5 ways to deal with financial anxiety before it seriously harms your health

Stressing over money shouldn’t stop you from living your best life.
Person crying over bills and a calculator on a desk.
Talking (and thinking) about money can be stressful, but it doesn't have to be. In fact, the more you know about your finances, the better. Karolina Grabowska / Pexels

Adulting is hard. On top of paying your bills and rent on time, you also have to factor in childcare, insurance, and student loan repayments, which are set to resume later this year. With inflation raising the cost of living, mass job layoffs, and the threat of a recession, it’s understandable if you feel like you’re spreading your money a bit too thin.

Everyone worries about money—and the lack of it—every once in a while. But constantly stressing out about your finances can manifest into a more debilitating mental health condition called financial anxiety.

 “It’s a fear-driven attitude towards money whether that’s money management or talking about money,” says Megan Ford, a financial therapist, and advisor for the financial wellness app Stackin. Fortunately, there are ways to change your relationship with cash and healthy ways to cope when thinking about personal finances.

How financial anxiety affects your wellbeing

Going through an economic hardship like losing your job would evidently increase a person’s tendency to worry over money. Others might experience financial anxiety in certain situations such as the holidays when they feel pressured to spend a lot on gifts. Other experiences, such as foreclosure or child poverty, might have left a more traumatic impact on your psyche. 

About 23 percent of Americans have experienced financial stress at levels that meet the criteria for post-traumatic stress disorder, explains Joyce Marter, a psychotherapist, and author of The Financial Mindset Fix: A Mental Fitness Program for an Abundant Life. The number is even higher among millennials, where it goes up to 36 percent. “It’s very common for people to have symptoms of trauma while dealing with financial stress,” she says.

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Like any mental health disorder, financial anxiety affects your well-being. This condition can leave you feeling overwhelmed and in a state of self-imposed helplessness, here you feel like your actions won’t change the outcome so you give up and avoid it. With your mind preoccupied with money, there is only so much mental space for you to focus on other matters. A September 2022 study published in the Journal of Vocational Behavior showed that people suffering from financial anxiety have lower work performance as they tend to get distracted more easily, and emotionally exhausted from constantly worrying. 

This level of stress can also manifest itself in physical health problems. Research has previously linked financial anxiety to trouble sleeping, a greater risk of heart disease, and increased inflammation, which is associated with multiple health conditions: from gastrointestinal disorders to depression. Financial anxiety also has social repercussions with negative emotional consequences, especially when people choose to isolate themselves from loved ones only to avoid spending money, Marter says. 

Some might address their financial anxiety with unhealthy coping mechanisms, like totally refusing to look at their bank accounts, overspending and hoarding, or even avoiding spending money on things they actually need. The answer to overcoming this kind of stress lies somewhere in between splurging and extreme frugality and comes from nurturing your financial education.

Help yourself by brushing up on your financial literacy 

Creating a stable life means making smart decisions about your money. Financial literacy courses can teach you the best way to save, invest, and budget your spending. 

“The more information you have, the more empowered and capable you’re going to feel in correcting your financial situation,” says Marter.

This doesn’t mean you have to spend thousands of dollars on a financial literacy college class. Marter says reading books on the topic, listening to money podcasts, and following money experts on social media, all help in learning how to best manage your personal finances. Following this approach also lets you digest small nuggets of information instead of trying to cram everything about money management from a single crash course. 

Just make sure the advice you’re getting is coming from a reputable source. Marter recommends financial experts such as Dave Ramsey and Suze Orman who offer online personal finance classes for under $100.

Split your income with the 50/30/20 rule

Ford and Marter say an important part of money management is making a plan that helps you save more than you’re spending. This is because financial anxiety is all about the uncertainty of the future. If you’re not sure how much money is coming in and out on a monthly basis, it can feel distressing to think about not making ends meet this month. 

The first step is having a record of your income and setting a budget of how much you’re willing to spend each month. A popular method is to split your money by the 50/30/20 rule, which states that you should distribute your funds according to your needs, wants, and savings. 

