Tips For Dealing With Family Financial Stress And Its Potential Mental Health Effects

Financial stress is a common challenge for families that can be overwhelming. When a family's financial situation becomes strained, it may affect the adults and children. Certain coping strategies may promote a sense of responsibility and reduce the stress accompanying financial matters.

Prioritizing physical and mental health in families can be valuable when facing financial stress. For example, consistent exercise and relaxation practices may reduce the effects of financial stress on sleep, mental health, and overall well-being. Families and individuals with financial challenges may also benefit from therapy and support from a professional. 

Why finances can significantly impact families 

Money and finances are often pivotal in family life, affecting almost every aspect of daily living and potentially causing mental health problems. Families may manage financial responsibilities like housing, utilities, and transportation. Ensuring the family budget can cover these costs can be key to maintaining stability.

Meeting basic needs, such as food, clothing, and education, requires enough money on a regular schedule. Families might struggle to afford necessities or pay for unexpected expenses without adequate income. Healthcare and health insurance are other financial considerations. Families may also budget for premiums, copayments, and any out-of-pocket expenses. Unexpected medical bills can strain finances further. Financial stress can ripple through the family. Left unmanaged, financial stress can have negative effects on relationships and mental health. Parents might experience anxiety over money, which can also affect their children. 

Different strategies, such as open conversations and clear financial plans, may reduce this stress. Families can also access other resources, such as community programs or financial counseling, to manage their finances. Understanding and planning for these aspects may help families work through financial challenges effectively.

Causes of financial stress

Financial stress can come from multiple sources, each potentially contributing to a family's economic burden. Factors like job loss, medical expenses, and debt can cause financial difficulties that vary in severity and impact.

Job loss

Losing a job may cause financial difficulties for families. When the primary income earner in a family loses their job and there is no more money coming in, it can lead to immediate money troubles. The household income can suddenly drop while the bills and financial obligations remain. This situation may force families to make tough decisions about their spending and saving practices.

Job loss often depletes savings and can drive families into debt. For instance, a single-income household may quickly exhaust its emergency funds if it loses its primary source of income, leading to increased reliance on credit cards or loans to cover expenses. In such cases, debt can increase stress from job loss with mounting interest payments. Those with a low credit score may find themselves in a situation where they cannot take out loans or emergency funds. 

Medical expenses

Unexpected medical expenses can also place a severe strain on family finances. Even with insurance, out-of-pocket costs for treatments, medications, and doctor visits can quickly add up. Chronic illnesses or sudden medical emergencies may lead to substantial and ongoing expenses.

High costs can force families to make difficult choices between essential needs. For example, they might have to decide between paying for necessary medical treatments or covering daily expenses such as food and rent. The financial burden can also affect mental well-being, as the constant worry about how to pay for medical bills contributes to overall stress.

Debt

Debt is a common source of financial stress. Whether loss of money comes from credit cards, student loans, or personal loans, accumulating debt can create a heavy financial burden. Interest payments can add up, making paying off the principal amount more difficult.

Families burdened by debt often face difficult decisions regarding their financial priorities. Managing multiple debt repayments can incite a cycle of financial difficulties. In this case, paying off one debt leads to neglecting another. This cycle can lead to a continuous state of financial instability and stress.

Lack of emergency savings

A lack of emergency savings can leave families vulnerable to financial shocks. Unexpected expenses like car repairs or a new roof can disrupt a household's financial stability without a financial cushion. 

A lack of emergency savings often forces families into a reactive mode, where they are constantly managing financial crises. For example, a family without savings may take out high-interest loans to cover unexpected expenses, worsening their financial problems. 

Overspending

Overspending can lead to financial stress by creating a gap between income and expenses. When families spend more than they earn, they often resort to borrowing or dipping into savings. Lifestyle choices or a lack of financial planning can also drive overspending.

For example, regularly purchasing non-essential items or failing to budget effectively can result in accumulating debt. Overspending often requires greater financial discipline and planning to avoid persistent financial problems.

Housing costs

Rent or mortgage payments often consume a significant portion of a family’s income, leaving less available for other necessities. Rising housing prices and stagnant wages may worsen this issue. For example, a household spending half its income on housing may find it challenging to save for emergencies or invest in education, leading to ongoing financial insecurity that seems to worsen. 

