Financial stress can manifest itself in many different ways, and looks similarly to any other form of stress or anxiety. The difference is in the cause of the stress and that it tends to center on financial situations. Coping with financial stress can involve personal budgeting and better financial planning, as well as therapy.
Signs of Financial Stress: What It Looks Like
Financial stress can present differently depending on your stage of life. In teens, for example, financial stress may come in the form of avoidant behavior. For a teen, avoiding exposure that you may be on unequal terms with your peers is a motivating factor, so avoiding activities with friends where spending money comes into play, like going shopping or out to eat, may be the behaviors seen.
Also, since finances are largely dependent on parents, there may be increased hostility toward parents.1 Teens may also be motivated to start work earlier out of a need to control their finances.
For adults, financial stress behaviors look a bit different and are greatly impacted by social support in place.2 For college age adults, the financial burdens of attending college has an impact on whether or not a college education is obtained, and therefore what career and income potential is open to an individual.
As adults enter their careers, they face stress around income, performance at work, and achieving a quality of life they desire. Stress can manifest itself in overspending out of denial, frustration, or need for comfort. It can also present as anger, irritability, and resentment toward others and themselves.
In later years, financial stress has an impact on quality and length of life. As you get older, typically healthcare costs increase, an expense that may not have been present earlier in life. This stress may influence an older person to stop working later in life, or decide that retirement is impossible for them. The stress added also impacts overall health and psychological functioning, as well as their sense of self-worth and control.3
Mental & Physical Health Complications Caused By Financial Stress
The long term effects of financial stress on the individual are not dissimilar to the long term effects of chronic stress or anxiety in general.
The following are common complications associated with financial stress:
- Anxiety Disorders
- Major Depressive Disorder
- Alcohol or Substance Abuse4
- Gastrointestinal Disorders such as ulcers and reflux disease (GERD)
- Hypertension (high blood pressure)
- Muscle aches and pains
- Increased risk of Dementia5
Generally speaking, chronic financial stress can have both mental and physical consequences if left unmanaged.
8 Ways to Cope With Financial Stress
1. Understand Your Money Story
So many of our behaviors, beliefs, and thinking patterns come from our own personal life story. A big part of that story is the role that money plays in our lives. It could be very helpful to sit down with a therapist to talk about your money story. How you relate to money, and how money affected your life from a young age up until today. Knowing this may enable you to open up to options and strategies you were unable to implement before.
2. Consider Your Spending
78% of American workers report living paycheck to paycheck.6 What this means is that nearly 80% of us are living barely within or, much more likely, beyond our means. Reducing spending is definitely one way to reduce financial stress, however the downside is giving up on things that improve quality of life. A limitation worth mentioning here is that only so much spending can be cut depending on your own responsibilities, liabilities, and needs.
3. Ask For A Raise
When done tactfully and appropriately, asking for a raise may be one of the easiest ways to increase your income, and therefore reduce some financial stress. This largely depends on your skills, performance, and length of employment with a company, but if you can demonstrate merit, asking for a raise can definitely take some financial burden away.
4. Consider a Geographical Cure
Lets face it, some places are just too expensive to live. Places like Boston, LA, or NYC rank among the most expensive places to live. Depending on your housing situation, you may want to consider moving to a cheaper location. Sometimes a longer commute or smaller home means more money at the end of the month.
5. Change Your Ride
I know it’s nice to have the freedom of the open road available at your convenience, but that convenience comes at a cost. In 2014, the average American used $2,512 worth of fuel for transportation.7 This doesn’t even account for car payments, insurance premiums, maintenance, parking fees, and those sweet air fresheners and window stickers you want. Ditching the car may be one of the most financially beneficial options for you if you can swing it.
Most major cities have adequate public transportation options, even for suburban areas, making the commute for work and social events manageable. For those fancier occasions, hailing a ride share or riding with a friend may be the way to go. For those that cannot stand to go without a vehicle, buying used can reduce or eliminate the car payment, and if you can carpool or use public transportation for work, you can still affordably have your ride for those weekend getaways.
6. Set A Budget
The number one tool people can use to manage finances and reduce financial stress is budgeting. Unfortunately it is one of the most boring and hardest to implement for some. If you’re having trouble sticking to a budget, I’d recommend tip #1 to start. However, if you’re able to stick to a budget, it is a lifelong tool that will help manage your finances and reduce financial stress throughout your life.
Having a good way to track where your money is going is the first component of a good budget. Every dollar brought in has an assignment, whether that’s rent, loans, food, or shopping money. Start by tracking where you spend your money for a month. After that, create categories of spending, including essentials like household costs, loan payments, and food.
From there, you can determine what areas you can adjust spending in, and make those adjustments so that your income is even with your budgeted amount. As you are able to reduce overall spending category amounts, you can increase areas like savings and investments.
7. Take Action For The Future
I don’t like to say plan for the future because so many people do not act on plans that they make for themselves. You need to take action for your future. This means do a budget, and get things to the point where you are not paycheck to paycheck. Once you have more coming in than NEEDS to go out, you can start putting away into savings and investments.
