How to deal with financial stress

Financial stress was a fact-of-life for millions of Americans prior to the pandemic-era economic shutdowns. In recent years, however, more and more households are feeling even more stretched thin as prices, and borrowing rates, soar. 

Just 45% of Americans, according to a recent Gallup poll, rated their economic situation as good or fair, compared with 57% who did so just two years earlier. It’s no wonder then that a Pew Research Center poll found that inflation is the top concern of all Americans. 

The key is to take stock of what’s causing the stress in the first place, and believing that you have the wherewithal to implement an achievable plan to improve your lot. 

Understanding financial stress and its impact

Financial stress is felt across state lines by all types of Americans, and can come with serious consequences, including depression, high blood pressure and insomnia, among other ailments. 

“It can be very detrimental to your health, your mental health as well,” said Birdie Merriweather-Tyne, a registered nurse (RN) at Medstar Washington Hospital Center in the District of Columbia.

Nearly three-in-five of those who reported money as a significant stressor said that they were fighting to pay for things right now, such as food and housing, according to a 2022 poll commissioned by the American Psychological Association. 

Merriweather-Tyne sees that play out in real life. Some of her patients that are struggling to make ends meet rely on a steady diet of fast food, thanks to its low cost and convenience. Over time, this results in a series of maladies. 

“We have a lot of people that come in from the stress of having hypertension and poor dietary choices,” Merriweather-Tyne said. 

Even if you’re able to maintain a healthy diet, financial stress can have a spiralling effect on your personal finances. That’s because you tend to poorer decisions when under duress, which can lead to more debt or less savings. 

Moreover, the stress itself can cause you to become less productive at work, thereby imperiling your income. 

The belief that you are in control of your finances, and that what you do matters, is paramount to a healthy financial picture. Once stress overwhelms you, that confidence can evaporate. 

How to deal with financial stress

Determine the exact cause

It’s difficult to resolve your financial stress without understanding the exact cause. Since only you know the details of your situation, you’ll have to dig deep to determine why money is a source of stress. 

For example, your rent may have gone up and your boss may not have been able to provide a cost-of-living increase in your salary. Or, maybe your kiddo is now doing extracurriculars at school, causing you to shell out for sports equipment and miss work shifts to attend games. 

Until you know why your finances lead to stress, it’s impossible to know which money adjustments will make a difference to your stress levels. Understanding the cause can help you feel in control of the situation and find a solution that works for you.

Make a plan

Once you uncover the cause of your financial worries, it’s time to make a plan. The plan you create will take form based on the cause of your stress. 

Maybe you could meet with a career counselor about work opportunities. Or you talk with your kids about which individual sports games and extracurriculars are most important to them.

The key is to get creative and be diligent. 

Budgeting help. You can use the 50/30/20 budget rule and a monthly budget calculator to prevent accidental overspending. There are a ton of budgeting apps available and, if you prefer an old-school method, the budget binder.

Help with housing. If you’re struggling with housing costs, check out the U.S. Department of Housing and Urban Development and your local housing authority.

Help affording food. Feeding America lets you find your local food banks and sources to help you apply for food benefits. The U.S. Department of Agriculture has a list of food programs.

Help with debt. The National Foundation for Credit Counseling (NFCC) can connect you to a counselor who offers free or discounted sessions based on your income and help you devise a debt repayment strategy.

Job help. You could meet with a career counselor, find coaching help from a nonprofit such as Goodwill and tap your local network for opportunities. Also look up resources offered by your state.

Financial literacy opportunities. Money matters can be confusing for anyone. If you want to build up your knowledge, you’ve got plenty of options. The Consumer Financial Protection Bureau provides in-depth guides on things like how to buy a car; your local library could help you build financial literacy through books and the Federal Trade Commission can help teach you how to avoid scams.

Use small steps

An emergency fund is a key defense against financial stress — the typical advice is to have at least three months’ worth of expenses saved. 

But this is a challenge for many: Just 54% of folks had three months of expenses saved in 2022, according to the Federal Reserve, down from 59% in 2021. 

If you’re having trouble saving, start small. 

Let’s say your goal is to amass $5,000 in savings. Rather than judging your progress against the total amount you want saved ($5,000), try to save $500 ten times. Every time you hit $500 in savings, give yourself the equivalent of a gold star. 

This slow-and-steady progress can give you the motivation to keep going.

The same is true for paying down debt, which is especially important when interest rates are sky-high. The snowball method, for instance, has you catalogue all of your debts and then begin by paying off the one with the lowest balance.

The avalanche method, on the other hand, has you focus your attention on the debt that’s charging the highest interest rate. 

Automate your financial tasks

The sheer number of financial transactions you are responsible for each month might feel a bit overwhelming. You can streamline your financial life by automating some of your regular transactions. 

Some of the best checking accounts allow you to automate bill pay for items such as your credit card bills, utility payments, loan payments and insurance bills. You can also put your savings on autopilot. For example, if you want to save $100 from each paycheck, you could set up an automated transfer to a savings account on paydays.

As you automate your financial tasks, you free up time to think about something other than money and you could feel less stressed. 

Financial stress is a symptom of a larger problem. When you deal with that larger problem, you can lessen your stress and get on with your life.