Money is a charged topic of conversation for many people, inciting worry and fear. In fact, financial anxiety is fairly common and can be cultivated from various risk factors — including a difficult childhood, tremendous debt, or lack of understanding. By definition, this type of mental health struggle is often the overwhelming or nagging feeling of not keeping up with or controlling your finances, explains Snigdha Kumar, a personal finance expert for Digit.
When we struggle with these emotions, it can lead us to shut down or cope in ways that hurt our finances, like overspending, not paying bills, or not making goals, Kumar warns. Then, of course, this creates anxiety all over again when we receive overdue notices or see a negative number in our bank account.
Financial anxiety can also happen to people who make a significant amount of money but still fear losing it all. “Contrary to popular belief, financial anxiety is independent of whether someone makes enough,” Kumar says. “A wide variety of things can cause financial anxiety, some are confidence and knowledge gaps, and some are deeply ingrained in an individual’s relationship with money.”
If you’re nodding along in agreement and relate to these uncomfortable feelings, you’re not alone. And there are ways to settle your financial anxiety. Here is a guide on how to take your power back:
Source: Your family struggled to make ends meet.
Solution: Work through your trauma.
Not everyone has an easy childhood — and that’s okay. If you grew up in a home where your parents struggled with financial instability and hardship, you may have wondered where your next meal or pair of shoes would come from. As an adult, you may have been able to stop the cycle of poverty for yourself or your own family, but that doesn’t mean your early life trauma is healed, reminds Dr. Yvonne Thomas, Ph.D. As painful and challenging as it may be to process your experience, it can be life-changing to move forward from financial anxiety.
You can do this with a trained mental health specialist and take time each week to analyze your financial reports. Dr. Thomas recommends picking a time when you’re at ease and looking over what’s working well and what can be improved. “Be aware that looking at your financial situation rather than avoiding it can give you better control over your finances by being able to catch and/or correct any problems if there really is something to worry about,” she says. “Also, by looking at your finances when you are calm can help you learn to stop associating money with negative feelings, such as anxiety and fear.”
Source: You think money will solve all of your problems.
Solution: Dive into your emotions around finances.
Maybe you didn’t grow up struggling, but you also didn’t have a golden spoon, either. For those in the lower middle and middle class, money might seem like the only thing that’s keeping them from reaching their dreams and being happy. As Peer reminds us, this is a dangerous mindset to get into since fantasizing about bigger houses or fancier cars keeps us from dealing with our more significant problems.
“It may sound counterintuitive, but if you have serious money problems manifesting as anxiety, then you may need to address the emotional truth beneath those problems to make the pattern stop,” she says.
Source: You have no idea where your money goes every month.
Solution: Track your spending and emotions.
When you balance your financial statements, pay bills, and set aside savings each month, do you often wonder where in the world your money went? This is a common source of anxiety since it leads us to feel out of control of our income and progress. To get a better grasp, it can be helpful to track not only your spending but also the emotions tied to your purchases, says Dr. Elizabeth Dunn, the chief science officer at Happy Money.
As you go line-by-line in your last month’s statement, ask yourself: Did this purchase bring you joy or lead to feelings of regret and sadness?
“Rather than focusing on limiting your spending to the bare necessities, consider eliminating purchases that don’t increase your happiness and keeping the ones that do,” she says. “If Hulu or Netflix brings joy, that ‘Happy Spend’ may be worth keeping around.”
However, you should also cut down your ‘Sad Spends,’ so you can avoid purchases that bring financial anxiety and stick with the ones that increase your financial wellness. Then, moving forward, you can ask yourself this same question before you click ‘add to cart.’
Source: You have high personal debt.
Solution: Create a game plan with an expert.
Sadly, for most people carrying some level of personal debt is a way of life, says Danielle Holden, a family office advisor for Breakaway Bookkeeping + Advising. Because payments on student loans and credit cards must be met monthly, you may struggle to see the ultimate sunny day — and financial freedom — coming your way one day. “Even with very high levels of debt, there are several different strategies to chip away at it over time with different psychological effects,” she says.
The two most well-known strategies are called the ‘debt snowball’ and the ‘debt avalanche.’ As Holden explains, you pay off the smallest debt first with a debt snowball approach. This approach could be mentally helpful since it provides a ‘win’ to keep you motivated. With the debt avalanche, you pay off the highest-interest debt first. “Mathematically, this is the best way to pay off debt as you’ll pay less in interest, and it takes less time to get out of debt. But it requires a lot of discipline and commitment and dedication to constant review of discretionary spend,” she says.
Not sure which one to pick? Turn to a financial expert for help and guidance.
Source: You’re beating yourself up over past mistakes.
Solution: Plan for the future.
Nearly everyone has made a financial mistake in the past. Maybe it was opening up a store credit card and maxing it out. Perhaps it was giving a friend a personal loan — and they ghosted you right after. Whatever you beat yourself up over, it’s time to forgive yourself, says Dan Egan, the director of behavioral finance and investing at Betterment.
“Looking at past spending will generally make you feel bad and is not relevant to what you are going to do. So don’t worry about micromanaging your past spending,” he continues. “Instead, remember, each day is new, and you’re going to focus on setting up a better future each time you wake up.”
A good starting point is to create a basic budget that outlines your necessary expenses, like rent/mortgage, utilities, food and transport. Then, whatever is leftover can be divided between spending on whatever you want and savings.
Source: You worry about worst-case scenarios.
Solution: Prioritize your emergency fund.
It’s human nature to be a little freaked out before making a big purchase — say, a down payment on a house or a car. It’s a significant commitment and likely requires you to go into your savings. However, there’s a difference between the jitters — and catastrophizing the very worst-case scenario. Like, a tree falls on your house on day one and ruins it. Or it catches on fire. Or you and your partner lose your sources of income and can’t pay your mortgage.
Rather than letting yourself spiral out of control, take action and prioritize your emergency fund, Egan recommends. “Knowing that you have some breathing room allows you to make better decisions and experience less stress, again setting you up for a better future,” he says. “Simply knowing you have an emergency fund reduces the stress you’ll experience whenever an uncertain future rears its head.”