Money is a source of significant stress for individuals and families. Our financial difficulties and anxiety are a constant reminder of our financial insecurity. The effects of financial stress are deep and widespread. It plagues our relationships, our overall well-being, and deeply affects our loved ones in ways we normally don’t think of. The long-term impact of financial stress is a generational one; a blight on the goals and plans of hardworking families. Financial stress research shows that 60% of people indicated feeling anxious when thinking about their personal financial situation. Women reported feeling anxious about their finances at a higher degree (65%), compared to men (54%).
So what causes financial stress and anxieties around money? Financial stress can be caused by a variety of factors, often stemming from the imbalance between an individual's financial resources and their financial obligations or goals. However, economic imbalances are just one branch of a multifaceted problem. Let’s examine some common causes of financial problems and stress:
- Inflation: The growing costs of living and meeting daily needs.
- Poverty: Living in a state of poverty with little or no assets or resources
- Housing costs: High rent or mortgage payments relative to income can strain budgets and contribute to financial stress.
- Lack of assets and savings: The absence of assets to help create and fund opportunities often leaves people in a state of stagnation. Additionally, not having an emergency fund or adequate savings can leave individuals vulnerable to unexpected expenses, making them more susceptible to financial stress.
- Low financial literacy: A lack of knowledge about personal finance, budgeting, and financial planning can lead to poor financial decisions, which can exacerbate stress.
- Inconsistent income/unemployment/underemployment: Inconsistent cash flow easily creates budgeting upsets, especially when trying to meet fixed expenses. Furthermore, losing a job or being unable to secure a full-time position that matches one's skills and qualifications can lead to a significant decrease in income and financial instability.
- Debt: Medical debts, excessive credit card debt, student loans, mortgages, or other types of loans can create a heavy financial burden, as interest accumulates and repayment becomes challenging.
- Family responsibilities: Providing for children, aging parents, or other dependents can put pressure on finances, especially if unexpected expenses arise.
- Psychological factors: Perceptions of social status, comparisons with others, and the desire to keep up with certain lifestyles can lead to overspending and financial stress.
- Major life transitions: Death, divorce, job changes, and other life events.
- Legal issues: Dealing with legal problems, such as lawsuits or legal disputes, can result in significant financial strain due to legal fees and potential financial liabilities.
- The lasting legacy of inequality, access, institutional practices, and the growing wealth divide are additional underlying forces that give way to financial stress and anxiety.
Access to capable financial professionals and creating a financial plan paves the way to help individuals and families overcome financial stress.
Financial planning means putting plans in place in order to achieve your goals. It is a relevant and important process for all individuals and families regardless of income or asset level. Research shows that only 31% of families have any type of financial plan. Everyone deserves a financial plan. This absence of financial planning is one of the root causes of financial problems. Dealing with financial stress requires a combination of practical strategies and emotional well-being techniques. Financial stress and mental health are inextricably linked. Here's a more concise breakdown:
- Face reality: Acknowledge your financial situation and accept that stress is a normal reaction. Avoiding or denying the problem can make it worse.
- Seek professional help: Consult a financial advisor or credit counselor for expert guidance tailored to your situation.
- Budgeting: Create a realistic budget to track income and expenses. This helps you regain control over your finances and make informed decisions.
- Prioritize expenses: Identify essential and non-essential expenses. Cut back on discretionary spending to focus on necessities.
- Emergency fund: Start or build an emergency fund for unexpected expenses. Having a safety net can reduce anxiety.
- Debt management: Develop a plan to pay off debts gradually and negotiate with creditors. Seek competent professional advice when navigating the world of debt management, as there are many predatory vendors in this space.
- Set realistic goals: Break down larger financial goals into smaller, achievable steps. Celebrate each milestone.
- Educate yourself: Learn about personal finance to empower yourself with knowledge for better decisions.
- Focus on what you can control: Concentrate on actions within your control rather than worrying about uncontrollable factors.
- Mindfulness, relaxation, and staying active: Practice mindfulness, meditation, yoga, or deep breathing to manage stress and gain perspective. Engage in regular physical activity to boost mood and reduce stress.
- Stay social and reduce isolation: Lean on friends and family for support. Sharing your concerns can lighten the emotional burden.
- Limit news exposure: Reduce exposure to news that exacerbates financial anxiety.
- Hobbies and interests: Engage in activities you enjoy to divert your focus from stress.
- Limit comparisons: Avoid comparing your financial situation to others'. Everyone has a unique journey.
- Time management: Organize your time to balance work, personal life, and financial responsibilities.
- Tiny steps: Consistent tiny steps to confront a significant issue can be the best way to have a successful outcome. No matter how small the action, if it helps to positively address your financial situation, continue taking them.
- Celebrate small wins: Acknowledge and celebrate even small achievements in managing your finances.
- Positive affirmations: Replace negative thoughts with positive affirmations to foster a more optimistic mindset.
Remember that financial stress takes time to manage. Be patient with yourself and adopt a holistic approach that combines practical steps with emotional well-being strategies.
Effects of financial stress
Financial stress can have a wide range of negative effects on both your physical and mental well-being, as well as your overall quality of life. Some common effects of financial stress and financial stress examples include:
Physical health impact:
- Sleep disturbances: Financial stress can lead to sleep difficulties, including insomnia and disrupted sleep patterns.
- Physical symptoms: Headaches, muscle tension, gastrointestinal problems, and other physical symptoms can be exacerbated by stress.
- Weakened Immune System: Prolonged stress can weaken the immune system, making you more susceptible to illnesses.
Mental health impact:
- Anxiety and depression: Financial stress can contribute to heightened levels of anxiety and depression, affecting your mood and overall mental well-being.
- Feelings of helplessness: Inability to control financial situations can lead to a sense of helplessness and loss of self-esteem.
- Cognitive impairment: Stress can impair your cognitive functions, making it harder to concentrate, remember things, and make decisions.
- Increased risk of mental disorders: Chronic financial stress may increase the risk of developing mental health disorders such as generalized anxiety disorder or major depressive disorder.
- Family conflicts: Financial stress can lead to arguments and conflicts within families, especially when dealing with limited resources.
- Strain on relationships: Couples might experience strain due to disagreements over money management and financial goals.
Work performance impact:
- Decreased productivity: Financial stress can lead to reduced focus and productivity at work.
- Absenteeism: The stress might contribute to increased absenteeism or even the inability to work due to health issues.
- Withdrawal: Financial stress might cause people to withdraw from social activities and isolate themselves due to shame or embarrassment.
Unhealthy coping mechanisms:
- Substance Abuse: Some individuals may turn to alcohol or drugs as a way to cope with the stress.
- Emotional Eating: Stress can trigger emotional eating, leading to unhealthy eating habits and potential weight gain.
Impact on overall well-being:
- Reduced quality of life: Financial stress can diminish your overall quality of life and enjoyment of daily activities.
- Delayed life goals: Stress might impede progress toward personal and professional goals.
Future financial consequences:
- More debt: Ironically, financial stress can lead to impulsive spending or borrowing, worsening the financial situation.
- Lack of future planning: Chronic stress might prevent individuals from planning for the future, such as retirement or major life events.
It's important to recognize the signs of financial stress and take proactive steps to address it. Seeking support from friends, family, financial professionals, or mental health professionals can make a significant difference in managing and mitigating the effects of financial stress.