How to deal with financial anxiety

Many Americans are feeling high levels of financial stress in today’s economic environment, and for good reason: Sticky inflation and higher borrowing costs often result in more personal debt and the inability to save for emergencies and retirement.

If you’re plagued by money worries, you’re not alone. In fact, nearly half of Americans (47 percent) say money has a negative impact on their mental health, a recent Bankrate survey found.

Fortunately, there are various steps you can take to start improving your financial situation right away — which can alleviate money anxiety, in turn. These include finding ways to build up an emergency fund and pay down debt.

What is financial anxiety?

Financial anxiety is persistent, often intense worry and fear over one’s personal money situation. This anxiety might keep you up at night wondering how you’d pay your bills should you lose your job. It could also dominate your daily thoughts as you worry about how you’ll ever get out of credit card debt.

Many who have financial anxiety may have high debt or too little saved for a rainy day. However, even people with a solid financial foundation can experience money-related stress. They may worry that one day their savings might run out, as well as whether their investments are wise ones.

Recognizing that you have money anxiety can be the first step in helping you improve your personal finances — and, in turn, alleviate your anxiety.

What are common symptoms of financial anxiety?

Feeling anxious over money can lead to various physical ailments, and it can even contribute to further financial mistakes. Common symptoms of financial anxiety include:

• Aches and pains: Not having enough to cover bills or daily living expenses can cause ailments such as tension headaches or an upset stomach.
• Loss of sleep: Feeling worried over high debt or lack of emergency savings may cause insomnia, which can also increase one’s risk for other health problems.
• Overwork: You may feel compelled to take on a second job, just to be able to cover all your monthly expenses — which can create an unhealthy work-life balance.
• Financial avoidance: To avoid the stress associated with high expenses or a low bank account balance, you might delay tasks such as logging into your bank account or paying your bills.

“Financial anxiety is more than just a bad feeling — it may really impact both mental and physical health,” says Julie Guntrip, Head of Financial Literacy at Jenius Bank. “The connection between financial stress and mental health may emerge as feelings of anxiety, agitation, or depression, which tend to spill into all aspects of life.”

Physical symptoms that can result from financial anxiety include fatigue, as well as trouble with concentrating and sleeping, Guntrip says — adding that the anxiety may also lead to strained relationships, as well as potentially a lower quality of life in the present and the future.

Where does money anxiety come from?

Various types of money problems commonly lead to feelings of financial anxiety. For instance, consumers often worry about being able to cover unplanned expenses. The majority of U.S. adults (56 percent) wouldn’t pay a $1,000 expense from their emergency savings, a Bankrate survey found.

One factor that can keep people from saving for a rainy day is credit card debt. These days, 36 percent of Americans have more credit card debt than emergency savings, according to Bankrate’s emergency savings report.

Although the rate of inflation has come down significantly from 9 percent in June 2022, prices remain uncomfortably high on items such as shelter, motor vehicle insurance and transportation services. Among U.S. adults who say money negatively impacts their mental health, 65 percent cite inflation and/or rising prices as a reason, Bankrate’s Money and Mental Health Survey found.

Other common sources of financial anxiety include a projected increase in unemployment and high borrowing rates. In addition, financial anxiety often stems from a person’s past money situations that were traumatic, such as having been unemployed or unable to cover living expenses.

Financial stress in relationships

For those who are married or in a long-term relationship, the sharing of finances can lead to stress if both partners have different spending habits or priorities. In fact, according to Fidelity Investments’ 2024 Couples and Money study, nearly 1 in 4 couples say money is their greatest relationship challenge, which the study broke down by generation as follows:

• Generation Z: 29 percent
• Millennials: 27 percent
• Generation X: 26 percent
• Baby boomers: 17 percent

Nearly half (45 percent) of the partners in relationships say they argue about money, at least occasionally, according to the Fidelity Investments survey. It found that common financial concerns among partners include having enough saved for retirement (54 percent), paying for healthcare costs in retirement (51 percent) and building up emergency savings (42 percent).