Education expenses

The cost of tuition, books, supplies, and related fees can add up quickly, especially for families with multiple children pursuing higher education. These costs often result in taking out student loans, which can create long-term debt. Parents may be pressured to provide the best education for their children, even if it means stretching their finances. The rising cost of education can force families to prioritize educational expenses over other financial needs.

Strategies for coping with financial stress

Families can try various strategies to manage financial stress. Communicating, budgeting, and self-care can alleviate the pressure and maintain a balanced life despite financial difficulties.

Communicate openly about financial issues 

Scheduling monthly budget reviews can help parents track spending patterns and identify areas for adjustment. Including children in these conversations may also teach them about financial responsibility and create an environment where they are empowered to ask questions and voice their concerns.

Create a family budget

Creating a budget may help families track income and expenses, providing a clear picture of the family's financial health. Start by listing all sources of income and categorizing monthly expenses, including fixed costs like rent or mortgage, utilities, groceries, and discretionary spending.

Using budgeting apps or spreadsheets can simplify this process and ensure accuracy. Allocating funds to each category may prevent overspending. For example, if groceries typically cost $600 a month, setting $600 as a budget limit may keep spending in check. 

Build an emergency fund

An emergency fund can act as a financial cushion during unexpected situations, such as medical emergencies, job loss, car troubles, or urgent home repairs. Start by saving a small, achievable amount each month until you have enough to cover three to six months of expenses.

Small contributions add up over time. For example, setting aside $50 monthly can accumulate to $600 yearly. Keeping this fund in a separate, easily accessible savings account may ensure it’s available when needed but not too tempting to spend on non-emergency items.

Explore debt management options

Managing debt may reduce financial stress and improve well-being. Start by listing all debts, including credit card balances, loans, and other obligations. Understanding the total amount owed and the interest rates may help you prioritize which debts to tackle first.

Options like consolidating debt, negotiating lower interest rates, or setting up a payment plan may make repayment more manageable. For instance, consolidating multiple high-interest credit card debts into a single loan with a lower interest rate simplifies payments and may reduce overall interest paid.

Practice self-care and stress management techniques

Maintaining mental and physical health may help families cope with financial stress. Balanced eating and adequate sleep may also maintain well-being. Regular physical activity, such as walking or yoga, can reduce anxiety and improve mood.

Incorporating relaxation techniques like meditation, deep breathing, or mindfulness exercises can also lower stress levels. Setting aside time each day for activities that bring joy and relaxation may improve mood and well-being over time. 

Set realistic goals and celebrate small victories

Break down extensive goals into smaller, manageable milestones, like saving for a vacation or paying off debt. Achieving these smaller goals may provide a sense of accomplishment and keep motivation high.

Celebrate “small” victories to stay motivated. For example, if the goal is to save $1,200 a year, reaching the first $100 saved may be a milestone worth celebrating. Even in increments, recognizing progress may affirm that the family is moving in the right direction.

Connect with others facing similar challenges for support and encouragement

Connecting with others living with financial stress may provide emotional support and practical advice. Support groups, community organizations, or online forums allow individuals and families to share experiences, ask questions, and gain insights.

Sharing stories and tips may provide reassurance that others are facing similar challenges. For example, a local community center might offer financial literacy workshops where families can learn budgeting techniques and debt management strategies from experts and peers.

Navigate financial stress and family conflict with professional guidance

Get matched with a therapist

Consider therapy or counseling

Therapy or counseling may help individuals manage stress and emotional strain. Therapy may help individuals recognize the underlying causes of financial strain on their mental health. Counselors often provide coping strategies and emotional support during tough economic times.

Counseling for financial stress often involves family members, focusing on open communication and problem-solving skills. These sessions may foster a supportive home environment, which can be helpful when facing economic challenges. However, some people may not be able to access in-person therapy due to financial strain. In these cases, online platforms like BetterHelp may be more financially accessible. 

You can access professional help through video, phone, or chat sessions, potentially making fitting therapy into a busy schedule more manageable. In addition, online therapy often ranges in cost from 65 to 100 dollars a week. Research suggests that online therapy can be as effective as in-person therapy for depression, which is a potential outcome of financial stress.