Financial Stress 101 – Complete Guide and Coping Strategies

Money. For the longest time, it’s almost been treated like a dirty word. Like gasoline for our cars, or food for our bodies, money is the building block for most of the decisions we make in life. Our finances can impact what we do for work and for leisure, where we go to school, where we live, what we eat, the places we visit, the activities or hobbies we take up, and so on. It’s no surprise then that our finances can also be a big source of stress.

Financial stress is a present problem in our world, and ever topical as the global economies work to combat the difficulties that came about during Covid-19. A survey conducted by the American Psychological Association, or the APA, showed that 72% of Americans experienced financial stress at some point in their lives. 

So, what is financial stress? In broad terms, it refers to the negative emotions, anxiety, and worry that come from financial concerns, like the inability to meet financial obligations, unexpected expenses, looming debt, or insufficient income. 

When experienced chronically, or without reprieve, this negative stimulus can affect a person’s mental and physical health, relationships, and overall well-being. The World Health Organization released a report in 2019 that found financial stress to be a leading cause of stress-related illnesses such as depression and anxiety.

It’s clear that financial stress is both present and dangerous. As one of the leading causes of stress, it’s important then that we as a society know how to spot financial stress, to understand the causes and consequences of these destructive pressures in our lives. By understanding financial stress at a deeper level, we can flip the script, and begin to look at ways to manage this stress and the benefits that come with doing so. 

5 Signs You Are Suffering From Financial Stress

While stress may be an abstract concept, thankfully it provides very real and visible signs. In the same way that hunters learn to track the signs of an animal, so also should we learn to spot and understand the signs of financial stress.

By doing this, we can determine the severity of the stress we are experiencing, how it is manifesting in our lives, and affecting the quality of our experiences. Here are several of the most common signs that you might be suffering from financial stress:

Constant worry about money

If you find yourself constantly worrying about money, whether it’s paying bills, making ends meet, or saving for the future, you may be experiencing financial stress. According to a 2020 survey by the American Psychological Association (APA), 64% of adults in the United States reported that money was a significant source of stress in their lives. 

Difficulty sleeping

Financial stress can make it difficult to fall asleep or stay asleep at night. A study by the National Endowment for Financial Education found that 35% of Americans who reported financial stress also reported difficulty sleeping. The anxiety you have around your financial situation may cause you to stay up late, obsessing over ways to save or make more money, without ever giving you an opportunity for change. 

Physical symptoms

Financial stress can also manifest itself in physical symptoms such as headaches, muscle tension, and stomach problems. When our stress begins to affect the quality of our physical well-being, then we know that the issue has risen to a dangerous level. The same study mentioned before by the National Endowment for Financial Education found that 51% of Americans who reported financial stress experienced physical symptoms as a result. 

Avoiding social situations

Financial stress can lead to feelings of shame or embarrassment, causing some people to avoid social situations altogether. A survey by the APA found that 26% of adults in the United States reported avoiding social situations due to financial concerns. This can create a negative cycle, where you pull away from the healthy relationships which are necessary to manage your stress. 

Increased arguments or tension in relationships

Financial stress can also lead to tension or arguments in relationships, especially when there are disagreements about how money is used. According to a study by the National Endowment for Financial Education, 42% of Americans who reported financial stress also reported increased arguments with their spouse or partner about money.

When stress is involved, there will always be signs, you just need to know how to look for them. Really, it’s easy to look at these behavioral changes as symptoms of the larger issue. What’s important at this stage is to start looking for the source of your stress. 

You can do everything in your power to deal with the stress, but without understanding where these pressures are coming from, you will continue to find yourself back in the same place as you were before. 

10 Common Causes Of Financial Stress

Everyone’s finances are different. Even in similar scenarios, we can respond to or perceive financial issues in a myriad of different ways, simply based on the experiences we’ve gone through. Despite the differences, we can still boil down financial stress to the general causes, which can be a great first step in building a plan for your own stress management. 

Unemployment or underemployment

Employment can be a touchy subject for many people. Losing a job, or being unable to find adequate employment, can be a significant source of financial stress for any number of people, especially in the midst of difficult economic times.

According to the Bureau of Labor Statistics, the U.S. unemployment rate was 4.9% in February 2022. Without a job, it can be hard to meet your basic needs. Furthermore, it can be mentally taxing on our feelings of self-worth. 

High levels of debt

Meeting payments on high levels of debt can provide ample financial stress. This debt can come from a number of sources, including student loans, credit card debt, car payments, and mortgages. 

