What Is Financial Stress and How Do You Cope With It?

Financial Stress: What It Is and 7 Tips to Cope With It

Financial stress is a feeling of worry and unease associated with money, specifically expenses, debt, investments, and personal finances.

This emotional state often has a physical component. If unchecked, financial stress can lead to health problems like fatigue, digestive issues, and muscle pain. It can also lead to mental health issues like anxiety and depression. Chronic financial stress is when this condition is ongoing, even if it occurs intermittently.

How Common Is Financial Stress?

Many things can cause anxiety about money. Inflation, high interest rates, student loans, and unexpected medical bills are just a few examples.

The American Psychological Association reports that money stress is a major concern for most Americans. This means if you feel anxious about money, many others feel the same way.

A 2023 CNBC and SurveyMonkey study showed that 74% of Americans experience money-related stress. That same study found that 61% of Americans live paycheck to paycheck and seven out of ten American workers need at least $150,000 annually to feel financially secure.

What Causes Financial Stress?

Financial stress evokes strong emotions. These emotions can cloud judgment and make it difficult to pinpoint the exact source of anxiety. Is the problem growing debt? Are future medical bills a worry? Even a simple conversation about finances with a spouse or a boss can trigger anxiety.

As behavioral scientist Yasmin Ghodse-Elahi notes, there is often a struggle between enjoying life and the awareness that circumstances can change quickly. Finances are inherently unpredictable, and this unpredictability creates fear.

Therefore, it’s important to recognize the triggers of financial stress to be able to manage it well.

Common financial stressors are:

• Rising inflation

• Unexpected expenses

• Job insecurity

• High housing costs

• Medical bills

• Loss of income

• No emergency fund

• Caregiving responsibilities

• Insufficient cash flow

• Credit card debt

• Student loan debt

• Gambling debt

• Inadequate retirement savings

• Market volatility

• Divorce or separation

Sometimes, financial stress can originate from places other than your bank account. The feeling of being financially insecure is a prime example. Financial security goes beyond just paying the bills; it's about keeping the lifestyle you're accustomed to.

Another cause of financial stress is a lack of financial confidence. Financial attitudes often run in families. A childhood spent in a household where finances were unhealthy or hidden can shape how someone understands money. These deeply held beliefs are also a source of financial stress.

Making financial decisions based on emotions is also a problem. Financial anxiety can cause people to make bad, spur-of-the-moment choices with their money. Many people think they're objective when it comes to finances. But emotions are human nature. Everyone can make emotional decisions. A financial professional can help people see this tendency in themselves.

What Are the Signs of Financial Stress?

Managing financial stress and anxiety begins with acknowledging and giving a name to your feelings. It’s rather unfortunate that many people experiencing anxiety about money may not realize they are dealing with financial stress. They just feel that life is difficult and that occasional money worries are normal.

However, if financial stress and anxiety interfere with your quality of life and daily responsibilities, you should seek support.

There are several indicators that financial stress might be affecting your well-being.

One sign is a persistent feeling of restlessness or excessive worry about finances. This worry can intrude on other activities, even those unrelated to money. Physical symptoms can also manifest. You may experience body aches, a racing heart, or other physical reactions when financial matters come to mind. A sense of being overwhelmed is another telltale sign of financial stress. This feeling can involve a sense of losing control or an inability to keep up with financial obligations.

Avoidance behaviors are also common. People experiencing financial stress may avoid financial decisions or transactions. This avoidance can mean you avoid making purchases, paying bills, or communicating with creditors.

Financial stress can also stop you from enjoying other things. Money worries can take over your thoughts and prevent you from having fun. You could also feel guilty, embarrassed, or ashamed about your financial situation.

If you're rigid about your budget, that can be another sign. Even small budget changes might upset you. You may also find yourself feeling angry or irritated with people who handle your finances. Money worries can disrupt your sleep, making it hard to fall asleep or stay asleep.

If you have financial stress, you might worry about not having enough money. You might also be hard on yourself about past money mistakes. But financial stress can show up in other ways. Even if you've made good financial choices, you could still show signs of stress. You might save too much or constantly check your investments. You might also feel like you've failed if you're not further ahead, even if you're doing well.

