The Link Between Financial Stress and Mental Health
The connection between financial stress and mental health has become a growing concern, especially in recent times. With the uncertain economic climate affecting several industries, there is an increasing worry about rising inflation rates and the possibility of a recession. The loss of jobs, higher costs of essential goods, and the burden of debt can all contribute to overwhelming stress, anxiety, and other mental health issues. A recent study revealed that a significant 44% of individuals in the United States identified financial troubles as the main cause of stress in their lives.
Unfortunately, the effects of financial stress are becoming more common as the cost of living and job insecurity increase. In times like these, a financial advisor may help individuals regain control over their financial situation and make informed decisions by offering objective insights and expertise, thereby enhancing their overall mental well-being.
This article explores the connection between financial stress and mental health, and the steps individuals can take to relieve their financial stress.
How does financial stress affect your mental health?
There are different ways in which financial stress can manifest in health issues. Several financial stress and mental health statistics point towards how the two are co-related. According to the Money and Mental Health Policy Institute, 46% of people struggling with debt have mental health problems. Another survey conducted showed that 57% of respondents experienced adverse mental health due to insufficient emergency funds. The same study also found that 49% of respondents felt negative emotions looking at their bank accounts. Read below to learn more.
1. How financial stress can affect mental health
Financial stress can cause anxiety, depression, and other mental health issues. The constant worry about money can lead to sleep problems, irritability, and difficulty concentrating, affecting your ability to function in daily life. It can also create concentration issues and ultimately impact your daily life, from your daily chores to relatively more critical events in your life.
2. How financial stress can affect physical health
Besides mental health issues, financial stress can also cause physical health problems such as headaches, stomach aches, and even high blood pressure. Stress can weaken the immune system and make you more vulnerable to illness and disease. Stressed people are less likely to prioritize their physical health due to a lack of time and money. Financial issues may also come in the way of you seeking medical help for a health problem or illness, further impacting your lifestyle and well-being.
3. How financial stress can affect relationships
Financial stress can strain relationships with family, friends, and partners, leading to conflict and tension. People who are stressed over money may be more irritable and short-tempered. This can lead to family feuds and fights with your partner or children and create a sense of general discontentment. Many people have attributed having a poor relationship with their parents to their lack of money and the stress caused by it.
4. How financial stress affects lifestyle choices
Financial stress can often lead to unhealthy lifestyle choices such as overeating, smoking, and excessive drinking, which can lead to further health problems. These habits may offer temporary respite to people and help them tackle stress for a while. However, they cause much more damage in the long run. Not only do alcoholism, smoking, and overeating lead to more stress eventually, but they can also cause health issues that can cost more money to treat.
5. How financial stress affects work performance
Financial stress can affect your work performance, leading to decreased productivity, absenteeism, and even job loss. Depression and financial stress can make it hard for you to concentrate and focus. Lack of concentration affects your work, further increasing the chances of being laid off and lowering the chance of earning performance bonuses, salary hikes, promotions, etc.
Top reasons for financial insecurity and mental health issues
There are several reasons why financial insecurity can lead to mental health issues. Here are some of the top reasons:
1. Losing your job
Facing job insecurity can cause significant financial stress. This further leads to anxiety and depression. With mass layoffs in the recent past, many people have attributed their mental health issues to their professional insecurities. Losing a job or fearing losing your job can also impact your self-esteem and rob you of a sense of purpose. It can give rise to feelings of hopelessness and helplessness and affect a person’s personal life as well.
Debt is perhaps one of the primary cursors of financial stress. It can be a significant source of financial stress, particularly when it becomes unmanageable. The fear of being unable to settle the debt can lead to anxiety and depression, impacting mental health. The higher the interest rates or the borrowed amount, the more helpless and stressed one may feel. Debt can also create a sense of being stuck in a loop. A lot of credit card users experience this. Being stuck in the cycle of paying credit card interest and again using the card to buy things that may seem out of a person’s budget can be stressful. It also creates a habit and dependence on debt that can be hard to get rid of.
3. Low income
Struggling to make ends meet on a low income can lead to financial stress and feelings of hopelessness. Lower-income groups can find it hard to cover essential needs like access to healthcare, healthy food, and other basic necessities, leading to further health problems. They may also feel social alienation due to their income backgrounds. Lower-income groups may avoid meeting friends or family from high-income groups for fear of being judged. This social alienation further adds to their dismay and mental health woes.
4. Emergency expenses
Unexpected expenses such as medical bills, car repairs, or home repairs can cause financial stress, mainly when there is no emergency fund to cover them. These events may force people to take on debt that can be hard to repay. They may also push you to liquidate some of your long-term investments, making you worry about your long-term financial security.
