malaysians find it difficult to regulate their finances during hard times. A survey found that 52% of Malaysians struggle to raise RM1,000 during an emergency. The 2018 Financial Capability and Inclusion Demand Side Survey also revealed that nearly half of Malaysians are not confident that they will have adequate funds to sustain themselves in retirement age, and one in ten are not disciplined in managing their finances too.

At this juncture, home-taught financial education is no longer sufficient for youths to thoroughly grasp financial concepts as the parents may not be practising appropriate financial management themselves. Hence, it is important to inculcate financial literacy  through school curriculums, whereby equal significance is given just as other compulsory subjects As mentioned by K.C Wong, this initiative can be made possible with the help of subject matter experts to devise a structured syllabus on financial literacy. He also highlighted the need to instil the art of managing money – spending, saving, investing and borrowing, to students.

Despite efforts to increase financial literacy among youths through education, it is still a challenge to introduce these approaches to those who are financially struggling and those who live paycheck to paycheck. Hence, the government and various NGOs should take a more proactive role in ensuring inclusivity and accessibility to financial education.


In summary, the studies cited above have supported the notion that poor financial management can adversely affect one’s mental wellbeing and vice versa, poor mental health can lead to one slacking on their financial management. Therefore, it is imperative to consider both of these factors hand-in-hand as they closely correlate with one another.

In terms of mental health, the author believes that many issues stem from peer pressure, the strive for perfection, and the desire to excel in anything and everything. In reality, things don’t always turn out as we want them to be. Our life is truly precious because of the limited time available to pursue things that are meant for us. Ultimately, we need to start understanding ourselves, our needs, our priorities, and our inner motives that drive us towards meaningful pursuits (it can definitely be something substantial to us but not for others). 

Besides, to lead a happier life is also by recognising and understanding the lifestyle that we desire. Therefore, crafting the financial goals that align with what we need to achieve. Be it a simple or a more luxurious lifestyle, it’s just our own choice and our own life. 

With regards to financial education, we should empower ourselves with knowledge from various sources, such as from mainstream education or verified online sources. FLY: Malaysia is always an online platform suitable for youths to develop their basic financial knowledge. On the other hand, it is also important to reach out for help (e.g. financial advisory) to other trusted organisations should the need to seek professional advice arise. 

In short, mental health awareness should be done as vigorously as financial health awareness!


Reference List 

Twenge, J., Cooper, A., Joiner, T., Duffy, M. and Binau, S., 2019. Age, period, and cohort trends in mood disorder indicators and suicide-related outcomes in a nationally representative dataset, 2005–2017. Journal of Abnormal Psychology, 128(3), pp.185-199.

Lee, H., 2020. Unemployment among Malaysia’s Youth: Structural Trends and Current Challenges. [online] Available at: <> [Accessed 27 November 2021]. 2021. Coping with Financial Stress. [online] Available at: <> [Accessed 27 November 2021]. 2021. Dealing with financial stress. [online] Available at: <> [Accessed 27 November 2021]. 2021. The Facts: Money and Mental Health. [online] 

Available at: <> [Accessed 27 November 2021].

Gopal, P. and Malek, N., 2015. Breaking away from the cycle of poverty: The case of Malaysian poor. The Social Science Journal, 52(1), pp.34-39.Chonghui, L., 2021. Structured syllabus for financial literacy a must in schools, says credit bureau. [online] The Star. Available at: <> [Accessed 27 November 2021].

Researcher(s): Lim Yan Ting

Reviewer(s): Muhammad Bahari 

Editor(s): Natalie Eng

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