5 Emotional Causes of Financial Stress [Activities Included]

While inability to pay rent and bills on time clearly causes financial stress, certain emotions can also cause financial stress. Earning more money can alleviate financial stress to a certain extent. However, beyond a certain threshold earning more money cannot and will not alleviate financial stress. High income earners, high net worth individuals, and debt-free individuals still live with financial stress. Recognizing and addressing certain internal emotions is the first step in reducing feelings of financial stress. Consider the 5 following emotional causes of financial stress.

1. Feelings of financial guilt can arise when you feel a sense of obligation either from others or from yourself. For example, your family expects you to fly home from across the country for your grandmother’s 85th birthday party. You are also expected to financially contribute to the family gift. While of course you would love to celebrate your grandmother, you may also feel the weight of purchasing a $500 plane ticket and contributing $50 to the gift. Guilt can cause ongoing financial stress as various expectations and obligations continue to arise throughout your life. If you experience feelings of financial guilt, start by asking yourself these questions…

• What do I want to do in this situation?

• What do I feel obligated to do in this situation?

• What alternatives exist? (alternatives always exist, explore the gray areas)

• Is this situation causing me significant financial stress?

• If so, what do I need to do to alleviate this financial stress?

• How can I communicate my feelings so I am better understood in this situation?

2. Envy driven financial behaviors are rarely decisions made in your best interest. For example, you own a used Toyota with over 150,000 miles, while your friend leases luxury vehicles. You have no car payment, work fully remote, and live in a city with ample public transportation yet you find yourself considering purchasing a Tesla. Comparison, the root and act of envy, causes ongoing financial stress as you are not acting according to your values but rather according to other’s values. If you experience feelings of financial envy, start by asking yourself these questions…  

• What do I want?

• Why do I want this?

• How does what I want align with my values?

• Would I want this if my peers, siblings, coworkers, etc. did not have this?

• How will having this enhance my life?

• How will having this negatively impact my life?

• Is purchasing this causing me significant financial stress?

• If so, what could I do with this money instead that would alleviate instead of induce financial stress?

3. Shame is one of the most common feelings that arises in personal finance. Financial shame runs deep and has many faces, such as asking your brother for financial support, hiding debt from your partner, earning less than your partner, spending money on clothes you never wear, or not having any savings. Shame begets shame, creating an incredibly lonely experience. Freeing yourself from shame takes time and unlearning. If you experience feelings of financial shame, start by asking yourself these questions…

• Is my financial shame internally self imposed or imposed by others?

• When don’t I feel financial shame?

• What would my life look like if I let go of 10% of this financial shame?

• What do I need to be able to let go of 10% of this financial shame?

Also, repeat these affirmations…

• “I am not defined by my income, debt, net worth, or credit score.”

• “I am not defined by the financial decisions I have made.”

• “I am not defined by my level of financial knowledge.”

4. Worry is another common feeling that arises in personal finance and can be all consuming - impacting people on a daily (or even constant) basis. Oftentimes, regardless of income or net worth, worry comes in the form of a scarcity mindset. A scarcity mindset means you believe that you do not or will not have ‘enough’ money. ‘Enough’ money in the event the worst happens - whatever the worst may be for you. A scarcity mindset is often (but not always) established out of necessity. For example, your mom was the primary breadwinner and lost her job when you were eight years old.

Your family started clipping coupons for groceries and stopped going to the movies on the weekends. While this scarcity mindset may have served you and your family at the time, it may no longer be necessary as you are now an adult working full time and saving money each month. If you experience feelings of financial worry, start by asking yourself these questions…

• What is the worst case scenario I am afraid of?

• What is the likelihood the worst case scenario will occur?

• What can and can’t I control in this situation?

Also, remember that the feeling of worry is legitimate regardless of how much money you have. Other people may have less money than you and that does not diminish the worry that you are experiencing. Better understanding the source of and catalyst for your worry will help you to manage and ultimately reduce the worry.

5. Fear and overwhelm typically come into play when making financial decisions, particularly financial decisions around investing. For example, you want to contribute to your employer-sponsored retirement plan, but you can’t decide if you ‘should’ contribute to the Traditional 401k or Roth 401k. Fear of making the ‘wrong decision’ and being overwhelmed by the sheer number of options you have creates financial stress that results in not making a decision at all. Not making a decision may feel like a relief in the moment; however, in the long run, the financial fear and overwhelm will persist, and with many financial decisions, making no decision (not contributing to any retirement account) is usually the actual worst decision (Traditional 401ks and Roth 401ks are both great and have lots of advantages!).

If you experience feelings of financial fear or overwhelm, start by doing the following…

• Create an hour of time this week (and next week and the week after) to learn more about a financial decision that you are contemplating. Empower yourself with more knowledge.

• Let go of making the ‘perfect’ or ‘best’ decision. Instead, strive to make an ‘educated’ or ‘good enough’ decision - this is much more attainable. 

• Remember that many financial decisions can be changed, if you later come to realize that you would like to change course.

If you identify with one or more of these emotional causes of financial stress, remember…

• You are not alone. People of all upbringings, income levels, races, genders, abilities, etc. experiencing these emotions (and many more) in regards to their finances.

• You cannot begin the journey of addressing these causes until you have first identified them - awareness is the first step.

• You can overcome this. Others who doubted they could reduce their feelings of financial stress have achieved a healthier and more mindful relationship with money. You can too. And if you are here, you are already starting to!