Who Is Most Affected by Financial Stress?

Financial stress can affect anyone at any time. Your background, education, and even your income don't protect you from it.

In fact, it's not always about how much money you have. Sometimes, people with more money experience stress because of bigger financial commitments or the fear of losing what they have.

But some groups are more likely to experience financial stress than others.

For instance, if you earn a low or unstable income, you might find it hard to pay for basic living costs each month. Financial uncertainty means events like getting sick, accidents, moving, or deaths in the family can greatly affect your ability to provide food and shelter. This can naturally make you worried and stressed.

Students can also experience financial stress, particularly when you don't have financial support and you aren't working. Having to pay back student loans can add to this stress. If you're an older adult and you haven't saved for retirement, you might be more likely to experience financial stress. Even if you have saved, rising costs can make you feel financially stressed, even if you once thought you'd have enough.

Single parents face particular financial challenges. If you're the only parent providing financially for your child or children, you might find it difficult to make ends meet. Rising living costs, a lack of family-friendly jobs, and expensive childcare can make it hard to earn enough money to provide basic needs. This can make you more vulnerable to financial stress.

Being unemployed is a major cause of financial stress. Having no money coming in can create serious financial worries. Thinking about whether you'll have enough money for bills, food, and other expenses can negatively affect your mental health. The pressure of looking for a job can add to this stress. If you're unable to work, it can be even harder, but there are government support options you might be able to access.

Small business owners often face more financial risks than people who work for a company. You might have to deal with slow sales, economic uncertainty, and competition. Starting a business often means taking on debt, which can be a major source of financial stress. The social and emotional pressure of knowing that your business's failure would affect your employees can also be a burden.

Women, on average, earn less than men. You may also have less money saved for retirement because of taking time off work to raise children or care for family members. This can make you more likely to experience financial stress.

7 Tips for Managing Financial Stress

Does the above resonate with you? Well, you may not be able to control every financial circumstance, but you can most certainly control your reaction to it.

Try out these seven tips we've put together to help you cope with financial stress.

Tip 1: Talk to Someone You Trust

Money is a major part of life, yet we often treat it like a taboo subject. This silence only fuels anxiety. Sharing your financial worries with trusted friends, family, or mentors can be incredibly helpful. You might be surprised by how many people relate to your situation and can offer helpful suggestions.

Trust us, talking about your worries will make them feel less overwhelming. It might even help you gain perspective and realize you're not alone. Also, the person you talk to doesn't need to have all the answers; they just have to listen without judgment. Who knows, you might even find the solution you're looking for by talking it through.

Beyond personal support, consider seeking professional advice. Many organizations offer free counseling on financial matters, such as debt management, budgeting, job searching, communicating with creditors, and accessing benefits. Reaching out for expert help is a sign of strength, not weakness. It shows you're taking your financial well-being seriously. Your family can also be a source of support. Financial problems impact everyone in the household, so keeping them informed and involved can be beneficial. Let them express their concerns and offer suggestions. Create opportunities for inexpensive family fun, like walks in the park or game nights.

Tip 2: Take a Hard Look at Your Finances

When facing financial difficulties, it's tempting to avoid the problem by ignoring bills and statements. But this avoidance only makes things worse. The first step towards a solution is understanding your current financial situation.

Detail your income, debt, and spending over at least a month. Several websites and apps can assist with tracking, or you can manually gather receipts and review bank and credit card statements. While some financial problems are more complex than others, taking inventory provides a clear picture of where you stand. This process, though daunting, can give you a much-needed sense of control.

Include all income sources, from salary and bonuses to benefits, alimony, child support, and interest. Track all spending, even seemingly small expenses. These small expenses can add up quickly.

Take stock of your spending habits as well. List all debts, including past-due bills, late fees, and money owed to friends or family. Note minimum payments due. Identify your spending patterns and triggers. Do you shop when bored or stressed? Are there certain situations that lead to overspending? Recognizing these triggers allows you to find healthier coping mechanisms. Look for small changes you can make. Daily expenses like coffee or snacks can accumulate. Reducing non-essential spending can free up cash for bills. Eliminate impulse purchases. Wait a week before making non-essential purchases to curb impulsive spending. Be kind to yourself during this process.

