The Impact of Financial Stress on Our Mental Health

Employee Wellbeing & Mental Health

Promoting Financial Wellbeing for Improved Mental Health: Breaking the Cycle of Stress and Anxiety

Financial strain has intensified significantly in recent years but the mental health impact remains largely hidden.  Due to the cost-of-living crisis, an increasing number of individuals will experience financial stress and according to the Mental Health Foundation the impact on mental health could be on a similar scale to the COVID-19 pandemic.

The link between financial health and mental health is complex and multi-dimensional. Research has shown that individuals who are financially insecure or struggling with debt are more likely to experience mental health issues such as stress, anxiety, depression, and other psychological problems.

Money problems can also affect your sleep as well as your social life and relationships.  In this article, we will explore the link between financial health and mental health, including the causes and consequences of financial stress and some tips to address financial stress to improve your mental health.

Causes of financial stress

There are many reasons why financial stress can negatively impact our mental health. One of the most common causes is the burden of debt. When individuals are struggling to repay debts, they may experience anxiety, depression, and a sense of hopelessness. Debt can also lead to feelings of fear, shame and guilt, as individuals may feel like they have failed to manage their finances effectively.

Another cause of financial stress is the lack of financial security. When individuals are uncertain about their financial future, they may experience stress and anxiety about their ability to pay bills, cover unexpected expenses, and save for retirement. The lack of financial security can also impact mental health by reducing the sense of control and agency over one's life.

Inflation, economic instability, and job loss are other causes of financial stress. Inflation can reduce the purchasing power of individuals' income, making it more challenging to make ends meet. Economic instability can cause job loss and other financial hardships that can negatively impact mental health. Additionally, job loss can lead to feelings of failure and insecurity, which can lead to depression and anxiety.

Consequences of financial stress on mental health

The consequences of financial stress on mental health can be significant and long-lasting. Individuals who are struggling with financial stress are more likely to experience psychological symptoms such as anxiety, depression, irritability, and sleep disturbances. Financial stress can also lead to physical symptoms, including headaches, muscle tension, and stomach problems.

Financial stress can impact an individual's ability to function effectively in their personal and professional life. Individuals who are experiencing financial stress may have trouble concentrating, making decisions, and problem-solving. They may also experience a reduced sense of self-worth and self-esteem.

Financial stress can also have negative consequences for relationships. It can lead to conflicts and misunderstandings with family members and friends, and can also impact romantic relationships. Financial stress can also lead to social isolation and withdrawal, which can further impact mental health.

Financial strain cause individuals to engage less with activities that are known to protect mental health and prevent problems from developing.  This is why it is imperative to be aware of the impact that financial stress is having on our mental health so we can take action to limit its negative consequences. 

Tips for addressing financial stress

There are many strategies that individuals can use to address financial stress and improve their mental health. Here are a few to get you started:

  1. Take stock of your financial situation – it can be helpful to draw out a clear overview of the situation so that you can start tackling it slowly.  Create a budget and list out any debts you may have so you can make a plan to repay them.
  2. Tracking your spending can also help you to gain a better perspective of your spending habits and will give you an idea of where you can make cut backs. 
  3. If you cannot pay some bills, consider talking to the organisation and explain your situation.  Often a mutually agreed payment plan can be arranged to make payments more manageable. 
  4. If you are struggling, it is important not to feel alone.  If you can, reach out to family, friends, support groups or a trained therapist to talk openly about what is worrying you.  This can help to ease the burden and help you feel less isolated.    Talking about financial stress can reduce feelings of shame and isolation and can help individuals feel more empowered to address their financial situation.
  5. Do your research and ensure that you are claiming for any available tax credits or support packages which you may be eligible for. 
  6. Seek professional financial advice especially if you are already in financial difficulty. A financial planner or advisor can help individuals create a budget, set financial goals, and develop a plan for paying off debt. This can reduce financial stress and provide a sense of control over one's finances.
  7. Another effective strategy is to focus on meeting your immediate wellbeing needs. This includes engaging in regular exercise, eating a healthy diet, getting adequate sleep, and taking time to relax and engage in enjoyable activities. Good self-care can help reduce stress and improve mental health.

The link between financial health and mental health is clear and significant. Financial stress can negatively impact mental health in a variety of ways, including increasing anxiety, depression, and other psychological symptoms. However, there are many strategies that individuals can employ to address financial stress and improve their mental health.

  • Seeking professional financial advice
  • Practising good self-care
  • Developing good financial habits
  • Seeking social support

By taking steps to address financial stress, individuals can reduce the negative impact on their mental health, improve their overall well-being, and increase their sense of control and agency over their lives. It's important to remember that financial stress is a common issue, and there is no shame in seeking help and support to address it. With the right strategies and support, individuals can overcome financial stress and improve their mental health and overall quality of life.


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