5. Lack of financial education
A lack of financial education can lead to poor financial decisions, such as overspending or not saving enough. This causes financial insecurity and stress. Most people lack experience and knowledge of how most investment instruments work or how much they should save. Tax laws are also hard to grasp for many people. Moreover, there is a disinterest in matters of finance, especially in the younger generations. This gap creates tension and increases the likelihood of making poor investment decisions that may trigger mental health issues eventually.
6. Varying economic factors
Economic factors such as a recession, inflation, or market downturns can impact financial stability, leading to anxiety and depression and impacting a person’s mental health and financial wellness.
How to manage financial stress and mental health issues
Here are some tips for managing financial stress and mental health issues:
1. Seek professional help
If you are struggling with financial stress and mental health issues, it is essential to seek professional help. Mental health professionals can provide therapy and support that can make it easier to deal with tension. They can help you understand your mental health issues and find ways to live with them and overcome them. They may also recommend medicines or therapies that can help you manage your symptoms.
2. Hire a financial advisor
Financial stress can have a significant impact on your health and well-being. Therefore, it is essential to take steps to manage your financial stress and seek help from a financial advisor when necessary. In most cases, financial issues can be solved by prudent planning. A financial advisor can help you prioritize your goals, understand your risk appetite, invest in instruments suitable for your needs, and stay on track until you achieve your goals. They can also point out issues with your financial plan and help you identify areas that may be contributing to your financial stress so you can correct them.
3. Make a plan and start following a budget
Apart from seeking out help, you can also take small steps on your own to combat financial stress and mental health issues. One of the first things you can do is create a financial plan and start budgeting. Make sure you save a percentage of your income every month for emergencies, invest some towards your future goals, and use the rest for your present needs. This will ensure you always have a safety net to rely on in adverse times. At the same time, you will be able to lead a comfortable lifestyle. You can follow the 20 -30 – 50 rule where 20% of your salary goes towards your savings, 30% goes into your investments, and 50% is spent on essentials and non-essentials. Try to follow through every month and if you ever deviate from the plan, make sure to make up for it in the following months to stay on track.
4. Control your debt
Debt is one of the primary sources of depression and financial stress. Loans and credit cards can offer immediate access to funds, but the high interest can be hard to pay off. While you may have to take on debt for significant purchases like a house, you can try to lower your dependence on other forms of debt like credit cards. Credit cards can offer a false sense of financial freedom. But their high-interest rates negatively impact your financial growth in the long run. Moreover, they may trick you into living a higher lifestyle than you can actually afford. Sustaining this can be challenging, and you never really get out of the cycle of debt. Hence, it is crucial to control the urge to spend unless your bank account balance permits it. Try to stick to cash and not spend money if your monthly budget does not allow it.
5. Educate yourself on finance
Having a basic understanding of finance can be useful. It can help you choose the right investments for your goals, understand market movements, know different investment and saving strategies, such as diversification, value investing, long-term investing, tax-loss harvesting, etc., and employ them to save more money. Learning the basics of personal finance can also offer you confidence which can reduce self-doubt and lowers the chances of being financially stressed or vulnerable.
6. Find ways to increase your income
You can look for ways to increase your income to feel more financially secure and reduce stress. One way to increase income is to take on a part-time job. A part-time job can provide a steady source of additional income, help you in covering bills, saving for emergencies, and reducing debt. Part-time jobs can also offer a sense of purpose and social interaction, reducing isolation and improving mental well-being. You can also consider starting a side business. However, find a balance between your side hustles and self-care. Taking on too many responsibilities can lead to burnout and stress and undermine the benefits of having an additional income.
7. Practice self-care
When dealing with any kind of stress, it is essential to engage in activities that promote relaxation and reduce tension, such as exercise, meditation, or yoga. These activities can help you get a new perspective on life and focus on finding solutions to your problems. You must also prioritize getting enough sleep and eating a balanced diet to maintain your physical and mental health.
While the effects of financial stress can be hard to deal with, you can do a lot of things to manage it and protect your mental health. It is essential to seek help from mental health professionals and financial advisors when necessary. Remember that financial stress is a common issue, and seeking help and support is not a sign of weakness but strength. Prioritize self-compassion and try to build financial resilience through education, planning, and saving. It can help to keep your debt within control and have enough emergency savings to rely on in your hour of need. Taking proactive steps towards your goals can help you reduce stress, increase your sense of empowerment, and lead a happier, healthier life.
You can hire a suitable financial advisor using WiserAdvisor’s free advisor match service. The advisor can help you understand how money affects mental health and recommend ways to ensure your financial well-being in the long run. All you have to do is answer a few simple questions based on your financial needs, and the match tool will help connect you with 1-3 advisors best suited to meet your financial requirements.