Financial Anxiety: Causes, Impacts And Ways To Improve Your Situation

Many Americans are struggling with financial anxiety. According to Federal Reserve survey data from 2022, 35% of people said they were worse off financially than they were the previous year.

The survey also found that people are experiencing more spending increases than income increases. That might not be surprising when you consider that we are currently in a time of rising interest rates and a higher cost of living.

Let’s take a closer look at what financial anxiety really means, how it can impact you and how you can feel less stressed about your financial and employment situation.

At A Glance: 8 Steps For Coping With Financial Anxiety

Money worries are a common problem. But there are a few steps – listed below – that you can take to feel more in control of your finances. We’ll examine these in greater depth and discuss common mental and physical impacts of being too stressed about your finances.

1. Get a Handle On Your Debts
2. Examine Your Discretionary Spending
3. Make A Budget And Stick To It
4. Create An Emergency Fund
5. Get A Financial Planner
6. Build Your Personal Finance Knowledge
7. Try Unplugging
8. Consider Professional Mental Health Counseling

What Is Financial Anxiety?

Simply put, financial anxiety is any stress you feel that’s related to your finances. This can apply to your job situation, debt, income, investments and housing.

It’s not unusual to worry about what’s in your bank account. An American Psychological Association (APA) Stress in America™ survey found that 66% of American adults consider money “a significant source of stress.”

While watching your money can be a sign of taking financial responsibility, there’s a tipping point where it can become counterproductive – and mentally or physically unhealthy.

How Financial Worries Can Impact Your Well-Being

Stress can impact people mentally and physically. If you’re experiencing some of these effects, you might need to consider ways to address money-related stressors.

Financial Stress And Mental Health

Financial stress can cause mental health issues, with many of the effects hitting lower-income Americans hardest. Experts mention difficulty focusing, social withdrawal, substance abuse and irritability as common signs of financial anxiety.

A National Library of Medicine study also found that women and people who are unmarried, unemployed or renting experienced more money-related mental health problems than other people.

Money Anxiety And Physical Health

The APA study cited above also found that 76% of Americans believe stress affected their health in the month prior to taking the survey. The physical effects included headaches and fatigue.

Stress can also increase levels of the hormone cortisol in the body. According to the Society for Endocrinology, high cortisol levels can lead to weight gain, changes to the skin, muscle weakness, high blood pressure and many other symptoms.

If you’re feeling highly anxious about money while also experiencing some of these physical symptoms, it’s possible that your money stress could be affecting your physical well-being. However, these symptoms can also be due to other medical issues. Before assuming that reducing money stress will improve your physical health, you may want to consult a doctor to rule out other causes.

Types Of Financial Anxiety

Financial anxiety doesn’t look the same for anyone. Here are a few types of people who deal with financial stress and uncertainty at varying levels.

Those Who Are Struggling To Pay Rent

Lower-income people might not have a safety net when they struggle to make rent, get sick, or have another type of money emergency. Any unexpected expense is a serious hardship that can prevent them from reaching their financial goals.

Those Who Are Financially Stable But Worried

Even people with enough money and a solid investment portfolio can experience financial stress. They might worry about what might happen if they lose their job or the stock market crashes.

Those Who Are Trying To Keep Up With Debts

People in this category might appear to be in terrific financial shape on the outside, but if they’re in deep student debt or otherwise in debt in order to maintain their lifestyle, they might feel the stress of having to regularly pay out so much money.

Those Who Are Nervous About Money Management

Some people struggle to get a good overview of their financial situation. They might worry about what they’ll find if they start looking through all their accounts. This lack of visibility can only increase stress.

Those Who Are Concerned About The Bigger Picture

Some people might worry about economic policies and how these policies may impact them. Maybe you find yourself frequently on the edge about the national debt, Federal Reserve policies, trade and other macroeconomic policies beyond your control.

4 Steps To Cope With Money Stress Where An App Can Help

Depending on the type of financial anxiety you’re experiencing, you may find that an app such as Rocket Money^SM can be of great assistance. Next up are four important steps that can help you take to reduce financial stress.

1. Get A Handle On Your Debts

Identify some of your recurring debts, such as a mortgage, credit card, student loan or car loan payments. Paying these bills on time is critical to protecting your credit rating and overall financial health. Outside of refinancing a mortgage, it’s hard to change the amount due monthly.

There are many methods people use to create an effective plan to pay down debt. The debt avalanche method is among the most popular, but you’ll want to do some research to find the best approach for you.

2. Examine Your Discretionary Spending

Check out how much you spent on shopping, dining out, hobbies and entertainment in recent months. Determine whether it’s an amount that works for your income or whether you need to address overspending. You might trim some rarely used subscription services or memberships with streaming services. Budgeting apps are great for simplifying this process.

3. Make A Budget And Stick To It

Now that you have an idea of your major debts and spending, you can create a budget. If you’re using an app, this should be a relatively seamless process, requiring just a few clicks. The 50/30/20 rule provides many people with a starting point. It breaks your budget into three categories: needs, wants and savings/other debt. The 50/30/20 rule is simple and flexible, making it a solid starting point.

Of course, sticking to your new budget is essential to easing your financial anxiety.

4. Create An Emergency Fund

Having money set aside for unforeseen circumstances, such as a job loss or health care emergency, can reduce stress. Creating a new savings account strictly for emergencies is a smart place to start. You can even use direct deposit to automatically divert some of your paycheck to this account. Budgeting apps that let you link accounts and monitor them make creating a new account less stressful, as you can track all of your accounts in one place.

4 Steps For When It’s Time To Go Beyond An App

In certain situations, the tools that an app provides may not be enough to alleviate all of your financial anxiety. If that’s the case for you, taking one or any combination of the steps we’ll discuss next can make a huge difference.

1. Get A Financial Planner

Check with your bank, credit union or employer to get help with financial planning. A professional financial planner can provide peace of mind, especially if you’re considering brokerages or retirement investments.

2. Build Your Personal Finance Knowledge

Sometimes, people are worried about what they don’t know. Seek out resources for personal finance education. You might realize that your financial wellness is better than you thought – or you might learn actionable steps that will put you at ease.

3. Try Unplugging

Sometimes, once you’re well-informed and on top of your financial situation, the best thing you can do for your anxiety is to place a large chunk of your attention elsewhere. For example, reading a book or going outdoors – instead of scrolling through the news – can be a great habit.

4. Consider Professional Mental Health Counseling

If you’ve taken the right financial actions and still feel highly stressed about money, professional help for your mental health might be the next step. Your employer may have resources available to help you find a counselor or therapist. You can also check with your family physician.

The Bottom Line: Knowledge Can Relieve Financial Stress

Having a complete overview of your finances is a helpful way to start reducing stress. This knowledge, along with creating a budget that works, can improve your quality of life. Just be careful about obsessing over every penny.

If you’re looking for a simple way to track all your debts, income and spending, download the Rocket Money app. It provides easy, in-depth visibility over your finances.