Tip 3: Create a Financial Plan and Stick to It

If your expenses exceed your income, you have three basic options: increase income, decrease spending, or both. Achieving these goals requires a well-defined financial plan.

Clearly identify your financial problem. Is it excessive credit card debt, insufficient income, or overspending due to stress? Develop a separate plan for each issue. Brainstorm solutions with family, friends, or a financial counselor. This might involve talking to credit card companies about lower interest rates, restructuring debt, downsizing, or seeking overtime at work.

Next, put your plan into action. Be specific about how you'll implement your solutions. This could mean cutting up credit cards, networking for a new job, or selling items to pay off bills. Monitor your progress regularly. Financial situations can change quickly, so review your plan often. Are some aspects working better than others? Do changes in interest rates or expenses require adjustments?

Don't be discouraged by setbacks. Everyone makes mistakes. Get back on track as soon as possible.

Tip 4: Create a Monthly Budget

A monthly budget helps you stay on track and regain control, regardless of your overall financial plan. Include everyday expenses like groceries and transportation, as well as rent, mortgage, and utilities.

For annual expenses like insurance or property tax, divide them by 12 to allocate funds monthly. Try to anticipate unexpected costs like medical co-pays or car repairs.

Set up automatic payments to avoid late fees and interest rate hikes. When money is tight, focus on essential needs like food and housing first. Credit card payments, though important, can wait.

Continuously look for ways to save. Regularly review your budget and identify areas for expense reduction. Involve your family in the process. Ensure everyone understands the financial goals and works together to achieve them.

Tip 5: Manage Your Overall Stress

Getting your finances in order takes time. Your problems likely won't go away overnight. But you can immediately take steps to lower stress and find the energy to manage what comes your way.

Regular exercise, even short bursts, can ease stress, improve mood, and boost energy. Practice relaxation techniques like meditation or breathing exercises to calm your mind. Make sure you get enough sleep. Fatigue makes stress and negative thoughts stronger. Find ways to sleep better.

Your self-esteem can plummet when financial problems hit. Engage in activities that make you feel good, like volunteering, spending time in nature, learning a new skill, or connecting with supportive people.

Eat a healthy diet, rich in fruits, vegetables, and lean protein, to provide your body with the nutrients it needs for a stable mood and consistent energy.

Lastly, take time to appreciate the good things in your life, no matter big or small. When overwhelmed by financial worries, it's easy to focus on the negative. A positive outlook will provide a mental break and improve your mood.

Tip 6: Seek Professional Mental Health Support

While the previous tips can help, sometimes professional help is necessary. If financial anxiety affects your daily life or you feel stuck, consider seeking mental health support. A therapist can help you understand the root of your financial anxiety and develop coping mechanisms. Check with your school or employer for mental health benefits. Don't hesitate to reach out.

Talking to a licensed therapist doesn't mean your stress is extreme; it just means you're taking care of your emotional health. Therapists can help you reframe negative thoughts, build healthy habits, and feel more in control. There are also free or low-cost therapy services, online counseling platforms, and mental health hotlines that can provide immediate support. Taking this step may feel intimidating, but it's a sign of strength. You don’t have to carry this weight alone. Help is available, and it works!

Tip 7: Remember You Are Not Alone

Financial stress is a common experience, particularly during tough economic times. Remember that you are not alone in this struggle. Many people are faced with financial crises today, and there are resources available to help. Don't be afraid to ask for it.

Whether it's talking to a trusted friend, seeking financial advice, or contacting a mental health professional, support is, sometimes, just a matter of a phone call. Take things one step at a time, and celebrate small victories along the way.

You may feel like you're falling behind, but the truth is that countless others are walking a similar path. Financial struggles don’t define your worth. Join online communities, attend support groups, or connect with nonprofit organizations that specialize in financial education and counseling. Sharing your story or simply listening to others can ease the sense of isolation and remind you that progress is possible, even if it’s slow.