Debt and the interest that comes with it can make it very hard to get ahead, as large chunks of your money may go towards paying down these liabilities every month. According to a 2021 report by Experian, the average American has over $90,000 of debt, including all major liabilities, with even the youngest adults, gen-z, having a debt average of $9,000. 

Lack of savings or emergency funds

Without savings or emergency funds, unexpected expenses can quickly become a financial burden. According to a 2021 survey by Bankrate, 36% of Americans have no emergency savings. Without having cash to dip into in the event of an unforeseen circumstance, people are forced to take on interest-backed loans, only adding additional stress from increasing debt. 

Unexpected expenses

Unexpected expenses, such as medical bills or car repairs, can be a significant source of financial stress. A 2020 survey by Bankrate found that 65% of Americans experienced an unexpected expense in the past year. Not only is it stressful to see your money go towards some unplanned circumstance, but it can also be doubly disheartening if you were relying on that money for some other planned need or desire, such as a repair, clothes, or maybe even a vacation. 

Financial illiteracy and poor money management skills: A lack of financial knowledge and poor money management skills can lead to poor financial decisions and financial stress. According to a 2021 survey by the National Foundation for Credit Counseling, only 20% of Americans have a written financial plan. 

This includes creating and sticking to a budget, setting financial goals, and making informed decisions about spending and saving. Without these skills, you may struggle to make ends meet and may find yourself in a cycle of debt and increasing financial stress.

Income inequality and stagnant wages

Income inequality and stagnant wages can make it difficult to make ends meet and save for the future. According to a 2020 report by the Economic Policy Institute, the top 1% of earners in the United States earn 39 times more than the bottom 90% of earners.

Corporate profits begin to eat into worker wages, leading to insufficient pay and even layoffs. It can become demoralizing to see a select few make so much, while you are working to make so little. 

Economic recessions or depressions

Economic recessions or depressions can lead to job loss, monetary inflation, and reduced income, ultimately leading to elevated financial strain on the vast majority of people. As the price of goods rises without an equal rise in income, our buying power becomes diminished, making it more and more difficult to afford the same goods we could the year before.

Job insecurity or fear of job loss

Job insecurity or fear of job loss can lead to financial stress, as it may be difficult to plan for the future without a steady income. According to a 2021 survey by the Pew Research Center, 37% of Americans actively worry about losing their job. Operating in this state of worry can produce chronic anxiety over your place in a company, forcing you to work in a more agitated state of mind, which only increases the amount of stress you are under. 

Inadequate financial support for retirement

Without adequate financial support for retirement, it can be challenging to plan for the future and avoid financial stress. According to a 2021 survey by the Employee Benefit Research Institute, 31% of Americans have less than $1,000 saved for retirement.

For many, the idea of retirement is the light at the end of the tunnel. Not having a solid retirement plan can leave you working far into retirement age, at a point in your life where this work can take an even greater toll on your mental and physical well-being. 

High costs of living

High costs of living, particularly in urban areas, can make it difficult to make ends meet and save for the future. According to a 2021 report by the National Low Income Housing Coalition, a worker earning minimum wage would need to work 79 hours per week to afford a two-bedroom apartment at fair market rent in the United States. 

Needless to say, there are plenty of sources of financial stress in this day and age. Money is the ticket to play in most aspects of our life, so it’s natural to be worried about where our next check is coming from. We all have basic needs, which need to be met, but even more so, we want the breathing room to be able to enjoy life to its fullest, to buy and invest in our dreams and aspirations. Otherwise, our stress will build, and if left unmanaged, we will face the consequences. 

10 Consequences Of Unmanaged Financial Stress

Financial stress can have very real consequences. There’s often a dangerous habit in society to ignore stress. Too many people live with the mindset that you just have to buckle down harder under strain, that the pressure is a natural part of life and there’s little to be done. You may be thinking, “what’s a little stress going to do?” 

Fortunately, more and more research has been done surrounding the concept of financial stress, which is why we now know the severity of it when left unmanaged. So, now that you know the sources of financial stress, let’s look at 10 consequences of unmanaged financial stress on your short and long-term wellbeing.

1| Anxiety and Depression.

The impact of financial stress on mental health is a well-documented consequence. A study found that people experiencing financial stress, especially those with lower levels of financial literacy, were far more likely to report negative mental health symptoms, such as anxiety and depression (Richardson et al., 2017).

