Understanding The Ramifications Of Financial Stress

“According to results from the American Psychiatric Association (APA) Healthy Minds Monthly Poll, nearly 90% of residents in the United States report feeling anxious or very anxious about inflation, an increase of 8 percentage points from the previous month.”

Everyone faces some level of financial stress, even those with high incomes and those born into wealth. We’ve all heard the phrase ‘money doesn’t buy happiness.’ Of course this isn’t entirely true. 

It suggests that if you have enough money to cover all basic living expenses, more won’t make you happier or rid you of financial stress. It does not mean that someone with very little money should be as happy or stress free as someone with wealth in excess.

According to Healthline, “With inflation at a 40-year high, the APA poll also revealed that over 50% of Americans are worried about a potential loss of income.”

There is evidence that all income levels suffer from the associated ramifications of financial stress, although naturally the prevalence is higher within low-income populations. Furthermore, the already high levels of financial stress were exacerbated by the pandemic. 

According to Bankrate, Psychological Impact Of Financial Stress Reported By Age Groups:

48% of millennials (26 to 41 year olds) 

46% of Generation X (42 to 57 year olds)

40% of Generation Z (18 to 25 year olds) 

“Among those who cited money as having a negative impact on their mental health, 28 percent said they worry about it daily.”

A 2020 study conducted by the National Institute of Mental Health showed that the COVID-19 crisis has had major ramifications for global mental health. Following the pandemic and directly attributed to financial stress was a sharp increase in rates of depression, anxiety, behavioral changes, and irritability. 

Among those studied, 90 percent reported some level of financial stress related to the pandemic and two-thirds reported feelings of helplessness in facing the mounting financial difficulties.

With the understanding that everyone deals with this form of stress, it is important that everyone is aware of the ramifications of financial stress, and how these negative impacts can be mitigated. We are inevitably confronted with this stress on a daily basis. 

A person dealing with alcoholism could take steps to avoid alcohol entirely, whereas any person functioning in society today is faced with numerous financial decisions and opportunities throughout the day. 

Bombardment by advertisements, grocery shopping, unexpected expenses, and filling the gas tank are, for nearly everyone, unavoidable triggers of financial stress.

Stress is a completely normal physical response of the body to something that is perceived as a threat. Instances of stress trigger a series of physiological reactions including increased heart rate, muscle tension, and heightened breath rate due to increased levels of the stress hormones cortisol and adrenaline. 

If this response is chronic, and measures are not taken to mitigate the side effects, it can lead to a multitude of damaging physical and psychological symptoms including: 

  • Anxiety
  • Depression
  • Behavioral changes
  • Stomachaches
  • Headaches
  • Difficulty sleeping/insomnia
  • Irritability
  • Feelings of guilt when spending money
  • Compromised immune system
  • Muscle tension

There is a reason humans have evolved to react to threats with the stress response. This reaction is designed to alert us to the perceived threat, which allows us to initiate the flight or fight response and appropriately deal with danger.

As with all forms of stress, a moderate level of financial stress guides the decision-making process. The stress you feel prior to purchasing a high-ticket item is designed to prevent you from recklessly squandering your assets. 

That said, a high level of financial stress is not beneficial to mental health and should be effectively managed. The most effective way to deal with stress is not to attack the symptoms, but to address the root cause by improving your financial management. Of course this is more easily said than done, so it is important to manage the symptoms concurrently. 

Some effective methods to better manage finances include budgeting apps, avoiding temptation, establishing good spending habits, consulting a financial advisor, and analyzing spending to decide what is unimportant. 

Taking these steps towards financial success can inherently reduce the negative ramifications, but it is also important to practice stress-reduction techniques such as breathwork, meditation, yoga and other physical activity, and spending time with loved ones.

Although we all deal with some form of financial stress, we should recognize the purpose of our body’s stress response and understand the negative ramifications of any form of stress. Finally, once we understand and recognize these unavoidable stresses, we can identify strategies to prevent and mitigate the consequences.