Financial stress affects more than just your bank account. Worries about whether there is enough money to buy groceries, keep the lights on or pay the rent affects daily thoughts, feelings, behavior and health.
Money-related stress can feel like a threat to our very survival.
Recently, J$ over at Budgets Are Sexy wrote a thoughtful post in response to research by Payoff.com on a financial type of post traumatic stress called Acute Financial Stress (AFS). The research indicates people’s financial situation can have serious effects on their mental state and outlook on life.
According to Payoff, “23% of Americans — and 36% of Millennials — experience a debilitating degree of stress surrounding their finances”.
I can relate.
Fourteen years ago, we were informed a lawsuit had been brought against us for a car accident almost two years prior. We were being sued for an undisclosed amount of money.
The accident was a minor fender bender (think 5 mph and a dented rear bumper), not likely to warrant a lawsuit.
The timing couldn’t have been worse. We had just purchased a house, depleted our savings, and I had recently quit work to be a stay at home parent.
With a negative net worth, a new mortgage and student loans, financial disaster was one paycheck away.
At the time we had a baby with another one on the way and the thought of not being able to provide for our young family only compounded our fear.
In response to my distress, my husband informed me the insurance company would probably take care of it (though if it exceeded $100,000, we would be on the hook).
Also, no worries, we didn’t have any money for them to take anyway. While the fact that we were flat a$$ broke should have made me feel lousy, at that moment, it actually helped me feel better.
After a few months, the insurance companies settled the lawsuit out of court for around $25,000. We were left with an high insurance premium and the unjust feeling that the plaintiffs took advantage of the situation.
I realize the financial stress my family experienced during that time was minor compared with the stress others have to deal with day in and day out. Yet, the fear and helplessness of our situation gave me enough insight to recognize how easily it can bring you down.
What to do when financial stress strikes
1. Identify the source of the stress
Financial stress could come from a number of sources; following are some of the most common:
- Debt: credit card or student loans
- Unable to pay rent/mortgage payment
- Living paycheck to paycheck
- Consistently spending too much
- Lack of understanding about finances
- Not enough money to retire
(Ask: Is it really about the money? Is the stress truly about money or is money a convenient scapegoat for something else? Are you spending out of boredom, to keep up with the Joneses, or to make yourself feel better? If so, how can you address these issues at their core?)
2. Decide how to eliminate or reduce the source of stress*
Talk about it. Simply talking about a problem often brings some degree of clarity. Talking to a trusted friend, family member or interacting with an online community where you can discuss financial concerns can be invaluable.
Learn about money/finance. Check out personal finance books at the library, read online personal finance blogs, and ask questions of those who have the knowledge you are seeking.
*Sometimes sh** happens that’s beyond our control, but we can still decide how we are going to respond (e.g. our lawsuit – we did our homework and found, at worst, we could be forced to sell our cars, but not our house, which eased the stress. As soon as we could afford it, we took action to secure umbrella liability insurance).
3. Make a plan/set goals to eliminate or reduce stress.
Make a plan. Research has shown people who not only write down their goals, but write down actionable steps and become accountable to a friend are much more likely to follow through. Start with the most pressing financial stress, make a step-by-step plan, be accountable and follow through.
Consider professional help. Debt counselors can help with debt consolidation to make payments affordable and even lower interest rates. Non-profit debt counseling programs are widely available (check out NFCC and FCAA).
Financial planners can help with budgeting and planning for the future. But, be aware these professionals are often compensated for the financial products they “sell”. Consider a fee-only adviser that works on an hourly, as needed basis (rather than commission).
4. Change the voices in your head.
Change “I can’t” to “I can’t yet, but eventually I will”. A positive mindset and the belief that you CAN make positive changes is necessary to accomplishing any goal. Read financial success stories online and use them as inspiration.
Perseverance, along with a positive attitude, will eventually result in success…and less stress.
Here are some tools that I use myself that you may find helpful:
Want to painlessly save more each month (without even lifting a finger!)? Try out Digit. I really thought I was saving all I possibly could. Digit proved me wrong. See my review and updates on how much I’ve saved here.
Personal Capital tracks your expenses for you for free! Have all your accounts in one place and utilize their free expense tracking tool! I use their free net worth and expense tracking tools. Sign up for a FREE Personal Capital
account.
Reducing stress was one of the biggest side affects of gaining control of our money. Once we planned and organized our finances it was like a weight was lifted and the stress gone. Having just a little bit of savings takes the worry away from the little things that can go wrong in everyday life. Don’t believe, give it a try and see for yourself.
Same here, Brian. Having the debt paid off and an emergency fund in place eased worries about job loss or unexpected emergency expenses. When car and house repairs pop up, I am grateful to have that savings!
There are so many similarities between our situations. The stress factor (in our case, job loss) happened just after we had bought a house and just after we’d had a baby and just after I had resigned from work. Ugh! It was at about the same time too – and it’s taken the same amount of time to get on the road to solid recovery. This type of experience is probably more common than we realize, but since people don’t talk about their finances, most individuals deal with it in isolation. Great article, Amanda! I’ll have to check out J $’s post too.
Thanks for the thoughtful comment! The timing was the scariest part of our situation but, unlike your situation, ultimately we didn’t face significant financial implications. Our experience was just a glimpse into what your situation must have felt like. Agreed – our experiences are not all that uncommon, but finding support in these situations can be difficult, indeed. Another good reason to love personal finance blogs!
Organizing my financial plans before I graduate college is my biggest goal to hopefully avoid financial stress! I actually say J$ post and it is unfortunate how much people mismanage their money which result in loads of stress. Hopefully through good saving habits these forms of stress will be relieved from both our lives!
Good savings habits definitely help in the prevention of financial stress. Your future self will thank you for setting financial goals so early in life!
Oh good lord, I cannot imagine dealing with something of that magnitude!
I recently freaked out when I got a collections call. It was a mistake, but even the week or two it took to rectify it …. stress.
But the worst financial stress I’ve been through is supporting a partner through extended unemployment. So frustrating, so stressful, and so helpless.
Unemployment, or even the threat of it, can cause a great deal of stress, for sure! Taking a step back and choosing how to best deal with financial setbacks can be so difficult, but the chosen response can make a huge difference in the outcome. Thanks for the comment!
Greetings! Very useful advice in this particular post! It is the little changes that make the largest
changes. Thanks for sharing. Cheers, Madonna
Hi Madonna! Thanks for the comment! Little changes add up over time and can lead to great accomplishments!