It’s important to understand that the link between financial stress and mental health is very complex. Financial stress can cause feelings of shame, guilt, and worthlessness, which can further exacerbate mental health issues. In addition, individuals experiencing financial stress may be less likely to seek help for their mental health concerns due to concerns about the cost of treatment or lack of insurance coverage.

2| Decreased physical health. 

Chronic stress can have a lasting negative impact on our physical health. A study in 2018 found that this stress can lead to well-known health issues, such as high blood pressure, heart disease, obesity, and a weakened immune system (van der Valk et al., 2018). Additionally, many who face these issues tend to take on unhealthy coping mechanisms, such as overeating, smoking, or even abusing substances, which only acts to further exacerbate the health problems. 

3| Strained and Broken Relationships. 

When under stress, individuals tend to release those feelings onto the people closest to them, simply as an attempt to cope with the strain. Financial stress is known to impact relationships, leading to frequent arguments and decreased trust, leading to potential breakups or even divorce (Addo, 2017). 

4| Decreased work performance.

Stress can greatly decrease the quality of our work performance (Basyouni & Keshky, 2021). If financial worries are playing on a loop inside your head, you might find it difficult to focus on the work in front of you. Those who are experiencing this stress can often experience lower productivity and job satisfaction, which may even result in the loss of a job, only further exacerbating your financial stress. 

5| Substance abuse. 

Individuals experiencing financial stress have been known to turn to unhealthy coping mechanisms, such as alcohol or drugs (Sinha et al., 2008). As mentioned previously, this can have a direct impact on your physical health, as well as your mental health. Substance abuse is only used to mask the stress, not actually cure it, leading to destructive cycles that will only compound the problem. 

6| Sleep disturbances.

Financial stress can wreak havoc on your sleep quality (Bollu et al., 2019). If you’re experiencing anxiety over your financial situation, you may have a harder time falling and staying asleep at night. As your sleep cycle is interrupted, you’ll find yourself with diminished energy during the day, creating a number of problems for your mental and physical well-being. 

7| Decreased academic performance.

Students facing financial stress may struggle academically, leading to decreased grades and potential dropout (Frazier et al., 2019) Education needs focus, it needs dedicated thought, both of which can be difficult if you’re simultaneously worrying about the state of your income. This is only made more common by the continual increase in the price of education. 

8| Poor decision-making. 

Financial stress can impair your judgment, leading to impulsive or irrational decisions (Porcelli & Delgado 2017). As debt piles up or income drops, many people can lose hope in the plans they may have dreamed up for their future. Those who feel that they have few options may even turn to more dangerous paths to obtaining their wants and needs. 

9| Lowered self-esteem and self-worth. 

The inability to meet financial obligations can negatively impact one’s self-perception (Ryu & Fan, 2023). As a society, our financial position is often conflated with individual values. It’s easy then to struggle with negative self-worth when our placement on the economic ladder is so low. The loss of a job or even the inability to find one can also take a heavy toll on your self-esteem, causing you to question the value you bring to the table. 

10| Increased risk of suicide: 

Financial stress has been linked to a higher risk of suicidal ideation and attempts (Stewart et al., 2019). When someone’s self-esteem or self-worth falls too low, they can begin to wonder what possibilities are left for them in the future.

Financial stress is a serious problem and the consequences of it can be truly destructive. Often, these can compound, as most people will likely face several if not all 10 of these consequences. This is why it’s so important to understand how financial stress plays into our lives. Once you’ve identified the source of your stress, you can begin to make decisions that will lift you up instead of tearing you down, only then will you be able to find the benefits that come with managing your financial stress. 

8 Benefits Of Managing Financial Stress

Effectively managing financial stress can have numerous positive effects on an individual’s life, such as:

Improved mental health

One of the most significant benefits of managing financial stress is improved mental health. We know that financial stress can lead to anxiety, depression, and other mental health problems. 

When you’re worried about paying bills or making ends meet, it can be hard to nurture positive mental health. However, by utilizing effective techniques to manage your financial stress, you can reduce your anxiety and improve the health of your mind.

Enhanced physical health

Managing financial stress enhances the health of your body. Physical symptoms from financial stress like headaches, muscle tension, and stomach problems, can have a damaging effect on your physical health. 

These nuisances can make it difficult to enjoy your day or carry out your responsibilities. However, by developing effective strategies to manage financial stress, you can reduce the toll that this strain has on your body, keeping you happy and healthy. 

