How to Deal with Financial Stress: 5 Practical Tips and Advice
Financial stress is pervasive, especially in a fast-paced environment like New York City. The pressures of maintaining a particular lifestyle, meeting professional demands, and managing personal finances can often feel overwhelming. Left unchecked, financial stress can significantly impact one's mental health, leading to anxiety, depression, and more.
Addressing financial stress is crucial for maintaining overall well-being. This blog aims to provide a comprehensive guide on how to effectively deal with financial stress, offering practical tips and actionable advice. Whether you're struggling with budgeting, feeling the weight of debt, or simply trying to navigate the financial pressures of life in the city, this guide will help you build resilience and confidence.
Read on to discover the knowledge and tools needed to handle financial stress proactively.
1. Understanding Financial Stress
Financial stress is the emotional strain or tension you feel related to money. It affects people from all walks of life and does not discriminate based on income. It is possible to feel money-related pressure regardless of income or socioeconomic status. At Healthy Minds NYC, many of our clients who work in high-earning industries like investment banking, consulting, or entertainment report money worries as the primary reason they started therapy. Financial stress can result from practical money concerns, like mounting student loan debt, and an individual’s personal money story.
Your money story, or schema, includes the beliefs, experiences, and values you hold related to money. Everyone has a money story, whether they know it or not. Our schema around money develops from early experiences and can set the bounds of what we consider normal or comfortable in money matters.
For example, if you grew up in a household where money was scarce and basic needs went unmet, you may develop a money story that includes anxiety about having “enough.” Even when you’re earning a high salary, you might carry with you fears about being able to afford the things you want as you react and interpret new situations through the filter of your upbringing. Or suppose you grew up in an affluent household where money was abundant yet never discussed. You may feel pressure now as an adult to recreate the lifestyle you experienced as a child without the financial education you need to manage your money effectively. These types of money woes are common for New Yorkers.
When you experience financial stress, it can take a toll on your physical health. All forms of chronic stress have the potential to cause symptoms such as headaches, diabetes, stomachaches, sleep disruption, and more. Money stress can affect your mental health also, amplifying underlying mental health conditions or creating new issues with anxiety, depression, PTSD, and other psychological disorders.
Addressing financial stress as soon as possible is essential, especially when you begin to experience changes to your overall mental health and well-being. According to Very Well Mind, “The link between mental and financial health is cyclical–poor financial health can lead to poor mental health, which leads to increasingly poor financial health, and so on.” As you experience psychological and emotional distress, the effects of financial stress may cause you to make choices with your money that lead to more significant financial issues or that negatively impact other areas of your life. In this way, financial stress and mental health are linked. A therapist can help you untangle where your practical money concerns end and where your money story begins.
2. Assessing Your Financial Situation
To address financial stress, start by auditing your current financial situation. Avoidance is a common coping mechanism when dealing with financial stress. Unfortunately, avoiding difficult financial situations is usually unhelpful. Ignoring financial trouble may cause the problem to snowball or cost you valuable time to make positive changes that could benefit you. Making it a habit to face the condition of your money is the most essential step when learning how to manage financial stress.
You need a clear financial picture to understand what kind of debts and financial obligations you hold, what access you have to savings or investments, and what your income looks like. This information will help you feel more in control as you get a clear perspective of your financial status.
First, begin tracking your expenses. There are many apps and programs available that can help you with this process. Some, like YNAB, can automatically import your financial data and ongoing transactions into their system so you can easily categorize expenses. You can also manually take inventory of your accounts to collect your spending patterns. Be sure to note fixed expenses, like your apartment’s rent, and variable expenses that change each month, like how much you spend on take-out or the cost of therapy. Once you have your expenses, group them into categories. “Categorizing your expenses will help you not only track how much you’re spending but also see where your money is going” (NerdWallet).
Next, focus on understanding your income. Do you make the same amount of money each month? What are the intervals for your paycheck? Some of our clients receive large bonuses at the end of the year, which they need to put into savings to manage in leaner in months. Others are freelancers who receive payments in irregular installments as clients pay invoices. Get clear on what your average income is each month.
Lastly, identify any outstanding debt you have. Are you still paying off student loans? Do you owe money to any friends or family members? Do any of your credit cards carry a balance? You’ll need to know your debt amount and the timeline for paying off your balances to create a realistic spending plan.
Take advantage of the financial resources available to you as a New York City resident! The state offers educational links and events to help you meet expenses and build wealth. Visit the Department of Finance website for access to these resources.
