How to understand financial stress and how to deal with it?
Morgan Stanley did a survey and found that 78 percent of the people who answered felt stressed about money. The pandemic only made this problem worse because it showed how unequal things were in the United States.
To significantly reduce or, ideally, get rid of financial stress, there needs to be a big change in public policy and a big shift in corporate America.
While we all wait for this change to happen, there are steps you can take to get your finances back on track.
I call these steps financial wellness. Please keep in mind that these steps are not meant to downplay the racism, sexism, and other unfairnesses that exist now. Instead, these steps to financial wellness are meant to give you hope when it seems like there is none.
What is financial wellbeing?
I like to define financial wellness as the “actionable steps one can take to improve their financial health.”
According to the Financial Health Network, financial health is “the dynamic relationship of one’s financial and economic resources as they are applied to or affect the state of physical, mental, and social well-being.”
There are three types of financial health:
In August 2020, the Financial Health Network released its annual Trends Report. The report showed that nearly two-thirds of people in the United States were either just getting by financially or were in danger of going broke. These people are finding it hard to spend, save, borrow, or plan in ways that allow them to be resilient and take advantage of opportunities over time.
Many of us don’t need research to show that struggling financially is bad for your financial health and causes financial stress. We also don’t need research to show that money troubles and stress have a direct effect on your physical, mental, and social health.
But the research on financial stress and its effects may help you feel less alone as you deal with tough financial situations.
What are the effects of financial stress?
The Financial Health Institute defines financial stress as “a condition that is caused by financial and/or economic events that cause anxiety, worry, or a sense of scarcity and are accompanied by a physiological stress response.”
New research links financial stress to mental health. A 2014 study from Yale University looks into the idea that some “mental health problems” are actually money problems.
Most of the people who took part were in debt and very stressed about it. Debt has a strong negative effect on mental health and that if a person’s financial problems were solved, other problems might be solved as well.
Day-to-day, financial stress can make you make bad money decisions. It can lead to overspending or underspending. The same thing happens with money as it does with food. When people are stressed, they may eat out of emotion or severely limit their food intake.
A person may find comfort in “retail therapy,” which is mindlessly spending money on things that aren’t necessary, or they may find comfort in limiting their spending so much that they go without basic necessities or eat less food to save money. However, in the long run, both extremes can be bad.
As was already said, there are changes that need to be made from the top down to reduce the stress caused by expensive healthcare, predatory student loans, stagnant wages or salaries, and the rising cost of living.
But what can you do to change your situation while the people in the ivory tower block their way to change? How can you reclaim your financial power to reduce your financial stress, improve your financial health, and feel good about your financial situation?
My suggestion is that you add financial wellness into your life. Just like you read Healthline for physical and mental health tips to take charge of your overall health, there are steps you can take to take charge of your financial health.
What are some things you can do to improve your financial health?
If you work for an organisation, the best place to start is to ask your people and culture team (sometimes called human resources) about financial wellness benefits.
These benefits may include the following:
Earned wages access. This is the ability to get your wages or salary before you get paid so you can pay for something unexpected.
Financial counselling. Some employers pay the fees for financial coaching.
Needs-based short-term loans or grants. Some employers give their employees access to loans or grants to help pay for unexpected expenses that aren’t covered by earned wage access. These are either given as grants that you don’t have to pay back or as loans with very low interest rates (less than 5 percent).
In addition to these benefits, if you are self-employed, there are steps you can take on your own to improve your financial health.
These stages may include:
Resolving credit card debt
This can be done through consolidation or by simply asking to have your rate lowered. Some companies that will help you consolidate your debt for free.
Practice being aware of your money.
Money mindfulness is the practise of being aware when making financial decisions. When you make money decisions without thinking, you end up overspending and having a lot of different kinds of financial stress.
To be more mindful about money, I suggest taking three deep breaths before making any financial decision. Keeping an eye on how you spend your money will help you avoid spending money you’ll later regret and give you a sense of calm when you have to make scary financial decisions that feel out of your control.