Strengthened relationships

When you manage your financial stress, you can also strengthen your relationships. This happens when we reduce the tension that we are operating under. When the strain isn’t so bad, it’s easier to engage in conversation with others. There is more breathing room here for trust and care, and less time spent arguing over money. Developing techniques for dealing with your sources of financial stress can limit its impact on the relationships you have in your life, whether it’s with a partner, family members, friends, or even your work colleagues. 

Increased work performance and satisfaction

Managing financial stress will increase your work performance and satisfaction. When we’re stressed, it’s difficult to maintain our concentration in work settings. Focusing on tasks can become near impossible, causing the value of our performance to drop over extended periods of time. However, acute stress, short-term and limited, can be a powerful motivator for many. Utilizing techniques to manage your stress can turn weight into muscle and have you performing far beyond what you ever thought possible. 

Improved decision-making

Managing stress can lead to clearer thinking and decision-making. Financial stress can affect the quality of our choices, both short and long-term, as it impairs cognitive function and leads to impulsive behavior. However, by managing financial stress, you can reduce stress levels and make better financial decisions for yourself and your loved ones. 

Better academic performance

Students who effectively manage financial stress are far more likely to perform better academically. Financial stress is one of many stressors that can distract a growing mind, pulling you away from your studies and ultimately leading to a decline in academic performance. When you use effective techniques to manage your financial stress, you can improve your focus and concentration.

Increased self-esteem and self-worth

Gaining control over finances can also lead to improved self-confidence. Financial stress has a habit of causing feelings of inadequacy and low self-esteem, especially if you feel like you are not meeting your financial responsibilities. 

However, by managing financial stress, you can not only increase your chance of managing other consequences of the financial strain which may be getting you down but can also improve your sense of self-worth and self-esteem.

Reduced risk of substance abuse

Finally, managing financial stress can also reduce the risk of substance abuse. Financial stress can lead to negative coping mechanisms, such as substance abuse, as individuals try to alleviate their stress. However, by managing financial stress, individuals can reduce their reliance on negative coping mechanisms and reduce their risk of substance abuse.

As you can see, there are many exceptional benefits to managing your financial stress. While we all will face some form of financial stress during our lives, we don’t have to let it control and diminish our experience. As the old saying goes, “when life gives you lemons, make lemonade.” When you can manage your stress, you can turn that energy into some productive and truly beneficial. 

15 Effective Stress Management Techniques For Financial Stress

Once you know where stress is coming from, you can start making a strategy to deal with these pressures. Of course, everyone will have their own approach to stress. The key is to make sure that we are using healthy mechanisms to reduce the strain that finances have on our lives. 

Here are 15 of the most effective stress management techniques that you can use to control the impact of financial stress on your life: 

1| Create a budget. 

Creating a budget can be a useful tool for managing finances and reducing financial stress. A detailed budget helps track your expenses, identify areas for savings, and set aside funds for emergencies or debt repayment. By taking control of your finances and being mindful of your spending, you can reduce your financial stress and work towards achieving your financial goals.

2| Build an emergency fund.

Building an emergency fund can also be a key strategy for managing financial stress. Having a financial cushion for unexpected expenses provides you with peace of mind and alleviates the worry of being caught off guard. This will also help you to avoid high-interest debt, in the event of an emergency expense. Setting aside a portion of income each month and establishing a savings plan can help you build a financial safety net over time. 

3| Reduce your debt.

Reducing debt is a very effective way to alleviate financial stress. High levels of debt can be a significant source of financial worry and anxiety. Developing a plan to tackle and eliminate debt, such as the snowball method, can alleviate financial stress in the long term, freeing up your hard-earned money for savings, investing, or any other financial goals you might have.

4| Seek professional help.

Financial advisors or credit counselors can provide guidance on managing your finances and addressing financial stress. They can even help you develop a plan to manage your debt, create a budget, and establish savings goals that align with your short and long-term plans. Professional guidance can provide a sense of clarity and direction, helping you feel more confident in your financial decisions.

5| Improve your financial literacy. 

Improving financial literacy is another important strategy for minimizing stress. Let’s face it, the world of finance is complex. For many, it’s all just too daunting to get into. Gaining knowledge about personal finance, investing, and money management can empower you to make informed decisions and minimize your financial stress. By understanding financial concepts and terminology, you can better manage the money you do have, and potentially even get it working for you. In this day and age, there are many free, or paid, resources available for improving financial literacy, including books, online instructional videos, and financial education programs.

