October 11, 2022

How to Deal with Financial Stress

by Psych Times Staff

As the price of basic living expenses skyrockets, more people are stressed over money. A 2020 study by Capital One and the Decision Lab shows that 77% of Americans are concerned about their finances, and 58% feel that finances control their life. Financial stress causes many other health problems. So it’s essential to learn how to manage it.

How Financial Stress Impacts Mental Health

While it’s normal for everyone to worry about their finances, people from lower income brackets may experience higher financial stress levels. This could be because they don’t earn enough to meet their basic living expenses or because they have a large debt they’re struggling to repay.

Stress caused by other factors may be challenging to cope with, but financial stress can be particularly harmful for the following reasons:

  • It may lead to anxiety and depression.
  • It can cause health problems like migraines, diabetes, heart disease, and sleep disorders. It may also take a toll on the immune system.
  • You may develop unhealthy coping mechanisms like alcohol abuse. 

How to Manage Financial Stress

Dealing with financial stress isn’t easy, but not addressing the issue can make the situation worse. Financial stress and poor mental health can follow a cyclical pattern. This means that when you’re stressed about money, it can affect your mental health, causing you to manage your money less effectively and may limit your opportunities to make more money.

 When you’re suffering from anxiety or depression or have a migraine or heart disease caused by stress, it can inhibit your ability to work or seek better opportunities. 

Still, as difficult as it may be, there are ways to manage your financial stress. Consider the following:

Tackle Your Debt

Debt is probably one of the biggest contributors to financial stress. If you have a lot of debt, work towards paying it off strategically. It may be more manageable to repay your loans with the highest interest rate first.

If you can’t manage to pay your debt, contact the lender and work out a payment plan. The lender will be more accommodating and willing to negotiate if you are transparent rather than avoid them and miss payments.

Another option may be consolidating your debt. Consolidation is useful if you have several loans that you need to repay. To reduce your debt, you can work out the total amount owed to lenders and take out a new loan for the total amount. You then pay all your loans in full using money from the new loan. This way, you can manage to pay one large loan instead of several smaller ones. 

Put measures in Place to Deal with Emergencies

If you’re someone who lies awake at night worrying about how you will cope with the financial burden that comes from an emergency, having a plan or backup for these situations may put your mind at ease.

Building an emergency fund, even if you’re just contributing $20 a month, may add up and will provide some cushioning when you need cash. Another option may be to make sure that you have enough insurance, including car and health insurance. It may be helpful to buy gap cover or  Medicare G when buying optional insurance. 

Having sufficient insurance may give you peace of mind should something happen since you won’t have to worry about where you will get the money to pay for it as you are already covered. 

Relook Your Budget

You may think your budget is completely stretched and there is no way to reduce your expenses, but life constantly changes, so it’s worth reviewing your budget to see where you can cut back. 

From a mental health perspective, finding ways to cut back on even $50 can put your mind at ease, so instead of looking for massive savings, finding small ways to save may be beneficial.

It may not be easy to remember all the small amounts you spent, so keep a money journal. You can do this by using a notes app on your phone or an excel spreadsheet, or you can track your spending in a notebook. Make a note of every time you spend money, even if it’s just a dollar. 

When reviewing your budget, you can use your money journal and bank statements to see exactly where your money is going. You don’t have to eliminate these things, but you can cut back a little, giving you more wiggle room in your budget.


Stress over money can seriously impact your mental health leading to anxiety, depression, and health problems. Money may be tight, but finding ways to cope with this stress is crucial to feeling more in control. Saving even small amounts, having insurance, paying off debt, and reviewing your budget can help to ease your financial stress.



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