The Psychological Impact of Financial Stress

January 5, 2024   •  Posted in: 

Financial worries and mental health are closely interconnected, often influencing each other. This article examines how financial troubles contribute to anxiety, depression, and other mental health challenges, along with recommended coping strategies.

What is financial stress?

Financial stress is the emotional and psychological strain arising from money, debt, and financial stability concerns. It can refer to a range of different aspects of finance, including:

  • Debt burden: Struggling to manage debts (including credit card debt, student loans, mortgages, or other obligations) can weigh heavily, leading to significant stress levels
  • Income instability: Fluctuating income, irregular paychecks, or job insecurity can make it challenging to plan and budget, causing anxiety about meeting basic needs.
  • Unforeseen expenses: Sudden emergencies, such as medical bills, car repairs, or home maintenance, can strain finances and create unexpected financial pressures.
  • Lack of savings: Insufficient savings for emergencies or retirement can generate worry about long-term financial security.
  • Job loss or underemployment: Losing a job or being underemployed can disrupt financial stability, making it challenging to cover expenses and maintain a desired quality of life.
  • Rising living costs: When the cost of living outpaces income growth, individuals may find it increasingly difficult to make ends meet.
  • Financial goals: Striving to achieve financial goals, such as buying a home, paying for education, or saving for retirement, can lead to stress when progress is slow or obstacles arise.

Financial stress is of particular concern when the current global economic situation is volatile, which can lead to job insecurity and income fluctuations for individuals. The cost of living can increase, with housing, healthcare, education, and other essentials rising faster than wage growth. These conditions make it challenging to afford basic necessities.

Medical expenses are an ongoing financial issue for many Americans. Healthcare costs, including insurance premiums and out-of-pocket expenses, can be a significant source of financial stress.

Increasing student loan debt has also become a significant burden for many young adults, affecting their financial well-being and life choices. At the other end of the scale,
a shift away from traditional pensions to personal retirement savings has placed the responsibility of financial planning on individuals, creating anxiety about retirement security.

Likewise, societal pressures to keep up with materialistic trends and maintain a particular lifestyle can contribute to overspending and debt accumulation. The ease of comparing one’s financial status to others on social media and online platforms can lead to feelings of inadequacy and financial FOMO (fear of missing out).

These societal experiences may seem trivial, but they have been borne out in the scientific literature. A study[1] conducted in Sweden with young individuals discovered that clothing brands play a crucial role in shaping and showing one’s identity. The act of shopping was seen as a significant social activity. If someone can’t engage in cultural activities or freely present the identity they want, it could potentially harm their mental health and overall well-being.

How does financial stress impact mental health?

It is well understood when under financial stress, people often experience poor mental health.

Experiencing financial difficulties is closely connected to the development and persistence of common mental disorders such as depression, self-harm behaviors, and higher suicide rates. Being in debt has been linked to a higher occurrence of substance use, depression, psychosis, and suicide[2].

Chronic financial stress can contribute to the development or exacerbation of depression. The feeling of helplessness and the perception that there’s no way out of one’s financial situation can lead to sadness, hopelessness, and a lack of motivation.

Interestingly, recent studies[3] suggest financial strain becomes more significant based on how an individual thinks and feels about it. Simply put, how you see your financial situation substantially impacts your mental well-being more than the actual financial facts.

Financial worries can also lead to high levels of stress and anxiety. Constantly thinking about debt, bills, or financial instability can trigger the body’s stress response, releasing stress hormones like cortisol. This can lead to persistent worry, restlessness, and feeling overwhelmed.

One 2017 study[4] confirmed the above impact on stress, anxiety, and depression but also identified a link between financial stress and alcohol dependency. Researchers noted that any increased alcohol intake took a toll on participants’ bank balances, further adding to financial worries.

Financial worries can further exacerbate pre-existing mental health conditions. For example, an individual with generalized anxiety disorder might find their anxiety heightened by financial stressors.

Prolonged financial stress can have physical health consequences, such as headaches, digestive problems, and sleep disturbances. These physical symptoms can further contribute to the overall deterioration of mental well-being.

Likewise, financial hardship may mean people need help heating their homes or accessing nourishing food adequately. This can impact physical health.

How does financial stress strain relationships?

Financial worries can strain relationships with partners, family members, and friends. Conflicts over money can lead to arguments, resentment, and isolation, negatively affecting one’s social support system and overall mental health.

Some choose not to share their financial concerns with friends, family, or loved ones. Instead, they suffer alone. However, the impact of this stress plus the isolation felt by individuals can come out in other ways, such as being quick to anger or to cry about seemingly unimportant things.

Financial difficulties can impact one’s self-esteem and self-worth. Society often attaches a sense of value to financial success, so struggling financially can lead to feelings of inadequacy and shame.

Coping mechanisms and unhealthy responses to financial strain

Financial stress can lead to unhealthy coping behaviors such as overeating, substance abuse, or overspending. These behaviors can provide temporary relief but often worsen mental health in the long run.

When dealing with financial stress, people often find coping with other life stressors harder. Their emotional and psychological resources might be depleted, making it challenging to handle additional stressful situations that arise.

How does financial stress affect job performance?

Numerous studies[5] indicate that employees facing financial difficulties exhibit lower job performance than those with stable financial situations. The factor that connects personal finances to work performance is the amount of stress generated by financial struggles.