6| Prioritize self-care.

Prioritizing self-care in the midst of controlling your finances is very important for managing your stress levels. This can include engaging in regular exercise, eating well, and getting enough sleep. All of these options help to reduce stress and improve your holistic health. By taking care of your body, you can better manage the stress of financial difficulties, whether the pain points when they come and improve your ability to grow from the challenges.

7| Practice mindfulness and relaxation techniques

Deep breathing, meditation, or yoga can help manage stress, as well as improve your mental clarity. By engaging in these practices regularly, you can cultivate a sense of calm, and a safe space, which will allow you to navigate your financial stressors in a more efficient and constructive manner. 

8| Set realistic financial goals.

Setting realistic financial goals can provide a sense of direction and accomplishment, even in the face of financial difficulties. Creating achievable financial goals, such as paying off debt, building savings, or establishing a budget, can provide a sense of control and progress toward financial stability. It’s easy to become burned out in this process, but goals can make it easier to feel accomplished and motivated along the way.

9| Communicate openly about finances.

Communicating openly about finances can also be a helpful strategy for managing the mental strain of isolation that money can have. Discussing financial concerns with family or friends can provide emotional support and potentially helpful advice, while also potentially deepening your relationships. Seeking the guidance and support of a financial professional can also be beneficial, as they can provide objective feedback and assist you with your financial plans.

10| Explore additional sources of income. 

Pursuing side jobs, freelance work, or passive income opportunities is a great way to supplement your income. This may be the necessary step to pay down debt, build your savings, or maybe even just give you a little peace of mind spending money when you want it. By exploring different avenues for income, you can diversify your financial resources and reduce your reliance on a single source of income.

11| Cut unnecessary expenses.

Cutting unnecessary expenses can be an effective way to reduce unnecessary sources of financial stress. Reevaluating and reducing non-essential spending can free up funds for debt repayment or savings. By being mindful of their spending and eliminating unnecessary expenses, you can feel more in control of your finances and work towards achieving your financial goals.

12| Utilize employee assistance programs.

There are plenty of amazing employee assistance programs out there, ready to be a tool for you. Some employers offer financial counseling, mental health support, and other resources to help employees manage their stress. By taking advantage of these resources, you can access professional guidance and support to better manage your finances and mental health.

13| Join a support group. 

Joining a support group can provide emotional support, encouragement, and practical advice for individuals experiencing financial stress. Connecting with others who are going through similar experiences can help you feel less isolated and alone. Support groups can also provide a forum for sharing resources, strategies, and experiences.

14| Focus on what you can control.

Focusing on what can be controlled can help alleviate feelings of helplessness or hopelessness. Concentrating on aspects of personal finance that are within one’s control, such as creating a budget or reducing debt, can provide a sense of agency and direction. By focusing on what can be controlled, you’re placing yourself in a better frame of mind to manage your finances and work towards achieving your financial goals.

15| Celebrate small victories. 

Celebrating small victories is essential along the way to financial stability. Doing so can boost both your motivation and self-confidence. Acknowledging and celebrating progress towards financial goals, such as paying off debt or increasing savings, can provide a sense of accomplishment and momentum, which will be indispensable during tougher times. 

By recognizing your progress and celebrating small victories, you can stay motivated and focused on achieving your financial goals.

These are 15 of the most effective ways that you can put the reins back into your hands. Sometimes, the changes we make are small, but their impact on them is monumental in the long run. When you begin to formulate and follow a strategy, you open up a world of possibility for yourself and reduce the negative weight that financial stress puts on your hopes and dreams. 

Final Thoughts

Financial stress is a very prevalent issue, one that has been around for a long long time. Our worry over money or the state of our savings, our debts, and our income can have detrimental effects on all parts of our life, including mental and physical health, relationships, and work performance. This is why it’s so important to take notice of the problem early. 

When you understand what financial stress is, it becomes easier to see the signs and sources. Not only is this essential to help yourself, but it can even be used to spot stress in others. When you see the signs, work backward to find the sources. 

Unmanaged, these stressors can have profound impacts on our well-being, presenting a number of long-term consequences on our health and happiness. 

Manage your stress. You see the signs, you found the source, and now you just have to implement the techniques. These adjustments to your life might feel cumbersome at first, but I assure you that their benefit will last a lifetime. 

When you alleviate the burden of financial stress, you are accepting a future of hope and possibility. So what are you waiting for? With the proper tools and strategies, financial stability and freedom are finally within reach.


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