If you have ever experienced anxiety over a bill or felt a sense of guilt following a purchase, you understand firsthand how your finances influence your mental well-being. You are certainly not alone: according to research from Capital One and The Americans report feeling anxious regarding their financial status.
Unfortunately, money issues and mental health struggles are deeply intertwined, often creating a cycle that can be difficult to escape.
With May marking Mental Health Awareness Month, it is a perfect time to examine how your financial life and mental health interact, as well as the steps you can take to improve your relationship with both.
How does money impact your mental health?
Financial difficulties are a frequentthem can exacerbate the situation. If you are already dealing with mental health challenges, financial pressure can make them significantly worse
For instance, if you feel stressed or anxious, you might turn to “retail therapy” as a coping mechanism, which can lead to high-interest credit card debt. Alternatively, feeling overwhelmed might cause you to avoid paying bills, make impulsive purchases, or neglect essential financial responsibilities.
Data supports this trend. A poll from the Money and Mental Health Policy Institute found that 42% of individuals experiencing poor mental health delayed paying their bills, while 63% found it difficult to make financial decisions.
This is where the cycle takes hold. The more your mental health suffers, the more likely you are to encounter financial stress, which in turn worsens your mental health.
Positive money habits can improve your mental health
While the link between financial hardship and mental health struggles is evident, it is important to remember the inverse: improving your financial situation can have a positive impact on your mental well-being. For example:
When you maintain an emergency fund, you gain the peace of mind that comes with knowing you can handle unexpected costs.
When you possess good credit, you can qualify for loans more easily, providing an extra layer of security should you need to access cash.
When you track your monthly spending, you feel more in control and better equipped to adjust your habits when necessary.
However, before you can begin improving your finances and your mental health, you must be able to recognize when things are heading in the wrong direction.
Signs that money may be affecting your mental health negatively
Financial strain does not just affect your bank account; it can bleed into other aspects of your life. When you are caught up in the daily grind, you might not immediately notice when your mental health begins to decline. It may require slowing down to honestly evaluate your behaviors, but identifying these stressors is the first step toward better financial and mental health.
Here are some signs that money may be taking a toll on your mental health:
You worry about money on a regular basis. Maybe you compulsively check your bank account balance or wake up thinking about your finances.
You avoid money altogether. You might put off paying bills, ignore your bank balance, and shy away from any discussion of your financial situation because it feels too overwhelming.
You have a growing pile of impulse purchases. When you feel stressed or anxious, you may cope by spending money without much thought. You may have growing piles of debt as a result.
You struggle with guilt every time you spend. Regardless of your bank balance, financial stress can hijack your emotions. Even if you can afford a purchase, you might struggle to enjoy it.
Steps you can take to reduce money stress
Breaking the cycle of financial and mental health challenges is difficult, but it is achievable. Here are some healthy ways to begin coping with money-related stress:
Take stock of your finances: When you are feeling anxious, avoidance is a natural reaction. However, you might find that once you shed light on your numbers, the situation is not as frightening as you imagined. Start by reviewing your bank accounts, credit card statements, debt balances, and bills to gain clarity.
Prioritize your biggest challenges: After reviewing your finances, you may feel overwhelmed by the number of tasks that need your attention. Do not try to address everything at once. Instead, focus on the issue causing you the most stress and resolve that before moving on. For example, you might focus on getting current on your car payment before you start saving for a wedding.
Make a plan: Once you have prioritized your financial to-dos, you can begin taking action. If you have credit card debt, direct any extra money from your budget toward paying it off. If your bills are chronically late, try setting them up on autopay so you do not have to think about them.
Build a financial cushion: Money may not buy happiness, but a study from Australia found that a regular savings habit has a positive impact on mental health. If your savings are low, focus on building a buffer to reduce stress and provide peace of mind.
Add friction to your spending habits: If you struggle with impulse spending, try adding friction to your shopping process. For example, if you cannot resist targeted ads on social media, limit your time online. Other strategies include unsubscribing from marketing emails and removing saved credit cards from online shopping sites.
Tend to your mental health: Because mental health struggles can worsen financial challenges, self-care is essential to reducing money stress. Simple strategies include prioritizing sleep, taking a daily walk, and connecting with loved ones.
Get support: If you are struggling to manage your finances, you do not have to do it alone. There are many financial professionals available—including coaches, therapists, advisors, and nonprofit counselors—who can help. You may even have a loved one willing to offer emotional support.
Remember, you do not need to solve all of your financial and mental health problems at once. Even taking one small step can help you start building financial confidence and improve your mood. Once you gain a little positive momentum, the connection between your finances and your mental health will begin to work in your favor.