3. Creating a Financial Plan
Creating a financial plan, or budget, is the next step in learning how to manage financial stress. “A financial plan is a document that details a person’s current financial circumstances and their short- and long-term monetary goals” (Investopedia). When you have a plan for your money, you protect yourself from catastrophizing, a cognitive distortion where you jump to the worst possible scenario. Your plan helps remove some of the emotionality from your finances by reducing your financial situation to clear numbers you can strategically manage.
“The saying is true: health is wealth! When the condition of your body is optimized, you’ll be better positioned to make powerful changes in your financial life that lead to positive results. ”
To create a realistic and effective budget, we recommend considering some of the following steps.
Use the information you collected in step one of managing your financial stress. Use your income to calculate your net worth and cash flow. Then, use your past spending habits to estimate how you’d like to spend your money moving forward based on your monthly income. You can capture this information in a spending plan template like this budget spreadsheet we share with our couples during premarital counseling sessions. Remember to set money aside for an emergency cash fund that can cover at least six months of your expenses if unexpected events occur. You’ll also want to place cash in a future retirement savings account or a separate investment vehicle.
When building your plan, consider your short- and long-term financial goals. Are you planning to stay in New York City, or will you be moving soon? Do you expect changes to your career that might affect your earnings? Do you want to purchase property in the city or get a vehicle? Including these factors in your financial plan will be helpful as you’re dealing with financial stress.
Making a financial plan is not cookie-cutter because your financial picture will include unique variables. Enlist the help of a financial advisor or a financial planner in New York City to support you. A financial expert paired with a financial therapist can work as a team to guide you on the specific steps for how to manage financial stress in a way that aligns with your circumstances.
4. Building a Support System
Experts can provide valuable insight on how to deal with financial stress. Your network of friends and family members can also be key members of your mental health support team. The people closest to you may know you best and have often watched your money story develop. Reach out to loved ones to support you as you navigate anxiety around money or wrestle with financial stress and depression.
Communicate with others so they know your situation. You may need to be open with friends about new limitations or your preferences for how to spend time that better reflects your financial plan. If you’re a parent, you may need to be more transparent with your children about the financial strain your family is facing. Amanda J. Rose, PhD, who studies emotional adjustment in children as a professor at the University of Missouri-Columbia, emphasizes the benefit of talking openly about money with children. She says, “Parents tend to underestimate how much kids notice and what they’re capable of understanding, but it’s important to be honest and discuss the situation in an age-appropriate way” (APA). Family conversations about money will help minimize your child’s anxiety and aid them in developing a money schema that is more useful in the long run.
If you share your life with a romantic partner or live with roommates or other family members, you’ll want to tell these individuals about your financial stress. Your stress may affect their lifestyle. Also, they may have wisdom or insight to offer that could benefit you. Remember that your loved one may be triggered when you share your concerns about money. Sometimes, their fears and values about money intersect with your situation, making it challenging for them to remain objective about your experience. That’s okay. Your financial advisor and financial therapist will be neutral parties with a fiduciary and ethical responsibility to work for your best interests.
When discussing money with family or friends, practice excellent communication skills by being assertive and actively listening to hear what they may have to contribute. Ultimately, it’s your choice how you decide to address your financial tensions.
5. Practicing Self-Care and Stress Management
The last step for how to deal with financial stress is to target the effects that financial stress has had on you mentally and physically. First, practice self-care techniques that improve your physical health. The saying is true: health is wealth! When the condition of your body is optimized, you’ll be better positioned to make powerful changes in your financial life that lead to positive results.
The Help Guide suggests easing stress levels by practicing mindfulness and relaxation techniques, exercising, and focusing on sleep. They also suggest boosting your self-esteem and mindset by practicing gratitude and finding ways to help others. “Even when you’re struggling yourself, helping others by volunteering can increase your confidence and ease stress, anger, and anxiety” (HelpGuide.org).
Your financial therapist can help you create a stress management plan. Clients who are feeling financial stress often try to deal with their problems by working longer hours to earn more money. When you sacrifice your work-life balance, your efforts to solve your problem are counter-productive. Aiming for work-life harmony despite financial pressures will serve you best in the long term.
In New York City, you have many resources to help with financial stress and mental health. Our Care Coordinator is available to help you find the best tools and support for your needs. See how we can help you better manage stress. Schedule a free consultation call with our office today.
