Causes Of Financial Stress: How They Can Affect Your Money And Your Mental Health
People can experience financial stress for various reasons. For example, some are stressed about debt from student loans or high-interest credit cards and loan debt. Others may experience the stress of living paycheck to paycheck or experience uncertainty over whether they'll have enough retirement savings to support themselves when they reach retirement age. Understanding the causes of financial stress and its potential effects on mental health can be part of resolving the problem. Below, explore common causes of money-related stress and how stress can impact your mental, physical, and social health.
From credit card debt to inflation: Causes of financial stress
Research shows a clear connection between financial stress and health in all areas—including psychological, physical, and social well-being. Studies also reveal that financial stress affects people from all walks of life and is extremely common. For example, a 2024 survey courtesy of Bankrate found that 47% of adults in the US said money “has a negative impact on their mental health, including causing stress.”
The causes of financial stress often vary between people, and they can change throughout an individual's lifetime. For example, one may go from worrying about student loans and credit card debt to stressing about housing and retirement. Some people face a combination of such challenges, adding to their stress levels.
Insufficient income
The rising cost of living vs. stagnant wages can be a source of anxiety for many people in the United States. Statistics from a 2024 LendingTree survey found over one in three US households are financially insecure, with 36.4% reporting they had a “somewhat or very difficult time paying their usual household expenses.” Poverty levels are also rising in the US, with the most current data reporting an increase in the overall poverty rate from 12.4% in 2022 to 12.9% in 2023. This change can make covering average household expenses like food, utilities, and other necessities even more difficult for individuals in lower-income households in the long run.
Debt
Student loans, credit card debt, medical bills, and mortgages are frequent causes of financial stress. High interest rates and their compounding effects can be a significant setback for many people trying to spend less and save more. Paying your bill every month yet seeing no decrease in your balances (even if you pay more than the minimum payment) can be demoralizing and lead to hopelessness.
Job insecurity
Unpredictable employment markets and fear of layoffs or reduced income contribute to financial stress. Unpredictability was especially an issue during the COVID-19 pandemic when many people were laid off. Census records revealed that by mid-April 2020, unemployment had reached its highest rate since the Great Depression. Nearly five years later, economic recovery has been slow for some, and four in five workers still feared losing their jobs in 2024.
Unexpected expenses
People often worry about building enough savings to cover unexpected expenses like medical emergencies, home or car repairs, and family crises. With limited or no access to financial safety nets, such costs can significantly strain households that might not otherwise worry as much about finances. To pay unexpected expenses, some people might use high-interest credit cards or loans that can put them further in debt, causing more stress.
Illiteracy about financial health
Lack of knowledge and misinformation about budgeting, saving, or investing can lead to poor financial decision-making. In some cases, individuals lacking financial knowledge will allow someone else to manage their finances who might not make sound financial decisions or have their best interest in mind. Economic literacy can help people become empowered, make more informed financial choices, and reduce harmful spending behaviors.
Economic inequality and financial stress
Broader societal issues such as wage gaps, systemic barriers, or rising housing costs disproportionately affect low-income and marginalized groups. This type of inequality can have a ripple effect beyond impacting one’s income. The sense of injustice or powerlessness in the face of systemic inequality can exacerbate mental health issues, such as depression and despair. Additionally, global economic disparities can reduce life expectancy and limit access to services required to maintain health, such as sanitation, water, education, and health care.
Impacts of financial stress on mental health
Research from many organizations, including the NHS and NIH, shows that struggles around financial instability, debt, and an inability to meet day-to-day needs can have a profound, sometimes long-lasting impact on an individual’s mental health. Financial insecurity may lead to increased anxiety, depression, and mood swings. Some people experience trouble sleeping, reduced self-esteem, hopelessness, and suicidal thoughts— particularly when individuals struggle to meet basic needs or manage large debts. Financial stress can also exacerbate existing mental health conditions and negatively affect relationships.
Emotional strain
People struggling with finances may blame themselves for their financial situation, leading to feelings of guilt. They might internalize their situation, experiencing shame and self-esteem issues. When those feelings or thoughts go unaddressed, they can evolve into serious mental health issues like anxiety and depression.
Cognitive and physical health effects
People with constant money worries might experience reduced focus, decision fatigue, and decreased productivity. Stress-related physical health issues, including insomnia, hypertension, and weakened immunity, might also arise. These challenges can seriously impact an individual’s problem-solving abilities and everyday functioning.
