Financial stress describes a negative feeling that one is incapable of meeting the financial demands of daily necessities and not having adequate funds to make ends meet. Even reading about financial stress can be a stressful experience. Questions can also be stressful such as:

  • How confident are you that you could find the money to pay for a financial emergency that costs about $5.000?
  • How often do you worry about not being able to meet normal monthly living expenses?
  • How often do you say ‘ I can’t go because I can’t afford to’?
  • How stressed do you feel about your finances in general?

Its amazing how much this type of stress can intrude into our life and how it can affect out physical and mental health. Ulcers, Migraines and even premature death because of heart disease, alcohol abuse and suicide are just some of the unfortunate results that financial stress can cause. As far as our mental health is concerned things don’t look so good either. Financial stress can include symptoms of anxiety, anger, guilt and depression. It is a fact, that excessive worry about our finances can create emotional distress in such an extent that our daily life becomes dysfunctional. We could feel angry all the time displacing our anger to all the wrong people who are not to blame. We could be experiencing psychosomatic symptoms because of our severe anxiety. Financial stress can even also kill our sexual life by reducing our sexual desire, or causing erectile dysfunction, or anorgasmia or even infertility.

Can rich people experience financial stress?

Well of course they can. Some people are considered extremely wealthy. That’s very subjective but let’s imagine for the sake of this example that someone has 1 billion dollars. Something happens like a financial crisis or a series of bad investments or other unexpected scenarios and the net worth is decreased to 100 million dollars. That means 90% of the 1 billion vanished. Severe depression and anxiety can occur because of this situation. Why? Because that person had created a reference point to live a billionaire’s lifestyle. For most people 100 million is a dream, but for this person it is a nightmare. How we live our life has to do a lot with our expectations about the future, our expectations from ourselves and expectations others have from us. Undoubtedly, the amount of 100 million can suffice to meet the financial demands for many years without any worry. Unless..

  • We compare ourselves to those who have more
  • We have created very high fixed expenses
  • We have connected our happiness to money

Let me address those reasons. Firstly, there is no reason to compare ourselves to anyone’s net worth because life satisfaction and mental health are mostly connected with the quality of our relationships and not with money. Secondly, fixed expenses can be downsized unless we fear that others might consider us a failure. And thirdly, experts say that happiness does increase with wealth, but the correlation peaks at earning $75,000 per year. I guess $100,000,000 is more than enough.

Wrong ways to deal with financial stress.

Before we discuss what we can do let’s mention what we should not do. Overeating or undereating can be a way to cope with anxiety. We get a reward from that and a relief, which unfortunately does not last long. This might also create more guilt or anxiety reinforcing the cycle of negative feelings. Our body and our mind need to be healthy. Food is a crucial aspect of our health so taking care of ourselves will help us make better decisions and feel better.

Over consuming caffeine is another behavior for most of us in order to work more, but this could deprive our sleep and leave us agitated. We could regulate our consumption by noticing how our body reacts after coffee and limiting our consumption accordingly and not drinking in the evening.

Over working sounds like a good coping behavior but think of this; overworking can make us more vulnerable to mistakes, which will also increase our anxiety or frustration. We can take breaks, go outside, take a walk, breathe and then return to be productive again.

Spending money compulsively through shopping or gambling can also have a stressful effect. This is counterintuitive sometimes but it can provide instant gratification. After that, negative feelings come back to remind us the actual problem is still there and we have made it worse. We could go out without credit cards and avoid places, which could trigger those behaviors such as shopping malls.

Withdrawing socially is another common behavior when people are very stressed, however prolonged social withdrawal is a sign of depression. Be with people who relax you and make you feel good about yourself; friends or family who can support you without criticism and can do fun staff together.

What can we do?

It is crucial to remember that in order to overcome financial stress we have to be willing to take action and control of our life. First of all, we keep our fixed expenses low. Even if we get a promotion or a raise we do not have to upgrade to a bigger house or a new car. Most assets depreciate faster than our income is increased. We play safe and adjust our lifestyle according to our income. This creates feelings of security and lowers the sense of uncertainty about the future. Strategic steps will eventually get us the house we want but patience is a virtue.

Another effective tool is tracking our expenses daily. There are many apps that can help us monitor where every cent is being spent. Very often we do not realize some frequent expenses, which no matter how small, they are very significant if annualized. Some of that money can be saved which brings me to a very important point. If we all understood the importance of compound interest we would secure our future and reduce our financial stress. When we are young we don’t plan 30 or 40 years ahead. However, if we had saved let’s say $5,000 and started saving monthly another $400, with a 7% annual return after 30 years we would have saved …. $528,570.89. That can be considered as a decent retirement. Anyone can do that and start at any point, of course adjusted to their own capacity of saving. This is an amazing tool that can be a plan for our children or ourselves.

It is very important to be proactive. We keep daily lists of expenses, prioritize and reconsider our needs, identify our stressors and make a plan. This can save us from unhealthy behaviors and negative emotions. If we feel we need guidance then we could also ask a friend or family member for support or seek help from a financial therapist.