Financial worries can affect job performance due to distraction, increased absenteeism, and decreased productivity. This can lead to additional stress, impacting mental health further.

Employees grappling with heightened stress due to financial issues often show reduced productivity at work, as their focus becomes divided between job responsibilities and personal financial concerns.

Addressing mental health care amid financial constraints

There are many barriers to accessing mental health care. For example, health disparities are well known to exist in differing populations according to education, race, ethnicity, sex, sexual orientation, and place of residence.

Financial concerns are also a factor that might hinder access to mental health care, as therapy, medication, or other treatments can be costly. This can create a cycle where lack of treatment worsens mental health, further impacting one’s ability to address financial challenges.

Strategies for building resilience to help navigate financial stress while safeguarding your mental health

What practical steps can you take to manage financial stress and protect your mental well-being? Here are 15 strategies for building resilience and navigating money worries:

  1. Create a realistic budget: Develop a detailed budget that outlines your income, expenses, and savings goals. This can help you understand your financial situation clearly and reduce anxiety about money.
  2. Seek professional financial guidance: Consider consulting a financial advisor or counselor who can provide expert advice on managing your finances, reducing debt, and creating a sustainable financial plan.
  3. Practice mindfulness and stress reduction: Engage in mindfulness meditation, deep breathing exercises, or yoga to manage stress and anxiety associated with financial worries.
  4. Limit exposure to financial news: Constant exposure to negative financial news can increase stress levels. Stay informed, but avoid overconsumption of news that might exacerbate your anxiety.
  5. Build a support network: Maintain open communication with friends and family about your financial challenges. Talking about your concerns can sometimes alleviate stress and help you find solutions.
  6. Focus on what you can control: Concentrate on aspects of your financial situation you can control. Shifting your attention to actionable steps can provide a sense of empowerment.
  7. Prioritize self-care: Invest time in activities you enjoy, whether spending time with loved ones, pursuing hobbies, or engaging in physical exercise. These activities contribute positively to your mental well-being.
  8. Set realistic goals: Break down your financial goals into smaller, achievable steps. Celebrate each milestone you reach, which can boost your confidence and motivation.
  9. Explore additional income streams: Find opportunities to supplement your income through freelance work, part-time jobs, or selling items you no longer need.
  10. Practice gratitude: Regularly acknowledge the positive aspects of your life, regardless of financial challenges. Gratitude can help shift your focus from what you lack to what you have.
  11. Educate yourself: Learn more about personal finance and money management. Knowledge can empower you to make informed decisions and take control of your financial future.
  12. Stay connected to mental health resources: If you’re struggling with anxiety or depression related to financial stress, consider seeking professional help from therapists or support groups.
  13. Break tasks into manageable steps: Tackle financial issues one step at a time. Overwhelming problems can be broken down into smaller tasks that are easier to address.
  14. Maintain a long-term perspective: Financial stress is often temporary, and circumstances can improve with effort and planning.
  15. Avoid comparisons: Refrain from comparing your financial situation to others. Everyone’s journey is unique, and focusing on others can increase feelings of inadequacy.

Building resilience takes time and effort, so it’s essential to be patient with yourself. Experiment with these strategies to see which ones work best for you, and consider adapting them to fit your circumstances and preferences.

Seeking additional support

It’s essential to recognize the relationship between financial worries and mental health, which is complex and bidirectional. While financial struggles can lead to mental health issues, poor mental health can also make it more challenging to manage finances effectively. Seeking support from mental health professionals, financial advisors, and social support networks can be crucial in addressing these challenges.

At The Center • A Place of HOPE, we can help. Whole Person Care treats the entire you – your mind, body, and spirit. It treats all aspects of your life – physical, emotional, nutritional, intellectual, relational, and spiritual – to enable complete healing. In this way, you work through all components of your life that have contributed to your current condition. The result is a deeper, longer-lasting, and more complete recovery.

Contact us today for treatment options, admissions, financing, and insurance.


1. Gianneschi, M. (2012) Vara och Märkas Unga Konsumenters relationer till Klädindustrins Varumärken. thesis. BAS.
2. Frankham, C., Richardson, T. & Maguire, N. Do Locus of Control, Self-esteem, Hope and Shame Mediate the Relationship Between Financial Hardship and Mental Health? Community Ment Health J 56, 404–415 (2020). https://doi.org/10.1007/s10597-019-00467-9
3. Asebedo, S. D., & Wilmarth, M. J. (2017). Does How We Feel About Financial Strain Matter for Mental Health? Journal of Financial Therapy, 8 (1) 5. https://doi.org/10.4148/1944-9771.1130
4. Richardson, T., Elliott, P., Roberts, R. et al. A Longitudinal Study of Financial Difficulties and Mental Health in a National Sample of British Undergraduate Students. Community Ment Health J 53, 344–352 (2017). https://doi.org/10.1007/s10597-016-0052-0
5. Martines (1970) The effects of personal financial debt on employee job performance, ScholarWorks. Available at: https://scholarworks.calstate.edu/concern/theses/37720f94j.

Dr. Gregory Jantz

Pioneering Whole Person Care over thirty years ago, Dr. Gregory Jantz is an innovator in the treatment of mental health. He is a best-selling author of over 45 books, and a go-to media authority on behavioral health afflictions, appearing on CBS, ABC, NBC, Fox, and CNN. Dr. Jantz leads a team of world-class, licensed, and...

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