How to reduce financial anxiety and money stress

If money problems have you feeling like the weight of the world is on your shoulders, there are various practices you can begin today to help improve your financial and mental health.

Develop a spending and saving plan

Also known as a budget, this plan will ultimately help you pay all your bills each month, and also have some money left over to deposit into a savings account. It can give you a better handle on your money management, ultimately leading to less stress and peace of mind.

Methods of budgeting include the 50/20/30 rule, a zero-based budget and cash stuffing. You can make your budget using pen and paper, a spreadsheet or a mobile budgeting app.

“Financial stress typically occurs when we feel scared or unprepared,” says Jenius Bank’s Guntrip. “A budget may help because it is a preparedness tool. Best practices in budgeting start with tracking money flows — the money that comes in and goes out each month.”

As such, budgeting can help with goal setting, spending and saving, Guntrip says. “Making progress toward a goal can help to create feelings of empowerment, confidence, and control, [which are] feelings that potentially counter the negative symptoms of financial anxiety.”

Track your money-management progress

As your budgeting efforts help you to get on a better financial path, track your progress with saving money and paying down debt. This can involve setting monthly goals and possibly rewarding yourself for reaching set milestones.

Seeing the results of your efforts helps alleviate stress as you increase your savings or lower your amount of debt. Working toward established goals can help motivate you as you gain momentum.

“If someone has set a goal — such as getting out of credit card debt — but isn’t actually taking steps to reach that goal, there is often a feeling of being disempowered and hopeless, which has negative effects on one’s mental health,” says Jennifer Dunkle, financial therapist and founder of New Awareness Therapy.

“Conversely, tracking one’s progress with saving money is a great example of setting a goal and actually taking steps to get closer to the goal,” Dunkle says. “Even though the goal may be a long way off, getting on the road to reaching that goal helps people feel empowered and more hopeful.”

Realize not everything is in your control

It helps to accept that certain events are often out of your control, such as a sudden job loss, sickness, a recession or a pandemic. When it comes to such hardships, the best you can do is have some money saved to help cover unplanned expenses without having to go into debt.

“It’s super important to avoid the stress of being unprepared for the vicissitudes of life,” says financial therapist Dunkle. “We’ll be able to cope a lot better with stressful events if we at least have a financial cushion to fall back on. Experts usually recommend having 3-6 months’ worth of savings in a not-very-accessible account that is set aside for this purpose.”

The best place for an emergency fund is often a high-yield savings account, and you may find it’s best to keep this money separate from money you’re setting aside for other purposes.

Improve your financial literacy

Gaining a better understanding of personal finance increases your confidence and helps you make informed money decisions. For example, a lack of knowledge could result in your being charged unnecessary bank or credit card fees. It could also be the reason you leave money on the table by earning a low rate on a savings account.

Ways you can boost your money IQ include listening to money-related podcasts and following personal finance influencers on social media. These sources often provide easily digestible tips and ideas, while money management books can be helpful for those seeking more in-depth information and advice.

Practice self-care

As with any type of anxiety, you may be able to soothe your financial anxiety through various activities:

• Breathing exercises and meditation: Whenever you feel anxious, deep breathing can help release tension in your body and lower a racing heart rate.
•  Find a stress-releasing hobby: Taking more time to do the things you enjoy may reduce anxiety by boosting your sense of well-being. Such activities can include cooking, reading, bike riding, spending time with family members or playing with a pet.
• Keep a journal: Writing about your anxieties can help you detect harmful thought patterns as well as possible ways you can improve your money situation.
• Speak to a mental health professional: Talking with a therapist about your anxieties can work wonders in lifting some of the burden you’re feeling.

Bottom line

People’s money worries are commonly brought on by high costs of living, high amounts of debt and not enough savings. The best way to alleviate money anxiety is often by improving your personal financial situation. Even taking small steps today — such as setting up a budget or finding ways to lower your spending — will help you worry less and gain confidence, which ensures peace of mind, less anxiety and better sleep at night.