Managing Stress in Difficult Financial Times

Updated August 26, 2022
Young couple discussing over financial bills while using laptop on sofa

You probably take active steps to manage your physical and mental health. But do you also take time to manage your financial health? Financial health is a person's ability to manage expenses, navigate financial hardships, and avoid debt. Finance is generally not a topic that is directly associated with health, but the two can be intertwined.

Your financial health can play a role in just about every aspect of your life. For example, it can affect your ability to secure food and manage housing. It can also be negatively affected if you experience financial stress due to changes in income or shifts in the economy. It's important to know how to deal with financial stress in order to navigate life's challenging situations and regain your financial health.

What Is Financial Stress?

Financial stress is the feeling of worry or anxiety surrounding money, debt, or other financial issues. For example, a person might experience financial stress if they lose their job, have to make additional or unexpected payments, or if the nation experiences a recession or depression.

According to the 2020 Stress in America survey conducted by the American Psychological Association (APA), approximately 64% of people in the United States feel stressed about money. And, 87% of adults are worried about the rise in costs of everyday items in stores due to inflation. The APA notes that this is the highest level of financial stress measured since 2015.

If you're experiencing financial stress, know that others experience it, as well. Many aspects of life can fluctuate during this challenging time, such as your job or monthly expenses, and unexpected changes to these areas can cause anyone to experience financial stress at any point in their life.

Does Everyone Experience Financial Stress?

When the economy has been in decline for six months or more, it is referred to as a recession. When there is a long-term economic decline that is more severe and includes high rates of unemployment, it is called an economic depression. The country has experienced both depressions and recessions. And these economic shifts affect people differently.

Elizabeth Sterbenz is a Licensed Marriage and Family Therapist (LMFT) who specializes in financial therapy. She says that not everyone experiences financial stress due to recessions or depressions. Whether or not a person experiences financial stress depends on their unique background, situation, goals, and expectations.

"The intensity may vary," states Sterbenz. She adds that some people are able to withstand difficult financial situations better than others due to factors such as planning and preparation. However, Sterbenz notes that the majority of people do experience financial stress for one reason or another.

Different Types of Financial Stress

According to Financial Autonomy, a podcast hosted by personal finance expert Paul Benson, there are several different types of financial stress. He breaks down financial stressors into three distinct categories.

  • Debt - Many people experience an extra burden due to increased spending on credit cards, student loans, or mortgage payments which can cause debt to build up. Having additional payments each month or constantly feeling like you will never be able to pay off what you have borrowed can cause people additional worry.
  • Inherited - Inherited financial stress can stem from a person's childhood experiences. For example, if you come from a household where your caregivers were constantly worried about making payments or arguing about financial issues, you may have grown up to develop an innate sense of financial stress. The topic of money may always feel stressful or sensitive to you.
  • Longevity - Financial stress due to longevity relates to a person's worry about the normal ups and downs of the economy or of a person's own financial situation. For example, a person may be stressed about the potential decrease in the value of a stock they invested in.

Benson notes that people can experience more than one type of financial stress at a time.

Financial Stress and Mental Health

Financial stress is a complex and multi-faceted issue. It can impact your mental health and social relationships, as well as your financial well-being. Your mental health is just as important as your physical health. In fact, they can even influence each other.

Mental Health Effects

Financial stress can affect more than just your financial well-being. It can impact your psychological and emotional well-being, as well. Dr. Linda Gallo is a professor of psychology at San Diego State University who has an APA's podcast called Speaking of Psychology. According to Dr. Gallo's conversation with members of the APA, financial stress is associated with several negative mental health effects. For example, she notes that financial stress can contribute to symptoms of anxiety and difficulty sleeping.

Further research shows that financial stress is also linked to other mental health consequences, including:

Physical Health Effects

Woman irritated in front of computer

Stress can also lead to negative physical health consequences, such as headaches or stomachaches, as noted in the APA's podcast. And, it is even associated with diabetes, heart disease, and other chronic conditions when a person experiences stress over a long period of time according to Dr. Gallo. Stress can also worsen preexisting conditions, such as rheumatoid arthritis. Declining physical health can also impact your mental well-being.

Social and Relationship Effects

Stress can also negatively impact your social behaviors and relationships according to a research review from the Public Library of Science (PLOS). In fact, some researchers are even using it to measure a person's social health and well-being. Social support has been found to act like a stress buffer, but financial stress can actually cause individuals to push loved ones away.

