Whether it stems from being in debt, not earning enough income, the growing expense of raising children, or even having a partner who struggles with personal finance, financial stress has a severe impact on our overall well-being.
If you find yourself worrying about money, know that you’re not alone. With 2020 being the year that it was, research shows that 41% of Americans reported that the COVID-19 outbreak is a significant threat to their financial situation. In fact, 17% of respondents stated that they were “very worried” about severe financial hardship.
Financial stress can have a negative toll on our physical health, our mental well-being, our relationships, as well as our work performance. To say the least, it can be detrimental to our everyday lives.
While financial stress is very real for many American households, the silver lining is this—there are ways to not only cope with financial stress but to reduce it and eliminate your financial worries. When you have less financial matters to worry about, you’ll be able to focus on the other important areas of your life that matter most.
Continue reading to learn the negative impacts of financial stress, and what you can do today to start reducing your own financial stress.
The negative impacts of financial stress
Although any stress can take a toll on your health and workplace performance, stress related to financial issues can be especially harmful. Financial stress can lead to:
1. Poor physical health
Ongoing financial stress has been linked to chronic migraines, digestive problems, heart disease, sleep problems, weight gain, and more. When left untreated, these conditions can lead to life-threatening illnesses, which can plunge you further into financial disarray.
2. Delayed healthcare
If there is less money in the budget, those who are already under financial stress tend to cut spending in categories they shouldn’t, such as healthcare. According to Gallup’s annual Health and Healthcare poll, a record 25% of Americans held off seeking medical care in 2019 because of cost—up from 19% the year before.
Though this method may seem like a good idea to keep your monthly costs down, delaying medical care can lead to even worse health outcomes and even higher prices. This, in turn, then leads to greater financial stress.
Remember, your health is your wealth.
3. Poor mental health
In many cases, there is a recurring link between mental health and financial stress. Poor financial health and heightened stress can lead to poor mental health, which then leads to increasingly higher financial worry, and so on.
Studies have shown that people in debt are more likely to have a higher occurrence of mental health issues such as depression, anxiety, and cognitive impairment than those who are debt-free.
4. Low workplace performance
We now know that difficulties with money are a considerable contributing factor to personal stress. But were you aware that financial stress can have a serious impact on an employee’s workplace performance?
Employees who struggle with financial well-being often bring that pressure to work. Financial stress can lead to increased absenteeism and tardiness, stress leaves, higher claims on benefit plans, employee turnover, decreased morale, as well as lower quality work, avoidable errors, and inabilities to focus on projects. Having employees who are financially stressed is proven to impact the bottom line, too.
How to cope with financial stress
1. Make a budget
While you may feel overwhelmed and think that a budget will only add to your financial stress, it’s quite the opposite. A budget is an effective tool you can use to get help take control of your finances and stop worrying about money.
It allows you to decide when—and how—you are going to spend your hard-earned dollars. A budget will make sure you cover your immediate expenses while continuing to work towards your savings goals. It can also help you find extra funds that you can put towards outstanding debt or even building an emergency fund to prevent future financial stress from taking place.
Remember that the first few months of planning and sticking to your budget will be the most planning. However, once you know what to do, you can reduce the amount of time you spend learning how to stay with it, and in turn, reduce your financial stress.
2. Create a financial plan
Financial stress often results from a lack of sufficient planning around how you manage your money. While budgeting is often a good first step and a great financial tool to use, a financial plan is arguably the best tool you’ll ever have for your finances. With a financial plan, you’ll be able to better understand:
- How to protect your income.
- How to earn and save more.
- How to reduce your spending.
- How to pay down your debt
- How to calculate and save for retirement.
As an employer, offering financial planning for your employees is a proven way that can help ensure your team is satisfied, and business thrives. When you provide additional tools and resources as part of your benefits package, you show your employees that you not only care but understand that their needs and success outside of the workplace matters. With a financial wellness benefit, your employees will come to work with a positive attitude, a motivated mindset, and will be able to work at peak performance.
3. Build an emergency fund
An emergency fund is a pool of savings that is specifically meant to cover unexpected expenses and financial emergencies. While these situations can be expensive and stressful, if you know that you can tap into your emergency fund to cover it, much of the stress will be relieved. It’s also easier to stick to your budget if you know you have some extra funds in the bank ready to cover any unexpected emergencies that may pop up.
It would be best if you aimed to have at least $1,000 saved in your emergency fund until you’re out of debt. Once your financial situation is more stable, you should aim to have around three to six months’ of living expenses set aside.
Building an emergency fund may seem difficult at first—especially if you’re already struggling to make ends meet each month. It’s okay to start small and set aside just $10 a month while you grow your savings.
4. Find appropriate support
If you’re seriously struggling to get a hold of your personal finances, don’t be afraid to seek outside help. There are various classes focused on basic money management that can help coach you through budgeting and help you plan ahead in order to improve your financial stability.
If you are feeling overwhelmed by debt, you can also work with a credit counseling service that can help you restructure your loans and in some cases, negotiate with creditors.
In some cases, it is more effective to create a plan for your debts rather than just consolidate them. The Savvy Debt Payoff App is a financial tool that maps out a debt-payment plan for you by showing you exactly how you should be paying off your debts to save you thousands of dollars that would have otherwise gone to paying interest.
5. Determine what you can change
If you are continuously having financial issues, you may have either an income issue or a spending issue. It may even be a combination of the two.
For example, if you know that you aren’t making enough money to keep up with your current bills, it’s time to sit down and decide what you can do to improve your situation. This might include options such as returning to school to qualify for a higher paying job, picking up a part-time job, or even starting your own side hustle.
On the other hand, if you think you have a spending problem and it’s a compulsive behavior, you may want to get professional help in dealing with the issue you’re facing. Once you have a plan that will help you change your situation permanently, your financial stress will likely be reduced.
6. Track your progress
Tracking your progress towards your financial goals can make a huge difference in the amount of stress you feel on a daily basis. While it may sound like it’s not a solution, looking at the positive aspects of your current financial situation and the steps you’ve taken can seriously help alleviate stress by providing motivation to help you stay the course and see it through for the long-term.
As you start to see the progress you’re making, you’ll feel confident knowing the steps you’ve been taking are working. That confidence will ultimately pave the way and keep you motivated to continue taking action today, tomorrow, next week, and well into your future.
Remember, changing and improving your financial situation ultimately starts and ends with you. Only you have the power and resources needed to want change and to start taking action to make improvements today.
Your financial future starts today
Savology has helped more than 40,000 households across the United States improve their financial well-being by providing comprehensive digital financial planning. Users can get started with our free financial planning or premium monthly planning memberships, allowing them to build a personalized financial plan, holistic report card, personalized action items, and more. In addition to our consumer-facing platform, we’re helping employers across the country provide their employees with effective financial wellness benefits.