Social consequences of money issues
Financial stress can create complications with relationships and social interaction. If an individual is heavily burdened by making tough financial decisions or believes they are a burden to others, they may experience tension, arguments, and resentment within families. The stigma society assigns to financial struggles can lead to shame and embarrassment for some people, causing them to withdraw socially. Social isolation and disconnection have been linked to several mental and physical health conditions, including anxiety, depression, increased risk of heart disease, dementia, and other symptoms and conditions.
The behavioral effects of money-related stress
In addition to social withdrawal and avoidance of discussing financial worries, individuals experiencing financial difficulty might engage in avoidance behaviors around financial planning, leading to a worsened economic situation over time. They might engage in risk-taking behaviors, such as gambling or impulsive spending, as a coping mechanism, which can create a cycle of spending and debt. Some people facing financial issues turn to other unhealthy coping behaviors like excessive drinking, substance use, or risky sexual behaviors.
Potential strategies for better financial health
Despite the statistics, many people find ways to get out of debt, save for the future, and increase their financial stability. Among the most common tips people receive when they’re having financial trouble is to spend less money and beware of fraud and scams. While these tips are legitimate and practical, they aren't always realistic or within an individual's control. A combination of strategies is often more effective at helping individuals improve their financial health.
Improving literacy about money management
Financial literacy may be among the most achievable and practical steps to better financial health. Learning to budget, save, and spend wisely can give individuals a sense of empowerment, control, and confidence in their spending abilities. Resources like books, workshops, or online tools may help you learn how to manage your money, save, invest for the future, and manage potential financial risks.
Financial planning and budgeting
Creating realistic budgets and setting financial goals can give you more control of your money. Many possible budgeting methods and tools are available for people with various financial goals. Whether you want to track expenses, build emergency funds, build a retirement portfolio, or develop more mindful spending habits in the future, there are plenty of options to get you on track.
Credit card and other debt management
Rolling debt into a low-interest consolidation loan or credit card is another financial tool some people use to lower monthly payments and reduce overall balances. If you're overwhelmed, you might ask for advice from a financial advisor who can guide you toward the best strategy. Some people also use a debt relief program or consumer credit agency to negotiate down loan and credit card interest. Some consumer advocate groups may provide free financial advice for managing debt to those who qualify.
Communicate and ask for help when needed
Although stigma around financial issues might discourage some from talking about money or reaching out for assistance, doing so can have many benefits. Discussing finances with partners, family, or other trusted individuals can empower you to take control of your financial future, set achievable goals, and make informed money decisions. Talking to others can benefit your mental health by reducing feelings of isolation, despair, and helplessness. Openly discussing financial difficulties can also help break down the stigma often associated with economic challenges, making it easier for people to open up to others when needed.
Mental health support to manage financial stress
Self-care and stress management techniques like exercise or mindfulness can help individuals build resilience while managing financial stress. In addition, online or community support groups tailored to individuals experiencing financial stress can also be a valuable coping tool. Participants in such groups can offer encouragement and connection by exchanging experiences and success stories. Some seek guidance from a mental health professional with expertise in methods like cognitive-behavioral therapy (CBT) tailored to help people cope with stress, anxiety, and depression.
Therapy options to manage stress and improve your mental health
Although individual therapy can be highly effective, some people experiencing money-related stress and anxiety don't reach out for help because they think they can't afford it. Others might worry therapy wouldn't work for them, believing it could be a waste of time and money. While some types of therapy can be expensive, many people find virtual therapy is a positive solution to such barriers. Online therapy is typically more affordable than traditional treatment without insurance, and platforms like BetterHelp may offer financial assistance or fees on a sliding scale for those who qualify. In addition, online therapy platforms can be convenient, allowing you to schedule sessions at a time that works best for you, including outside of standard business hours.
Abundant research shows that virtual therapy programs are as effective as in-person treatment. For example, one study from the UK and Ireland measured the experiences of 30 people participating in a four to eight-week online CBT intervention tailored to help people experiencing depression and anxiety resulting from financial stress. After completing the program, the researchers noted the individuals who participated displayed “statistically significant improvements in symptoms of depression and anxiety, and improved perceived financial well-being.”
Takeaway
Managing money is often personal, and financial stress's causes and psychological impacts are unique to each person. Addressing the practical and emotional aspects can empower individuals to face challenges, alleviate financial stress, and better control their finances. If you or someone you know is experiencing mental health challenges associated with money problems, consider reaching out to a counselor in your area or online. Finding support can be a significant, proactive step toward better well-being.