First, about 50 percent of your finances should go towards your needs—this includes items such as your rent, insurance, and loan payments. These costs are often fixed expenses, which means that they tend to stay the same month over month, making it easier to plan ahead. Other essentials like groceries and utilities also fall into this category, but they provide more wiggle room for savings. For example, you can always opt for more store brands versus name brands when it comes to foods, or turn off the heat at home before leaving for work.

The next 30 percent of your income should go towards your wants—this is everything that’s optional, like dining out, movie tickets, and shopping. This is the area where you can cut back the most on your spending because they are variable expenses. Even though their price doesn’t change from month to month, subscriptions such as streaming services and gym memberships, also fall under this category, as they are optional.

The last 20 percent of your income should go to your savings. This will help with setting money aside in case of emergencies such as unexpected medical bills, or cushioning periods in between jobs. Unforeseen expenses may prevent you from putting this 20 percent straight into your savings account, but that’s ok. Just try to get this area of your budget back into shape as soon as you can. And even in the tightest of months, make the effort to save some money—experts say that even one percent can help you keep the habit

Be realistic about your budget

The 50/30/20 rule is only one of many money management strategies, but whichever one you use, the most important thing is creating a budget you can realistically live on. If you have issues saving money, Ford says making a budget where you save $2,000 each month might be difficult and could discourage you from budgeting altogether. Instead, she recommends starting small, maybe saving $100 from every paycheck and eventually making your way up to put away a bit more. 

It’s also important to set up a budget that allows you to spend on the items that matter most to you. For example, some people may not think twice about cutting out rock climbing classes in favor of a lower-priced gym. But for someone else with a passion for the sport, there might be other budget areas they’re willing to modify to afford this activity. 

Everyone’s budget will look different. If you’re having trouble coming up with a plan, Marter recommends seeking support from organizations like the Consumer Credit Counseling Foundation which provides free assistance with creating a budget. Your bank or credit union may also have someone you can talk to in person for budgeting advice as well.

Have an accountability partner

Inconsistency and quitting too soon are two common reasons people fail at budgeting. Marter says having an accountability partner to check in on you every month can help you keep track of your financial goals. You would want to choose someone who can support you in making hard adjustments like paying in cash instead of using credit cards. 

Your money buddy should be someone who can provide some tough love if and when you go over budget. Some people might choose their spouse or best friend as their accountability partner. If you don’t feel comfortable sharing your finances with your friends or family, Ford says you might want to consider seeing a financial therapist.

Shift your money management mindset

You can budget and save all you want, but financial anxiety will not go away unless you change how you think about money. 

People with financial anxiety often experience negative or catastrophic thinking even if it’s illogical: losing your job does not necessarily mean you’ll never find another one and end up losing your house, for example. Financial anxiety also promotes a scarcity mindset, where you see limited opportunities to make money, resulting in a feeling that you’ll never have enough. 

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Marter says the best way to shift your mindset is through cognitive behavioral therapy. The approach teaches you to restructure your negative and irrational thoughts around money into more neutral or positive ones. An effective technique is thought-stopping. “When you have money anxiety and are worried about being homeless or some other catastrophic fear, literally say to yourself: stop. Then reroute your attention to a positive thought,” explains Marter. The latter could involve practicing gratitude and thinking about the all good things in your life—not just the material ones. 

You could also try calming techniques when you feel yourself spiraling. Mindfulness practices like deep breathing and meditation act as a reboot for the mind and shifts the focus to the present moment, helping you let go of negative thoughts. Marter recommends a deep breathing technique called square breathing, where you inhale through your nose, hold your breath, and exhale through your mouth all in counts of four. 

Ultimately, tuning into any shifts in your mind and body when talking and thinking about money, can better equip you for sticking to a budget strategy. “Turning up your awareness of your financial landscape is an important aspect of managing financial anxiety, but also a good money management habit in general,” Ford says. Because when it comes to your spending habits, the saying still rings true: knowledge is power.