Money and Stress...Why?

Money stress is a common yet profound challenge that affects individuals worldwide, regardless of their income level or financial situation.  According to a recent CNN study, 71% of Americans identify money as the major cause of stress, with 76% claiming to live paycheck to paycheck.  Everyone knows stress is a problem that can lead to heart disease, anxiety, depression, and much more, yet day to day we keep living with it and have no plans to get out.  Let’s explore some fundamentals around the cause of it and some techniques to get control.

Financial stress is an innate response to uncertainty and/or the perceived threat to our ability to meet essential needs. When financial stability is at risk, our sense of security diminishes, leading to stress. Several psychological and societal factors amplify this experience:

• Fear of the unknown: Uncertainty about future income or unexpected expenses can create anxiety.

• Social comparison: The pressure to maintain a certain lifestyle or compete with peers in terms of possessions, status, etc. “Keep up with the Jones’”

• Value conflicts: Personal values, such as the desire for freedom and independence, may clash with financial realities, causing discomfort and tension.

While each individual's situation is unique, common stressors include:

1. Low or Uncertain Income

One significant contributor is insufficient income or income instability. People with irregular earnings, such as freelancers or those in precarious jobs, often struggle to plan their finances effectively, rather than deal with it, people ignore it until it becomes a problem.  Similar in low income situations, rather than deal with the inability to keep up with the finances, individuals will just resort to Credit cards to maintain things until it becomes too hard to deal with.

2.      Debt Burden

Debt, whether from credit cards, student loans, mortgages, or medical bills, is a major source of anxiety. High-interest rates and the pressure to repay loans can make individuals feel trapped and overwhelmed.  Yet, many quickly turn to these resources to solve their financial problems.  You cannot solve financial instability with debt!

3.      Inflation and cost of living increases

Increasing expenses for housing, healthcare, and groceries can cause strain.  Especially when there is no management or budget to control additional spending.  Instead of looking at the details, once again many will turn to credit cards to just cover the rising costs only adding to the stress.

4.      Financial Illiteracy

A lack of understanding about money management, savings, investments, and budgeting can leave individuals vulnerable to poor financial decisions and unforeseen difficulties.  Unfortunately many of the techniques I teach are not taught to teenagers or young adults.  It takes too long for people to take control and take the time to understand their unique situation.

5.      Life Events

Major life changes, such as job loss, divorce, illness, or the birth of a child, often bring unexpected financial challenges, depending on where you are in your planning, this can either send you into a spiral or just challenge things in the immediate term.

Managing the Stress and Taking Control

While financial stress can feel overwhelming, there are effective strategies to combat it and foster a sense of control and resilience. These methods involve both practical steps and mindset shifts.

1.    Know Your Numbers

Start by gaining a clear understanding of your finances.  Build a net worth statement (Need a template?  Send me an email brian@coachbw.com).  At first this may not look so good, it’s ok, it usually doesn’t look good the first time you do this.  Now, build a budget, what are you spending v. what are you earning.  See my Budgeting 101 section at the top or https://www.coachbw.com/budget.  When doing this, it is important to see where you might be able to cut some costs. I have several posts on places to look for cost cutting, including groceries, dining out, insurance, cell phones and many other areas. It is time to be a little frugal, especially if you budget is tight.

2.    Develop a Debt Repayment Plan

Getting rid of debt will immediately reduce your stress.  American households are carrying over $5 Trillion in debt, with credit cards being over $1 Trillion of that.  Car payments are now on average $742 per month for new and $545 per month for used. The average household has over $100,000 of debt, with the average credit card hold a $6,580 balance.  I give you all these numbers so you can see you are not alone, but also to give you a reason to take action.

The average debt payment is 11.3% of income, but in many cases it is far worse, equaling as much as 30% of a income or more.  Getting rid of these payments is critical to reducing your stress.  The most successful method is the snowball method and more most this is the easiest way to track it.  Start with the smallest debt and accelerate payments on it, till it is gone.  In some cases, it may mean it is time to sell that new car or truck to help move this along faster and free up more money to pay things off.  Getting rid of debt reduces a major reason for money stress!

3.    Strengthen Your Income

If you want to pay off debt quickly, then increasing your income is the fastest way.  Find a side hustle, work overtime, do whatever you have got to do to create stability in your finances.  If you work a cyclical job, then work somewhere else in the off season.  If you work a full-time job in the day, work something else on the night or weekend.  I for one have a solid job, but I still do soccer referee work on the weekends during my time off.  That was an extra $5-600 last year, plus it was fun.

4.    Build an Emergency Fund of 3-6 months of expenses

After your debt is paid off, then it is time for an emergency fund is based off of your monthly budget. Then cut it back to your bare minimum (no dining out, no fun money, etc.), now multiply it by 3 or 6 months and that should be set aside and marked for emergency use only!! That last part is important, this is not because you want a new computer or car or something, this is when something critical breaks and needs repaired.  My favorite one to point out.  Is a broken dishwasher an emergency?  No, you can hand wash dishes for a month, until you set aside $500 to buy a new one.  You do not need the $1,500 dishwasher that works from your phone.

5.    Increase Your Financial Knowledge

Improve your financial literacy by reading books, attending workshops, or consulting a financial coach/advisor. If you struggle with any of the areas above a financial coach can really guide you here.  I’ve helped many individuals build a budget, work from a budget and take control of their income, taught them the tenants of investing and planning ahead to make the most of what they have been given.  There are plenty of books out there, but a coach can help you accelerate that learning hands on.  In my time with clients I’ve quickly unlocked and freed up at minimum $100 per month just by finding fat in their budgets and helping them to pay off those debts that weigh them down.

Money stress is a pervasive issue that affects both our emotional well-being and physical health. By understanding the causes of financial anxiety and adopting proactive strategies, individuals can regain control over their finances and develop greater resilience. While the journey to financial stability may be challenging, it is achievable with patience, planning, and a commitment to building a secure future. When you are secure in your finances you will grown in your career, grow in your relationships and grow personally!