We know how your mental health can affect the way you deal with money. If you’re feeling low or depressed, you may lack the motivation to manage your finances. It might not feel worth trying. Thinking of the future is hard when you have no motivation to do so. Spending may give you a brief high, so you might overspend to feel better. You might make impulsive financial decisions. If your mental health affects your ability to work, this might also reduce your income and put more pressure on you.

We also know your financial situation can affect your mental health. Certain situations might trigger feelings of anxiety and panic. Worrying about money can lead to sleep problems. Money problems can affect your social life and relationships. You might feel lonely or isolated, or like you can’t afford to do the things you want to.

You don’t need to have significant debts for money to affect your mental health. We know all too well the vicious cycle of depression and debt. Nor are you guaranteed to be happy, just because you have money. Even for those who have money, the emotional connection to money, and the way you think about money, influences your decisions. And these could have huge impacts on your future state of mind.

You might feel guilty for spending money, even if you know you can afford it. Or, you might feel guilty for seeking support, even if you know you need it. You might feel stressed if you’re under a lot of pressure to support yourself and others. And worn down from working so hard to generate the income just to sustain your family. What is it all for?

Steve Jobs had money. “I reached the pinnacle of success in the business world. In others’ eyes, my life is the epitome of success. However, aside from work, I have little joy. In the end, wealth is only a fact of life that I am accustomed to. At this moment, lying on the sick bed and recalling my whole life, I realize that all the recognition and wealth that I took so much pride in, have paled and become meaningless in the face of impending death.”

OK so Steve Jobs is an extreme example, but a key question to ask is: What is it all for? Is it for your family’s security? Is it for charity and philanthropy? Is it for the biggest holiday of your life (AKA retirement)? And have you got a plan to get there? Is your plan balanced enough to allow you the flexibility to live a little?

You might find it helpful to take some time to think about how you feel about money and why. For example, if you’ve struggled with money in the past or didn’t have much money growing up, this might affect the way you feel about money now. You could try answering these questions:

• Are there certain times when you’re more likely to spend money?
• Are there certain times when you’re more likely to save money?
• How does it feel when you spend money?
• Do you feel differently when you’re spending and saving?
• What are the emotions and feelings you think of when you think about money?
• Which aspects of dealing with money make your mental health worse?

Once you’ve done this, you might start to feel like you understand your habits and patterns around money a bit more. Knowing these could help you plan ahead for difficult times.

Having plans give us structure and a framework to work within. We can allow flexibility, and allow ourselves to be human. Using trusted advisers who understand money but also the emotional impact of money is important to keeping balance. And remember, what one person does is not necessarily the same and what others should do. We are all individuals. We all have to find our own balance.

Let’s pick Lauren as an example. She is 35, married and is currently earning 100,000 CHF per year. She is pregnant and wants to understand how the 60% contract when she returns to work after maternity leave is going to impact her pension provision and associated benefits.

Current Situation:

She earns 100,000 CHF per year. The coordination deduction is currently 25,095 CHF (this reduction is to coordinate the first and second pillars) therefore the coordinated salary is:

• 100,000- 25,095 = 74,905 CHF

As she is 35, a minimum of 10% is paid into her second pillar therefore 7,490 CHF is being contributed on an annual basis.

60% Contract:

60,000 CHF earnings per year. Lets assume the coordination deduction hasn’t increased since she returned to work, therefore the coordinated salary is:

• 60,000 – 25,095 = 34,905 CHF

She is now 36 and still in the 10% category so 3,490 CHF is being contributed to her second pillar on an annual basis.

Impact:

Lauren’s Second Pillar Retirement Savings

Although Lauren has reduced her contract by 40%, her annual second pillar contributions have decreased by 53%.

Lauren’s Second Pillar Insurable Benefits:

Children’s disability pension, children’s orphans’ pension, Lauren’s disability pension and the survivor’s pension in place for her husband will all also decrease as these are based on the new coordinated salary.

What does this mean for her and her family?

Lauren will be the main carer for their child and if Lauren was to become sick or die the family would have less protection in place as this is calculated on the new lower figure under the new contract.

At a time when they need more protection in place, they will have less.

What can be done?

In Lauren’s case she started a third pillar with insurance to protect her family on her death. Now if she dies before retirement the family will receive a 200,000 CHF lump sum and she is using the savings provision to save for her own retirement in line with her attitude to risk.

Of course, if Lauren’s circumstances were different my recommendations could have also been different – but that’s the benefit of a financial review