What exactly is financial stress? How does it impact you and what can you do about it?
Many of us know exactly what it’s like to feel stressed.
It’s harder to sleep at night, we’re more easily irritated, we might even try to find someone or something to blame for how we feel.
Stress is a totally normal part of life. We tend to feel stressed when we think we can’t cope with the life’s demands, or when our wellbeing feels threatened.
Is it normal to worry about money?
Financial stress is just one type of stress, but is regularly cited at the top of the list. For example, 54% of employees say their finances cause them more worry than their job, health or relationships — placing financial stress as the top concern at work, according to PwC.
Financial stress is closely linked with our health and wellbeing. Unfortunately, worrying about money can impact your mental health and this has a compound effect of making your finances feel more complicated.
A 2020 EY report found that 75% of those who said they have experienced financial difficulty reported material deterioration to their health as well.
Tackling financial stress
Financial stress might be affecting you too, but it can be hard to know how to tackle it.
It’s easy to try to ignore your finances altogether. You might put off checking your bank balance or opening a bill because you don’t want to feel more worried, anxious or guilty.
Researchers have found financial stress is directly related to what they call financial aversion, that is, avoiding thinking about matters related to money. Financial stress can cause general anxiety, which can lead to spending more on items that let you feel in control.
So, how can you reduce some of the stress and free yourself up to make clearer decisions?
Here are a few steps to consider:
Reduce the mental load by automating
Behavioural scientist and author of Good Money Nathalie Spencer says when we feel stressed, it can be even harder to make good financial decisions. Stress can hinder our decision making, which can then create even more stress.
“But you can start to put systems in place to help yourself, so you don’t have to rely on your willpower,” she says.
“For example, instead of having to rely on myself to leave money in my bank account that I can transfer into savings at the end of the month, I set up an automatic transfer right after pay day, so it happens automatically every pay cycle,” Nathalie says.
“Setting up these systems to ease the mental load frees me up from having to rely on my self-control or even my memory and attention. I’m basically outsourcing the action to different systems, which I just review every now and then to check they’re working.”
Slow down for big decisions
These days, we have more choice than ever. When it comes to financial decisions, there are so many options to choose from: Which bank should we go with? Should we switch energy providers? Pre-paid or pay as you go?
“When there are lots of different choices available to us, we can be tempted to choose the easiest or the simplest option, instead of the best one,” Nathalie says. “So, it’s really important that we slow down and take time for those big decisions, they do take time.”
Treat yourself for doing chores
Nathalie recommends treating yourself when you need to make these more stressful or complex decisions. “The idea behind a temptation bundle is that you pair something that’s a chore with something that you really enjoy, which takes out a little bit of the sting.”
“In my personal life, my husband and I do a personal finance meeting, a ‘PFM’, where we get pastries from our favourite bakery and review our spending or make tweaks to the budget.”
“It’s worth saying that managing money can be really difficult, particularly because of these natural human tendencies we have. But when you know your own behaviour better, you can put systems in place that can really help.”
When you feel more in control of your finances, you’re more likely to feel less stressed and trust yourself with the decisions you are making. Setting up a budget can help provide that sense of control, so you can get on with life, knowing you have a plan for the future as well.
Behavioural scientist Nathalie Spencer works in financial services to explore financial decision making and how insights from behavioural science can be used to boost financial well-being. She is the author of Good Money: Understand your choices. Boost your financial wellbeing.
Earnd is an app that allows employees to choose how and when they get paid at no cost to them. This means they can align their income with expenses, track their pay as they earn it and budget how best suits them.