Navigating Financial Anxiety: Overcoming Stress and Fear About Your Finances
Learning to navigate stress and anxiety around money is an important part of mastering your finances!
In our fast-paced world, financial stress is one of the leading sources of anxiety. With wages struggling to keep pace with rising cost-of-living, many families find it increasingly difficult to achieve financial stability.
Financial anxiety can significantly affect mental health, relationships, and overall well-being. It may manifest in various ways, such as:
Avoiding checking your bank account
Overspending as a way to temporarily relieve anxiety
Hoarding money for fear of not having enough
Dodging financial discussions with your partner
Neglecting to plan for retirement or other important financial goals
Recognizing these signs is the first step toward regaining control and finding a path to peace of mind.
What is financial anxiety?
Financial anxiety is feelings of stress, fear or worry about one’s financial situation or financial stability.
This type of anxiety can stem from a variety of factors, such as job loss, unexpected medical expenses, or economic recession. It can also be rooted in childhood experiences, depending on the money beliefs you were taught explicitly, or implicitly, in childhood.
The psychological impact of financial stress can affect all aspects of our lives. Individuals with financial anxiety may find themselves preoccupied with thoughts about money, causing increased stress. They may fear not being able to pay their bills, save for the future or cover an unexpected expense, leading to a sense of instability.
What’s more, comparing oneself to others can exacerbate feelings of financial anxiety and lead to feelings of inadequacy.
All of these factors impact overall well-being and can lead to negative thought cycles which can worsen mental health conditions like anxiety and depression.
Practical solutions
1. Create a budget
The first and most crucial step in alleviating financial anxiety is to create a budget. Understanding your current financial situation is essential for regaining control of your finances and reducing stress. A budget provides a clear picture of your income and expenses, allowing you to determine exactly how much you can spend each month without exceeding your income.
The “Pirates of the Caribbean” rule of budgeting means using your budget as a guideline - not a rule. It does NOT have to be perfect, it just needs to provide you with an overall view of your finances.
Remember, your budget should follow the “Pirates of the Caribbean rule” - it’s more of a guideline than an actual rule. Your budget shouldn’t be flawless. It should be a flexible guide that helps you gain a better understanding of your finances. Having a general idea of your income and regular expenses will help you feel more in control of your finances and bring peace of mind.
2. Build an emergency fund
An emergency fund is like a financial safety net. It holds three to six months of living expenses in an easily accessible savings account. This account is designed to support you during unexpected events, like a medical emergency or urgent car repair.
The greatest benefit of an emergency fund is the peace of mind. By their very nature, emergencies are unexpected and, quite often, expensive. Having an emergency fund will give you a sense of security, knowing that you have money set aside for difficult times. When an emergency arises - which it inevitably will - you’ll be grateful for the security it provides. Building an emergency fund is an important step that you can take proactively to protect your future financial stability, and emotional well-being.
3. Set realistic goals
The fear of “not having enough” is universal. Whether it’s facing a medical emergency or dreaming of an amazing vacation, the anxiety of not having enough money to cover important expenses can be overwhelming.
The solution? Start saving now!
At a minimum, I recommend a 3-6 month emergency fund, contributing to retirement savings, and setting aside money for vacations. These foundational goals provide a solid safety net for your financial life, and allow for some fun!
Beyond these essentials, take time to identify additional goals that are important to you. Whether it’s pursuing further education or buying a new car, establishing specific, personal financial goals is the most important part of maintaining motivation. These goals help you stay focused on what truly matters to you.
Reframing
Letting go of financial anxiety begins with transforming your mindset. Here are two powerful techniques to help you begin:
1. Practice gratitude
You might be tired of hearing "be grateful" all the time, but there’s a reason why everyone talks about it: it actually works. Instead of fixating on the stress and problems money can bring, shift your focus to the positive. Consider all the wonderful things money provides in your life, such as:
- Nourishing meals, whether from the grocery store or your favorite restaurant
- A safe and comfortable home
- Access to essential healthcare
- Memorable trips and experiences
- Reliable transportation
- Basic comforts like indoor plumbing, electricity, and warmth in winter
When you find yourself thinking, "Ugh, I have to pay my water bill," try reframing it to, "I get to use my money to enjoy a hot shower and a flushing toilet!" You’ll be amazed at how a simple shift in perspective can make a significant difference.
2. Think of money as a flowing river
The best advice I ever received to break me out of a scarcity mindset was this: Think of your money as a river, not a lake.
Thinking of your money like a river reminds you that it constantly flows in and out of your life, but never runs out. Opportunities may ebb and flow, but the river never runs dry.
When you envision your finances as a lake, it can feel limited—each withdrawal diminishes your resources, leading to a scarcity mindset. In contrast, viewing money as a river allows you to recognize that it constantly circulates. It comes in through earnings and opportunities, and flows out to cover expenses and investments, but it never truly runs out.
Embracing this perspective can help alleviate financial anxiety and foster a sense of security, reminding you that there’s always more on the horizon.
Conclusion
Financial anxiety can feel overwhelming, impacting not just our wallets, but our mental health and relationships as well. However, by recognizing the signs of financial stress and implementing practical solutions like budgeting, building an emergency fund, and setting realistic goals, you can regain control over your financial life.
Moreover, shifting your mindset through gratitude and mindset techniques can transform your relationship with your finances, helping you cultivate a sense of abundance rather than scarcity.
Remember, achieving financial stability is a journey, not a destination. Each step you take towards understanding and managing your finances contributes to a healthier, more peaceful state of mind. Embrace these strategies, and you’ll not only reduce your financial anxiety but also enhance your overall well-being. Your path to financial peace starts today!
Your life may not be perfect, but it is imperfectly yours. The only way to live it is your way.