Stress can cause people to experience changes in mood, such as feeling sad, irritated, or more on edge. As a result, this can lead to more arguments between family members and friends due to combative behavior. Also, feelings of sadness or depression can lead to a person isolating themselves from loved ones.

In addition, financial stress can contribute to unhealthy coping habits. For example, people may turn to emotional eating, drinking, or smoking in order to cope with difficulties. These habits may give a person a superficial sense of relief but can ultimately contribute to greater financial strain.

The Financial Stress Gap

Dr. Gallo says that people with lower incomes experience higher rates of financial stress compared to people of higher incomes. This division is known as the financial stress gap.

In the podcast, Dr. Gallo mentioned that there are many reasons why people with lower incomes experience higher rates of stress. For example, people with lower incomes may work in jobs that are more physically demanding, or that have less comforting environments, such as constantly being exposed to the sun, loud noises, or chemicals.

In addition, people with lower incomes might experience more stress in their community environments due to violence or less access to healthy foods. Also, people with lower incomes might have fewer resources available to help them cope. For example, they might not have the financial flexibility to attend therapy or have less access to emotional support from loved ones.

How to Assess Your Financial Health

The PLOS research review notes that most economic hardships are a result of a deeper struggle related to financial health. A person's financial health, also known as financial well-being, financial fitness, or financial wellness, can be strong or poor, just like physical health.

For example, a person with strong financial health might not be overwhelmed with worry due to monthly payments. However, a person with poor financial health might experience financial stress or financial anxiety about being able to keep up with costs.

Measure Financial Health

The Center for Financial Services Innovation (CFSI) created a measurement strategy with four main components that are related to daily financial activities. The four categories include:

  • Spend - Being able to pay bills on time and in full and spending less than your income.
  • Save - Having long-term savings that are sufficient for your lifestyle, as well as having enough cash on hand in case of emergencies.
  • Borrow - The ability to maintain a good credit score and having a manageable amount of debt.
  • Plan - Planning ahead for expenses and maintaining appropriate insurance.

You can use the survey from the CFSI to calculate your own financial wellness. If you encounter aspects of your life that do not follow their financial wellness guidelines, you might be able to develop a better understanding of where your financial stress is coming from.

Stronger vs. Weaker Financial Health

Poor financial health is associated with financial insecurities or scarcities. These insecurities can occur on different levels of severity, and a person can experience more than one at a time. In addition, the PLOS review notes that all the levels of insecurity are interconnected. Some areas of strong or weak financial security include:

  • Income level and employment - Being employed and having a financial income that allows you to meet or exceed expenses for the lifestyle you are living would indicate strong financial health. Lacking this type of security can lead to poor financial health and stress.
  • Housing security - Having access to adequate and stable housing, such as having no more than two people living in each bedroom and moving less than two times in the last year is an indicator of stronger financial health.
  • Food security - Being able to access and afford nutritional meals, maintain a healthy diet, and go without hunger would indicate stronger financial health.
  • Energy security - Being able to pay the gas and electricity bills on time each month can lead to a feeling of stronger financial health.

How to Manage Mental Health and Financial Stress

It can be difficult to know how to navigate each aspect of financial health or financial stress. It can be especially difficult to try and get your financial situation under control when you may already be feeling drained or low because of it.

This is why it's important to use tools to help yourself cope with the mental health aspects of financial stress. You can use the tips below to get a better understanding of how to tend to your needs. There's no right or wrong place to start. What's important is that you take a step.

Use a Wellness Wheel

Wellness Wheel

A wellness wheel reflects different aspects of health, such as physical, environmental, social, occupational, intellectual, spiritual, and emotional, as well as financial. Sterbenz uses it as a visual representation of ways to find balance in life.

For example, if you were feeling stressed or off, you could look to the wellness wheel and see which areas of your life might need more attention. If your mood has been feeling low, you might go for a run. If paying bills has become stressful, you might shift your attention to your social health and call a friend.

Lean on Social Support

Whenever you feel stressed, it's always a good idea to reach out to others for support. It can help you feel less alone in your struggles, and also validate your experience.

You can turn to friends and family members for help. Share your struggles with them if you feel comfortable doing so, or, get together to have fun. Even just hanging out to eat dinner is a way of taking care of your social well-being.

In addition, you can look to support groups or your spiritual community for help. In these spaces, you can find comfort among people that have similar experiences. Find whatever space makes you feel comfortable.

