<p>Financial shocks are associated with mental health. Most studies analyze this relationship using changes in income. This study examines whether a novel measure that captures the joint effect of income and expenditure—residual income—predicts reported symptoms of depression and anxiety more accurately than income alone. Residual income is defined as the amount of income remaining at the end of the month after covering expenses. Using a representative longitudinal dataset of Czech households from 2022 to 2024 and applying individual and time fixed-effects models, we find that residual income is more strongly associated with symptoms of depression and anxiety than income. Importantly, the relationship is significant across most of the income distribution. Individuals with low residual income are particularly vulnerable to changes in financial conditions, especially those with a history of depression and anxiety symptoms. Our findings suggest that residual income captures effects of financial shocks on mental health symptoms that analyses of income and expenditure separately may overlook. They can also inform the more effective targeting of psychological and financial interventions toward the most vulnerable individuals.</p>