how to cope with financial stress
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This article contains mention of stress and anxiety. It is however not meant to diagnose or treat anxiety disorder. If you are suffering from anxiety or other mental health illnesses consult a professional.
Do you often find yourself stressing over money or finances? Do you constantly think about how you will pay your bills? Or maybe, you live comfortably but are constantly worried you are not doing enough to stay ahead. Financial stress is very common. According to a 2015 study by the American Psychological Association, 72% of Americans feel stressed about money at least some of the time. (1) While these feelings can feel overwhelming, there are ways to minimize the financial stress and develop a healthier relationship with money.
What Causes Financial Stress
Financial stress is attributed to a number of things including but not limited to:
- Poor relationship with money growing up: According to 2017 T. Rowe Price study, 69% of parents are reluctant to talk to their children about money. Only 23% of children say they talk to their parents about money (2). These numbers are abysmal. Like all other healthy behaviors, examples are mostly set in the home. Many children grow up without proper financial teachings, leaving them vulnerable as adults to navigate the world of money management. Often times, a lack of knowledge or education leads to anxiety over the unknown.
- Overspending/poor money management: Unfortunately, stress over money can often lead to more spending. Spending money on something provides a momentary high, boosting your mood and offering a sense of comfort-albeit temporary. However, this momentary high is trumped by the greater stress of not having any money later on. Additionally, those retail credit cards carry an extraordinary price tag in the form of high interest rates and can wreak havoc on your credit score.
- Depression: Sadly, the COVID-19 pandemic tripled depression among adults in the US to 27.8%, up from 8.5% the previous year. In 2021 the depression rates increased even more, reaching 32.8% (3). Financial difficulties are both a cause and consequence of depression. Many individuals may find themselves unable to perform basic budgeting tasks when faced with debilitating depression. Conversely, overspending is also a reaction to depression with spenders chasing that purchase high. An MMHPI study asked participants if they tend to spend more when they’re depressed, with 93% answering yes (4).
- Excessive Frugality: While frugality can be a good thing, there is such a thing as being too frugal. An overbearing emphasis on saving and penny pinching can cause financial stress. With excessive frugality, people are immensely focused on every penny, often times forgoing necessary expenditures like home repairs, doctors visits, or even groceries to avoid spending money.
How To Overcome Financial Stress
Build an Emergency Fund
Having that financial cushion can provide some emotional reprieve for many. In general it’s recommended to keep 3-6 months of living expenses in case of an emergency. This emergency fund is meant to remain untouched until an actually emergency appears (ie car repair, medical bill, etc.). Some good options include a CD account or high-yield savings account like this one from CIT bank.
Set a Budget and Stick to It
Often, our financial stress is a factor of not knowing where our money is going. Setting a budget can seem scary at first but can actually provide a sense of control over what seems like a chaotic situation. Knowing exactly what’s coming in and going out can help you regain a sense of control over your finances and help bring you back down to reality.
Increase Your Income
If the financial stress is coming from not being able to keep up with your bills, the natural solution is to either reduce your expenses or increase your income. You can reduce your expenses with the previous tip and budget accordingly. Increasing your income simultaneously will provide even more of a cushion. There are various opportunities for side jobs that could help bring in additional income. Even an extra $500 a month will make a huge difference for the average person.
Get Professional Help
Financial stress can be very real and overwhelming and there is no shame in getting professional help. If you find that other ways of coping such as budgeting, or building an emergency fund are not helping, seek a professional to help you manage through your anxiety.
Coping with financial stress is not uncommon and can feel like a never-ending dilemma. However, taking control of your finances and following these few steps can help you base your concerns in reality will help you deal in the long-term.
Sources:
(1) Speaking of Psychology: The Stress of Money. Linda Gallo, PhD. https://www.apa.org/news/podcasts/speaking-of-psychology/financial-stress#:~:text=APA’s%20latest%20Stress%20in%20America,sources%20can%20affect%20your%20health.
(2) How to Talk To. Your Kids About Money. Ramsey Solutions. https://www.ramseysolutions.com/relationships/how-to-talk-to-your-kids-about-money
(3) Despression Rates in the US Tripled When the Pandemic First Hit _ Now they’re even worse. Jillian Mc.Koy. https://www.bu.edu/articles/2021/depression-rates-tripled-when-pandemic-first-hit/
(4) What to Do When Anxiety or Depression Affects Your Finances. Dana George. https://www.fool.com/the-ascent/banks/articles/what-do-when-anxiety-depression-affects-finances/
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