What is Financial Stress? : Financial Stress

Almost every American will feel stressed about money at some point in their lives. You may even feel stressed about your wallet as you’re reading this. But what is financial stress?

It could come from not knowing how you’ll pay your bills. Or maybe you’re worried about planning for the future like retirement or caring for your aging parents. Financial stress often compounds. That means it can come from multiple sources. One missed credit card payment can lead to falling behind in other areas of your financial life. The following updated article is your guide to financial stress.

What Is Financial Stress?

We define financial stress as anxiety-driven stress resulting from a financial event in a person’s life. Generally, this occurs around a major life event such as buying a new home or loss of income.

And because it’s rarely a hot topic of conversation at dinner parties, this stress may go undetected for long periods of time. Our personal finances aren’t something we Americans talk about very much. So it can be hard to identify its effects until it feels like too much. Some studies show that over a quarter of Americans suffer from Acute Financial Stress (AFS). This can bring about symptoms similar to PTSD.

Who is Affected By Financial Stress?

Put simply, everyone is affected by financial issues. It doesn’t discriminate. However, there are differences between demographics about the most common stressors. For millennials, their top financial stressors include paying down student loans, job security, and creating savings goals for big life milestones. Following the Great Recession, many millennials struggled to find jobs that matched their education and skill levels. Consequently, millennials are getting married later and buying homes at lower rates.

By contrast, baby boomers are most concerned about their upcoming retirement. Gen X is looking hard at their monthly bills and keeping up with debt. And in the middle of the COVID-19 crisis, many Americans are experiencing even higher levels of financial stress. Even if you weren’t feeling the pinch before, you probably are now. Economic uncertainty and job losses have turned many households upside down.

Why Do People Get Financially Stressed?

Financial stress doesn’t just come from buying too many lattes. It manifests itself for a multitude of reasons. Some of the most common reasons people get financially stressed include:

Planning for retirement
Paying bills on time
Saving for an emergency or unexpected expenses
Not earning enough money
Budgeting
Potential unemployment
Rising household expenses
Personal debt

Often, these factors all influence each other. Someone struggling to save money for an emergency may also be dealing with paying down debt.

Emotional and Mental Effects of Financial Stress

The ways financial stress affects our health is different for everyone. And the reactions you have to missing a bill may be different than your fears about the future.

One thing is clear though. Debt is one of the most common sources of stress. Nearly 8 in 10 Americans carry some form of debt. That’s a lot of people!

Americans carry an average of about $16,000 in credit card debt. The total average personal debt is even higher at about $90,000.

For many, debt isn’t just a number on a screen. It isn’t just a bill that arrives in the mail. Real emotional and physical responses come with financial stress.

Fear and panic can arise when a credit card bill is going to be late. This leads to losing sleep or feeling guilty about making other purchases during the week.

Physical Effects of Financial Stress

When your finances aren’t on track, it can feel like the world is working against you. Unfortunately, stress from your finances isn’t limited to emotional or mental effects. You can also start to feel physical side effects as well.

The most common effects of stress include headaches, trouble digesting food, and heart disease.

You may have trouble sleeping or develop insomnia. Weight gain and difficulty burning fat are also common. Depression can creep in when you feel like your situation will never get better. There may also be increased levels of anxiety or worry that can increase your blood pressure.

All of these physical impacts of living with money troubles can impact your marriage, friendships, and more.

What to Do If You’re Financially Stressed

Everyone feels financially stressed from time to time. But if your stress is persistent, it’s time to come up with a plan to tackle it.

For starters, take some time to calm yourself down. We know that’s easier said than done. But financial stress is manageable with the right tools and techniques. With a plan to tackle your debt or financial stressor, you’ll be able to work through it.

Next, work to understand your current financial situation. We recommend checking out our article called How Is My Financial Health? It will help you compartmentalize areas of your financial world to understand where you should focus your attention. You time block out your calendar, so why not block out areas of your finances?

Four Changes You Can Make Today to Alleviate Financial Stress

Now that you understand what financial stress is, what causes it, and how it can effect you physically and mentally, let’s look at four changes you can make today to crush your financial stress:

Stick To A Budget

Every household needs a budget. Although most of us keep mental math in our head about where our money goes, we’re often wrong. It’s easy to forget about the Starbucks trip, buying lunch for the team, or a late-night shopping spree. We’re all guilty of it. Having a written (or digital) budget is the best way to know exactly where your money is going. And that’s important when you’re trying to address other financially stretched areas of your life.

A budget not only can help you pay down debt, it can also help you understand what changes you need to make. It could mean living below your means for a while. Sorry, that means you may have to cut out your Hulu subscription. Or it could show you that you need to focus long-term on increasing your family’s income. And that may mean taking out a student loan to go back to school. Makes sense, right? Your budget is your home base. It’s how you take control of your finances. It isn’t just for tracking how much you spend on going out with friends. Instead, it should be the blueprint for making key financial decisions in every corner of your life.

Build A Healthy Emergency Fund

If you’ve ever read a financial book, followed a financial blogger, or watched a video on personal finances you’ve probably heard the term emergency fund. Financial guides love to praise the value of an emergency fund—or a “rainy day fund” as our grandmothers call it.

This often overlooked piece of advice is the key to relieving most financial problems. It gives you a buffer in your budget to keep on track with your bills even if something goes wrong. We won’t bore you with the details of building an emergency fund here, but we recommend checking out our guide to building an emergency fund. All it takes is 3 small steps to get started!

Track Your Progress

Changing how you deal with your finances takes time. If you deal with financial stress often, it may take weeks or months to feel like you’re getting things in order. And that’s OK! Dealing with the effects of financial stress is a marathon, not a sprint. Get in the habit of checking in on your finances once a month to review your progress, reevaluate financial goals if needed, and see how you’re doing emotionally.

A quarterly review may also help you wrap your head around how much progress you’ve made. Don’t get discouraged by comparing yourself to other people’s progress. You’re on your own journey.

Get Some Exercise

There’s no need to sign up for a 10k or take out a new gym membership. But the positive effects of physical activity are numerous. Staying physically active is one of the best ways to clear your head and keep your stress levels down. Going for a walk can not only give you fresh perspective on what you need to do with your finances, it can also relieve some of the tension you’re carrying around.

Personal finances and physical activity don’t sound like they go together. But trust us that a little sunshine, some vitamin D, and stretching your legs can have a positive impact on your checking account.

Dealing with Financial Stress Long-Term

If you’re currently financially stressed, it’s unlikely it will be the last time you encounter it. And with so much uncertainty because of COVID-19, financial stress may take some time to get through. Take time to focus on your mental and physical health by spending time outside. Get a plan in place about how you’re going to tackle your financial stress moving forward. As stressful as your money management can feel, knowing how to deal with the stress effectively is even more important.

Hopefully this article has helped you understand your financial stress better in addition to some simple steps that you can take today. We’d love to hear from you, so let us know your thoughts and feedback in the comments.