How do you relieve financial stress?
One of the best ways to relieve financial stress in your current financial situation is to practice money management techniques like the following:
- Create a monthly budget that includes at least a small portion of money that can go to savings
- Track spending amounts from your past and identify areas where reducing spending would be possible (such as with impulse purchases)
- Ask for financial and emotional support from someone you trust or a counselor to improve your emotional well-being (free counseling or coaching may be available for some people)
- Be honest with yourself about your money troubles if you’re struggling financially and keep up on your bank account, spending habits, and upcoming bills so you have enough money to cover your costs and keep paying bills on time
- Address physical symptoms when you feel stressed by seeking physical and mental health care support for your well-being
Can financial stress cause heart problems?
Financial stress can have a significant impact on physical health. If you’re constantly feeling angry, on edge, and upset, you might have an increased release of stress hormones like cortisol and adrenaline, which can harm the body over time, causing symptoms like headaches and inflammation. These symptoms can lead to heart disease in some people, especially those at a higher risk, like older adults.
What is the biggest financial stressor?
In 2024, one of the highest reported financial stressors is the increasing costs of necessities like food and shelter compared to a lack of increases in salary and wages in most states. Many banks also give fewer loans or increase interest rates, and housing prices have increased significantly. At the same time, the federal minimum wage has remained the same nationwide for almost a decade.
How do you get rid of financial stress?
Getting rid of financial stress often involves addressing the core cause. If you are stressed with finances because of the current economy and worry about being unable to afford basic expenses, you’re not alone. One way to reduce financial stress is to ask for help from a financial coach or counselor. You can also try self-regulation techniques like journaling, deep breathing exercises, and mindfulness. Some people decide to change their lives to change their financial situation, such as getting a new job or taking on a side gig.
What should you say to someone who is stressed financially?
If you know someone experiencing financial stress, actively listen to them when they tell you what they’re going through. Instead of giving unprompted advice, ask them if they want to brainstorm solutions together or to be validated and listened to. In some cases, people want to vent without receiving advice, as they might feel inadequate and shameful about the situation. If they ask for help, be understanding of their struggles and give your best advice. If you don’t know how to help, you can direct them to local resources like credit counseling or financial advising services.
When should you stop helping someone financially?
If you’ve been helping someone financially, you might decide to set boundaries in the following situations:
- They haven’t paid you back the money they owe you and keep borrowing more
- They use the money you give them for unhealthy or risky habits
- You can’t financially afford to support them anymore
- They aren’t taking steps to fix their financial situation on their own and are 100% relying on you
- They lie to you about money
- They never help you or say thank you for your support
- You don’t believe giving them money is helping them grow or change their habits
Who can I reach out to for financial help?
You can reach out to several types of professionals for financial advice and coaching, including but not limited to:
- Financial advisors (for people with higher amounts of money and investments)
- Credit counselors (for people with poor credit)
- Debt advisors (for people with high amounts of debt)
- Financial coaches (for anyone looking for financial advice)
- Career coaches (for people looking for financial advice related to income and work)
- Financial counselors (for people seeking professional mental health support related to financial issues)
When seeking a counselor for mental health, make sure they’re licensed to practice therapy in your state and aren’t just calling themselves a counselor.
How do you stay calm during financial stress?
A few quick ways to reduce stress can be used when stress or anxiety arises to ground yourself, such as deep breathing exercises, mindfulness, and meditation. These exercises calm the nervous system by tricking your body into believing you’re safe. You can also try stretching, yoga, exercise, and self-soothing exercises. Talking to a therapist may also be helpful.
What can financial stress lead to?
Financial stress can lead to mental illnesses like depressive and anxiety disorders and physical ailments like heart disease and diabetes. Often, stress can cause physical symptoms like headaches, inflammation, and high blood pressure. Over time, these symptoms can be harmful to the body.
What are three signs of financial stress impacting a person's well-being?
Three signs financial stress may be negatively impacting you include the following:
- You are extremely overwhelmed and have the urge to avoid any financial topics, including looking at your own financial profile or budget
- You start experiencing symptoms of stress like headaches, difficulty sleeping, overthinking, high blood pressure, etc.
- You are constantly worried about the future and believe you won’t be able to handle your finances
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