Financial advisors often find themselves playing the role of counselor, and they are confronted with clients whose emotional health is wreaking havoc on their finances. Some clients may be financially well-off, but so fearful of making a wrong choice that they don’t make any, leaving their wealth to slowly erode in cash accounts. Then there are clients who spend too freely, choosing blissful ignorance about potential damage to their bottom line.

Neither of these types of clients are financially healthy—regardless of wealth—because an individual’s attitude toward finances is just as essential to overall health as it is to the economic aspects of one’s life. In fact, the American Psychological Association reports that money is continually one of the top sources of stress in U.S. households, regardless of the economic climate.

It’s time to redefine the term “financial health” so it includes both a person’s economic stability and emotional well-being around his finances.

Economic stability is only part of reaching financial health 

What is financial health? The topic usually brings to mind only a person’s monetary wealth, but, as many advisors know, even the wealthy can suffer because of their finances. For example, consider the client who has more than enough financial resources to last the rest of his life, but gets anxious about even the smallest splurge. A standard financial algorithm would classify this type of client as being in excellent financial health, since he possesses enough material wealth to withstand any reasonable economic shock. Yet, this finance-related anxiety can ultimately mean his quality of life is quite low.

The impact of emotional well-being on financial health 

Morningstar conducted several focus groups with financial advisors to learn about the types of barriers to financial health they encounter in their day-to-day practice. The lesson from these interviews was clear: A client’s psychological state heavily impacts financial behavior, and advisors who ignore their clients’ emotional well-being quickly see their well-thought-out financial plans in ruins.

For advisors, paying attention to a client’s emotions and attitudes toward finances can be a key opportunity for meaningful coaching. By identifying specific patterns of thought that may sabotage clients’ overall financial health, advisors can help guide clients to better financial decisions and increase their satisfaction and peace of mind.

For example, our research found that a person’s unique “mental time horizon,” or how far ahead one thinks into the future, had a significant impact on financial health. A person’s tendency to think further into the future could have a huge impact on cash management, debt reduction, and savings behaviors—resulting in, on average, 20 times more money saved. However, many people automatically give more weight to immediate needs and discount the future, resulting in financial behaviors that may hurt long-term goals.

To identify your client’s natural mental time horizon, ask her to think about a day in the future. Without any prompting, your client will think of a day in a time horizon with which she feels comfortable. Once you know where she naturally feels at ease, you can start challenging her mindset and asking her to think a few years beyond her natural benchmark. Every time you meet with the client, push a little further, encouraging the client to extend the mental time horizon.

How this approach to financial health can help clients  

Morningstar has created a simple framework for assessing your clients’ financial health on both an economic and emotional level. Using this framework, you can quickly identify specific aspects of a client’s financial health that need to be addressed, and then use this information to guide the client toward a stronger state of well-being.