Seek Out a Mental Health Professional

Another way to take care of your mental health is to contact a mental health professional. This can look finding a therapist, counselor, or social worker that fits your unique needs.

You can talk about your worries and struggles in a safe environment with a trained professional that can support you. Together, the two of you can make a plan to help you move forward and live the life you want to.

How to Manage the Monetary Aspects of Financial Stress

A lot of things can impact a person's financial situation. You might experience a change in career, move to a new area, or transition from renting to owning a home. In addition, the economy is likely to change throughout your life, which can throw you curve balls and potentially be a cause for financial stress. These tips can be used to help you navigate through difficult financial times.

Confront the Issue

Before you can start managing your financial stress, you first need to acknowledge its presence. Sterbenz has two favorite sayings in therapy, "the only way out is through" and "sunshine is the best disinfectant." Both of these phrases can help you face your financial situation.

You need to shed light on a situation, in order to evaluate it and make a plan to move forward. "When you're struggling with financial stress, there may come a time for some hard decisions, but they're not going to get easier by avoiding them," says Sterbenz.

Take some time to recognize your needs. Work to accept them, whatever they are. Then, you can take steps to change the situation.

Evaluate Your Spending Habits

Do you spend less than your income each month? Where is the majority of your money going to? Are there any expenses you could go without?Notice how much you are spending each month and what you're spending that money on. You might find that you can go without some of your expenses, such as hair appointments or TV subscriptions to help cut down on costs.

Create a Budget

Woman using laptop at home

After you know how much you are spending each month, it can be helpful to make a budget. Calculate how much money you want to spend on groceries and gas each month. Then, follow the guidelines you set when you head to the grocery store or plan your meals.

You may also want a budget for fun activities, such as buying clothes or going to the movies. Set an amount that you are comfortable with that is within your means. Then, stick to the budget you have put in place.

You can use a budget calculator to explore your expenses and plan a budget for yourself. Discover where you spend the most, and evaluate where you can cut costs.

Make a Plan to Move Forward

Once you have calculated your monthly spending and modified your budget, you can make a plan to move forward. Do you have a savings account? How much do you want to have in your savings account in total? How much money do you want to contribute to your savings each month?

When you make a plan to move forward, you create tangible steps to help you achieve your financial goals. You can use your plan to adjust your budget in the future, change payment plans, and navigate through career changes.

Contact a Financial Expert

According to Sterbenz, a good first step to take is to talk to a professional, such as a financial advisor, financial therapist, or financial coach. "A solid professional in those fields should be able to help someone figure out next steps." Financial experts can help you create a budget, manage investments, and plan for retirement. They can help you meet your short-term and long-term financial goals.

If you are experiencing financial stress, it might be a sign that you need to look after your financial health. It can be difficult to navigate through financial changes, but it's possible with support from loved ones and a plan to move forward. Take the time to look after yourself. Personal well-being will bring you one step closer to financial well-being.

FAQs About Financial Stress

Are the emotional and psychological effects of financial stress the same as other types of stress?

"Stress is stress," says Sterbenz. Meaning that the stress you feel when you're running late for work impacts you the same way as financial stress due to paying bills.

Why do people experience financial stress?

"I've found that a lot of financial stress is tied into safety and security," notes Sterbenz. When you don't feel safe or secure, you can feel threatened or like you're in danger. So, when your finances feel like they are getting out of control, that can cause stress because it feels like something is threatening your well-being.

How can family members support loved ones that are experiencing financial stress?

"Be open to listening for when someone is asking for help," says Sterbenz. It can be hard to tell when someone is experiencing financial stress, and it might be equally as hard for a loved one to talk about it. Check-in with loved ones, and then ask yourself how you can support them within your bandwidth.

Are there any warning signs that people can look out for to tell if their stress levels are on the rise?

"Everyone has their own stress 'tells'," notes Sterbenz. Some people get snappy, become quieter, or experience changes to their sleep habits when they become stressed. If you don't know what your own tells are, Sterbenz suggests that you ask the people that are around you most to get a better idea of how your behavior changes.

Are there affordable therapy options available, especially for those whose incomes are already impacted?

"Utilize sliding scale therapy services," suggests Sterbenz. She notes that most cities have centers that serve as training sites for therapists. These centers usually set fees based on what a client is able to pay, which can make it a good, affordable option.

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Managing Stress in Difficult Financial Times