If you’ve ever stressed out about a bill or felt guilty after making a purchase, you know firsthand how money affects your mental health. You’re not alone, either: According to a survey from Capital One and The Decision Lab, 77% of Americans feel anxious about their financial situation.
Unfortunately, money and mental health issues are closely linked and, in some cases, form a cycle that can be difficult to break.
With May approaching and Mental Health Awareness Month, it’s worth taking a closer look at how money and mental health interact and what steps you can take to improve your relationship with both.
How does money affect your mental health?
Financial problems are a common cause of stress, and the resulting shame and isolation that many people feel only makes things worse. And if you already have mental health issues, financial challenges can exacerbate them. A survey by the Money and Mental Health Policy Institute found that, of those with existing mental health problems, 39% said their financial situation made their mental health problems worse.
Depression and anxiety as a result of financial problems also have knock-on effects on other areas of your life. For example:
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Worries about meeting your financial obligations can keep you awake at night, affecting your sleep.
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Conflicts related to money can put strain on relationships, and shame about your money situation can cause you to withdraw from your friends and family.
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Financial demands could make it difficult to concentrate at work, which could lead to burnout or a drop in performance.
Read more: Behavioral Finance 101: 7 Ways Your Brain Can Sabotage Your Finances
How Mental Health Issues Affect Money Habits
While financial difficulties can lead to mental health problems, the opposite is also true. If you are going through a difficult time with your mental health, your finances are more likely to be affected.
For example, if you are feeling stressed or anxious, you can calm yourself with “retail therapy” while racking up high-interest credit card debt. Alternatively, feeling overwhelmed could lead to avoiding bills, making impulsive purchases, or letting important financial tasks fall through the cracks.
The data also supports this phenomenon. The same Money and Mental Health Policy Institute survey found that 42% of people who felt mentally unwell put off paying bills and 63% had difficulty making financial decisions.
This is where that endless cycle comes into play. The more you struggle with your mental health, the more likely you are to face financial difficulties or stress, which only exacerbates your mental health problems.
Read more: Do you suffer from monetary dysmorphia? Here are the signs.
Positive money habits can improve your mental health
While the connection between money and mental health issues is clear, it’s worth remembering the other side of the coin: if you can improve your financial situation, your mental health can benefit. For example:
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When you have an emergency fund, you have peace of mind that if something goes wrong, you will be able to deal with it.
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When you have good credit, you can more easily qualify for a loan, giving you an extra layer of security if you need access to cash.
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When you know where your money goes each month, you feel more in control and able to adapt your spending when necessary.
But before you can work to improve your finances and mental health, you need to be able to tell when things are going wrong.
Read more: 5 psychological money tricks to reduce spending and increase savings
Signs that money may be negatively affecting your mental health
Financial difficulties don’t just affect your bank account; It can spread to other areas of your life. But when you’re busy going through the motions of your daily routines, you may not immediately realize when your mental health starts to take a hit. It may be necessary to slow down and take a hard look at your behaviors, but becoming aware of these stressors is the first step toward healthier finances and mental well-being.
Here are some signs that money may be taking a toll on your mental health:
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You worry about money regularly. Maybe you compulsively check your bank account balance or wake up thinking about money.
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You avoid money completely. You might put off bills, ignore your bank balance, and avoid any discussion about your financial situation because it seems too overwhelming.
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You have a growing pile of impulse purchases. When you feel stressed or anxious, you can cope by spending money without giving it much thought. As a result, you may find yourself in more and more debt.
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You struggle with guilt every time you spend. Regardless of your bank balance, financial stress can take over your emotions. Even if you can afford a purchase, you may find it difficult to enjoy it.
Steps you can take to reduce money stress
Getting out of a cycle of money and mental health issues is not easy, but it is not impossible either. Below are some healthy ways you can start to cope with money stress:
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Take stock of your finances: When you feel anxious, avoiding it is natural. But you may also find that after shedding light on your numbers, things aren’t as scary as you thought. Start by reviewing your bank accounts, credit card statements, debt balances, and invoices to clarify your situation.
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Prioritize your biggest challenges: After analyzing your finances, you may feel overwhelmed by the number of things that need your attention. But don’t try to do everything at once. Instead, focus on whatever is causing you the most stress and deal with it before moving on to anything else. For example, you could focus on catching up on your car payment before you start saving for your wedding.
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Make a plan: Once you’ve prioritized your financial tasks, you can start taking action. Do you have credit card debt? Start allocating everything you can get out of your budget to pay for it. Are invoices chronically late? Try putting them on autopay so you don’t have to think about it.
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Build a financial cushion: Money may not buy happiness, but a study conducted in Australia found that a regular saving habit has a positive impact on mental health. If you have little savings, focus on creating a financial cushion to reduce stress and give you some peace of mind.
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Add friction to your spending habits: If you struggle with impulsive spending, try adding friction when shopping. For example, if you can’t resist targeted ads on social media, limit your time online. Other ideas include unsubscribing from marketing emails and deleting saved credit cards from online shopping sites.
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Take care of your mental health: Because mental health issues can make financial challenges even worse, taking care of yourself is key to reducing money stress. Simple strategies include prioritizing sleep, going for a walk every day, and connecting with loved ones.
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Get support: If you’re struggling to manage your finances, you don’t have to do it alone. There are many financial professionals (including coaches, therapists, counselors, and nonprofit advisors) who can help. You may even have a loved one willing to offer emotional support.
Read more: 4 Signs It’s Time to See a Financial Therapist
Remember, you don’t have to solve all of your financial and mental health problems at once. Even taking one small step can help you start building financial confidence and improve your mood. And once you get a little positive momentum, the connection between finances and mental health will start to work in your favor.