Some people are in just too much psychological stress or confusion to deal with money on a rational level. For some the problem seems quite obvious. They may not have the intellectual engines to comprehend and apply the logical concepts of personal money management. For others the intellect is there but there is something else in the psyche that prevents the connecting of the logistical dots to manage money tools properly. They have problems that fall into the realm of Clinical Psychology or Psychiatry.

Financial therapy is for those people with a diagnosed psychological disease or disorder. These are people who can only be diagnosed by a professional psychologist or psychiatrist. They need treatment. It will included therapy treatment for the disease or disorder first and then once the disorder has been dealt with, the financial part of financial psychology can be undertaken with the patient’s psychological condition monitored by the professional. In this case the patient would have to be treated by the professional and then the financial professional would also have to be coached on the limitations that the patient may have for financial literacy.

The Psychology

Psychological diseases or disorders require a great deal of training to diagnose and treat. There are many ways to treat the various disorders and the psychological professional is the best to deal with this aspect. The ultimate goal is to locate and release powerful emotional energy that has been rejected or imprisoned in the unconscious mind. There is a life event or series of events or a mental or emotional process that is an impediment to the normal functioning of the psyche. It is capable of causing retardation of rational mental processes needed to manage money which needs to be managed rationally to be most effective. Most therapies include calm talks to root out the psychological trauma or event that has caused the mental disorder or illness.

Once the psychological problem has been dealt with by the therapist, the patient and the financial consultant can then address the financial part of the process. There are a few challenges with this concept. First is that often the psychological problem can only be dealt with and treated on an ongoing basis. Often periods of calm and control by the patient are punctuated by regressions to the irrational behaviors that were the obstacle to sound financial behavior. Money tools such as compound interest require rational behavior over long periods of time to have their best effects. A patient can undo years of financial progress during a very brief regression into old behaviors.

The second problem is much more complicated. The challenge is that the psychological professional may be the victim of some of the psychological factors that we identified in Financial Psychology. That person may have money problems and therefore will need to be purged of their own psychological weaknesses when it comes to money management before they can engage in the counsel of a patient that needs help with their management of money. Similarly, the financial professional may need some counsel as well. Standards in the finance profession are not regulated by any stretch and financial psychology is not even on the radar for standardization.

This can turn the concept into a real mess.

• Cognitive Biases – You will not only have to sort out the lies that the patient/client will be using to rationalize their illogical financial behavior but you have to deal with the same challenges with the professionals…both the psychological professional and the financial professional. 
• Family influence – who are you coaching? The patient/client who needs this level of assistance usually has other stakeholders interested in their financial well being. You then have to analyze where these members are in the progressions outlined in the description of Developmental Psychology’s insights on Financial Psychology. This turns the process into a team event and that costs money. 
• Ethics – any of the parties can take advantage. There will be a lot of money on the table if folks are willing to get this involved in a psychologically challenged individual’s finances and the behavior can lower itself to the criminal level by any of the stakeholders involved. 
• Complicated and costly…how much is there to gain? If someone is this challenged, the best strategy may be to just use simple, safe financial products that require little management and maintenance. There are a lot of stakeholders involved and they are there to take care of their part of the money. That money will need to be very productive to feed everyone what they consider their fair share for their interest in taking care of the patient/client. There lies a contradiction and a problem.

The Financial:

The financial part is the Big 3 Financial tools. The patient/client must be able to comprehend and manage their life plan, their budget and their balance sheet logically over long periods of time. That or they must be able to sort out who can be trusted to do this for them over the long term due to possible relapses and regressions where they may engage in counterproductive management behaviors. For the financial professional to work most productively he must be dealing with logical instructions that are in tune with the logical way that money works.

Conclusion:

It certainly has all the makings of a 3 ring circus. Financial planners and managers have seen this over and over. It has more quills than a porcupine and more needles than a cactus. This could be why this is a completely neglected facet of financial management. It is not even defined in Wikipedia. We tried and that was like putting our heads into a pencil sharpener. It does need to be dealt with though. Some of our most creative and talented minds are also tortured by mental illnesses and disorders. They are also the most wealthy demographic in our society. Helping them to properly manage their money has benefits that speak to many facets of our society. Once again resolution of this problem has to address a contradiction. It will need the focus of some of our most creative and talented people. The irony is that it is this group whose psyches are most vulnerable to mental illnesses and disorders.

Here is a brief list of psychological diseases and disorders.

• Addictions
• Obsessive and/or Compulsive behaviors
• Abuse - physical or psychological
• Schizophrenia
• Bipolar disorder
• IQ lower than 90
• Depression

There are over 400 different definitions of mental disorders that need the attention of a psychiatrist or a psychologist. That is why we will leave this to the professionals. Take care of the disorder first and then if there is the capacity to connect with the rationality of money management engage the services of a financial coach for that. The overwhelming fact is that those affected by such disorders account for over half of the population. No wonder money is not distributed fairly...less than half the players have the capacity to properly manage the rational tools of personal finance.