77% of Americans report being anxious about their financial situation according to a Mind over Money survey by Capital One and The Decision Lab. To make it real, if you and three friends are having lunch, three of you at the table are anxious about your personal finances. Are you one of them?
This is astounding, but not surprising. The “American dream” has long driven the mindset that we must acquire more, we must continue climbing the ladder, providing more than what we had for our children, keeping up with the proverbial Joneses. This all adds pressure. Pressure that can lead to immense anxiety. But, there are ways to reduce financial anxiety. First, we must understand the causes and the signs.
What causes financial anxiety
Several things can cause financial anxiety. Some of which include:
- Job loss. Losing a job can cause great stress, especially if you are not financially prepared. Job loss can last for weeks, but may sometimes last several months. A career might also be part of your identity which adds another element of stress.
- How you were raised. Your relationship with money is formed at an early age. Seeing how your parents, perhaps, managed everyday life financially has likely made an imprint on your relationship with money. If your parents were bad with money, odds are, you may have followed the same path.
- Looming debt. The more debt you have, the more anxiety is likely to build up. It might even cause you to pile on more, because you feel it will never be possible to dig your way out of debt anyway, so why not enjoy life. The problem with that approach is that it is a continuous cycle that only gets worse with time.
- Lack of financial education. Your lack of financial understanding may be a cause of worry. Whether it is not knowing how to manage bills or not knowing how to save and invest, the uncertainty can lead to anxiety.
- Fear of losing money. Fear of the unknown. You may have a decent sum of money, but experience financial anxiety or stress because you don’t know what to do with it. This can cause financial paralysis, leaving you unable to take action with your money to put it to work to earn more.
- Mistakes you’ve previously made with money. You may be stuck in a rut from previous mistakes you’ve made with money, constantly beating yourself up over prior decisions.
- Living paycheck to paycheck with no emergency fund. This is sadly the reality for many people. The uncertainty of “will I be able to make the bills this month” can cause tremendous amounts of stress.
Some signs of financial anxiety
When financial anxiety occurs, it can manifest itself in a number of ways.
- Overspending behavior. When one has underlying depression or unhappiness, the “high” from spending (aka “retail therapy) might temporarily lift the spirits. Overspending, however, digs you into a deeper hole with debt. It then becomes a viscous cycle that goes deeper and deeper.
- Feeling depressed and unmotivated. Large amounts of debt can often cause feelings of depression or hopelessness. That feeling that you’ll never be able to rid yourself of financial issues can lead you to depression and feelings of hopelessness.
- Avoiding bills and notices. Things may have gotten to the point where bills are coming, and you are not even opening them any longer. Out of sight, out of mind.
- Obsessed with being overly miserly. If you are overly focused on saving, to the point where it is taking over your life and others are characterizing you as miserly vs. frugal, you may want to further examine things.
- Turning things completely over to someone else. Some people get to the point where there’s so much anxiety built up about money that they simply turn everything over to someone else to manage, effectively “checking out.”
What can I do to reduce financial anxiety?
1. Create a plan and take control.
Having a plan in place where you pay yourself first, for instance, will help to ensure you are taking care of your future first. Additionally, taking control and stabilizing your finances with a right-sized emergency fund will give you the cushion you need to feel more empowered and in control of your financial life. Consider creating a bigger picture vision for your financial future and your retirement so that you’re making decisions along the way with the end in mind. Having a vision for the future vs. the situation you’re in today will help you keep your eye on the prize.
2. Avoid overspending by spending mindfully.
Your spending behavior has the potential to break you financially. By thinking through and planning purchases, assessing wants vs. needs and using “window shopping” for your retail therapy instead of making unnecessary purchases, you will get yourself out of a spending and debt cycle that may be keeping your down financially [Check out our previous article Spend Like A Millionaire, Mindfully for ideas].
3. Take things one step at a time. Give yourself grace.
Whether you’ve made money mistakes in the past or just generally feel uncomfortable dealing with money issues, it is important to pause and give yourself some grace. Breaking what you need to do into smaller parts will give you a sense of accomplishment vs. a sense of being overwhelmed by it all. If you’re dealing with tremendous debt, figure out what caused it, work to stop the cause, and take steps to get out of it and move forward. If you don’t go back and address the causes, you’ll find yourself right back where you started. [Check out our previous article F%@k debt 😡! Conquer debt, starting now. for help].
4. Avoid your vices. Stay connected.
Financial anxiety caused by debt or other financial issues may tempt you toward your vices. Excessive alcohol, gambling or other vices will only cause you to further spiral into the problem vs. toward a solution. The best thing you can do is to stay active and connected to the people who support you emotionally. Avoid those who are bringing you down both emotionally and financially. [Check out our previous article Breaking Bad Habits And Making New Ones For A Healthier, Wealthier Life – 3 Books That Will Transform The Way You Think].
5. Seek professional help.
When you’ve done everything you can, but things are still out of control, it may be time to seek professional help. There is NO shame in talking to a professional to get your anxiety and overall mental state managed. You may also want to seek professional help from a financial coach to help you get on the right path. Wherever you need help, seek it.
Reducing financial anxiety is a major step toward financial independence
Working to reduce any financial anxiety you may have by first understanding the signs, then addressing the causes is a major step toward financial freedom. Financial anxiety can be a huge detriment to your financial future if left unchecked. Following the right steps will help in addressing your needs for the long term. And that, my friends, is good for your wealth.