It is recommended that you have at least a $1000 emergency fund that you NEVER touch unless it is a true emergency. This, of course, is just a starting point. Once you hit that $1000, start saving until you have at least 3-6 months of expenses saved in a secure savings account. At that point, you should start looking at paying off debt or investing. This is where a Fiduciary like a Certified Financial Planner can help you make some decisions.
8. Get A Financial Advisor
Maybe you’re in a place where the financial stress you’re facing is more of a question of what to do with your money to secure your future. Even if you’ve only got a bit left over at the end of the month, knowing what to do with it can put you in a financially prepared situation. Finding a professional that will act as a fiduciary to you, meaning they have your best financial interests in mind and aren’t trying to sell you insurance or something, is the best route you can go. Look for a “fee-only” financial planner, as they do not make commissions off of selling you anything.
Working with a financial planner will help make informed decisions on the types of investments, loans payoffs, and other financial moves to make for securing your future and never having to worry much about money again.
Do’s & Don’ts for Financial Stress
Here’s a quick rundown of what to do, and what not to do, when it comes to managing finances and financial stress:
Do:
- Ask for help from a financially informed therapist
- Make a budget
- Set personal financial goals
- Save as much as you can
- Reduce expenses as possible
- Ask for a raise
- Use reasonable stress as motivation
Don’t:
- Use credit cards or keep a monthly balance
- Buy brand new vehicles
- Let shame keep you from making changes
- Spend “extra” money at the end of the month
- Assume you can retire without saving or planning for it
- Assume emergency expenses will not come
- Think everyone else lives this way so it’s not a problem
Treatments for Financial Stress
When it comes to financial stress, there are a couple of ways you can approach dealing with it. One is therapy, and finding a therapist that is comfortable dealing with stress and anxiety issues, and a therapist that has some financial training or background. The other is working on more tangible things with a financial planner. Alternatively, you may decide to go it alone.
Therapy
There are certain kinds of therapy that can help people cope with financial stress. The most common approach for dealing with financial stress will be Cognitive Behavioral Therapy. This is a good way to start taking a look at the way you think and feel around decisions and events related to money, and how to change things for the better.
Another approach is working with a Financial Therapist trained specifically in integrating financial matters into therapy. You can find a Certified Financial Social Worker that has this background, or a Certified Financial Therapist who specializes in treating mental health issues related to finances.
Intended Treatment Outcome & Timeline
Therapy is different for every person, so it’s hard to give an expected timeline for treatment. Ideally, a few sessions to a few months worth of sessions will address most immediate concerns. However, this largely depends on how intense the problems are and how much work you’re willing to put into the change process.
As far as outcomes are concerned, if financial issues truly are at the root of the problem, addressing those financial issues and making necessary adjustments could put you back to feeling normal quite quickly. For some, however, financial behavior and spending habits stem from other, deeper struggles, and therapy may take somewhat longer and be more involved in order to reach the desired outcomes.
Financial Planning
Working with a Financial Planner, specifically one that acts as a Fiduciary to you, is going to be one of the most helpful things outside addressing personal factors in therapy. A fiduciary is someone who works on your behalf with your interests in mind. Not all “financial planners” or “advisors” are fiduciaries, and some work on commission off the things they sell you, such as insurance coverage. A good place to find a fiduciary is PlannerSearch, where you can filter professionals by those that work on a “fee-only” basis.
Lifestyle Changes
The best lifestyle changes you can make are to set a budget and stick to it. Make adjustments to spending and reduce overall expenses so that they are lower than your income each month. This will allow you to put money away into savings for emergencies, and start investing or saving more seriously.
How to Get Help for Others Dealing With Financial Stress
Seeing those closest to you struggle with financial stress is a really hard thing to do. Here are some ways to get help for those in your life.
How to Get Help for a Loved One
Financial matters tend to be a very private thing in American culture. These conversations may be difficult, however are necessary. Try approaching your loved one with kindness, explaining what you have seen, and how you are concerned. Whether it’s increased anger, irritability, sporadic spending sprees, or dodging financial obligations, talking specifically about what you see will help communicate that there may be a problem to solve. Let them know you care and that you would like them to get some help with the stress they’re dealing with.
How to Get Help for a Teen
If your teen is struggling with financial stress, and you believe that they need some professional help from a therapist, you can find a qualified therapist through many sources. If you have healthcare insurance, call your insurance provider and ask them for in-network mental health therapists in your area. You can also use an online directory to find therapists in your area that are skilled in working with teens with anxiety and stress issues.
Financial Stress Statistics
Here are some interesting statistics about Financial Stress and its impact on people:
- In teens, financial stress in the household can lead to increased hostility toward parents1
- Financial stress has an overall negative impact on physical and mental health3
- Financial stress contributes to increased risk of substance abuse4
- 78% of American workers report living paycheck to paycheck6
- 72% of Americans report feeling stressed about finances within a given month8
- 44% of Americans report that money is their dominant source of stress in life9
Additional Resources for Financial Stress
The following are helpful resources for anyone impacted by financial stress:
- National Foundation for Credit Counseling
- Teens Got Cents: An online resource dedicated to educating and equipping teens to manage their finances.
- The Balance: online personal finance advice
