Money & Mental Health - How to Manage Financial Stress

Not too long ago, I found myself grappling with some difficult emotions concerning my finances. I’ve taken on some debt to attend medical school and interest rates are swiftly rising. I also recently bought a house and now the market is suddenly experiencing this topsy-turvy turbulence.

I am an economist, a former banker, a mental health advocate and a future psychiatrist. Even while understanding the economic dynamics at play, I've found myself wondering, "How am I going to get through this?"

I am certain I am not the only one experiencing these emotions.

Inflation is at a 40-year high, and around the world, everyday people are struggling to find ways to cope. It was recently reported that nearly 90% of residents surveyed in the U.S. have shared their experiences of anxiety about inflation. Just last month, that number was 8 percentage points lower. In the U.K., over a third of employees have admitted to feeling stressed about their financial situations, with 15% reporting negative effects to their productivity. The Financial Post reports that for working Canadians surveyed by the National Payroll Institute, 26% more people admitted to experiencing difficulties covering their bills and now living paycheque-to-paycheque, with the number of workers carrying credit card debt increasing to 42% from last year. According to that same survey, many people dealing with financial anxiety tend to throw in the towel.

Inflation can be simply defined as a higher cost of living, or that our dollar has less purchasing power. However, that simple definition of what’s happening in our accounts has a much more complex effect on our long-term wellness. Through studying Financial Economics and Medicine, and with a decade of experience in banking, I’ve learned about this impact and witnessed it in real-life settings where I've managed many clients through economic turbulence. The positive outcomes are always characterized by the same patterns – stress mitigation and a sound financial plan.

Reframing The Fear In Finances

Our finances are directly related to our basic physiological need to survive. Studies have shown that when inflation reduces our purchasing power, the majority of us begin to catastrophize our circumstances. This fear and panic built up in our brains then wreaks havoc on our entire lives, causing heightened levels of anxiety and depression, debilitating fatigue, and even accelerated aging leading to premature death. For those of us who’ve experienced financial trauma in our pasts, these findings are especially true.

For low-income communities that are disproportionately inclusive of marginalized groups, rising inflation can lead to mortal fears that a weakened financial situation can cause irreparable harm. For myself, my mind reverted back to 2011 — the year I left my abusive marriage. I was living in poverty, working multiple jobs to make ends meet, raising my daughters as a young single mother, and at one point on the verge of homelessness. By 2022, although I may have been cognitively aware that I wouldn’t end up in the same situation again, the unexpected financial shake-up brought back those memories so quickly and so vividly that I still felt like my fears were a possible threat.?

There I was, educated, with work experience, savings, and strong investments in a new, stable career, and yet my stress and anxiety were piquing, nearly crippling me from finding an appropriate fix to the underlying issue. This is an example of how we may process such experiences. It’s a negative feedback loop that causes more harm than good.

The logical part of our brains, the frontal lobe, is responsible for planning, organizing and logical thinking. As economic cycles naturally occur, it reminds us that the financial turbulence is temporary. It confidently says, ‘this too shall pass.’ However, our amygdala, the fear centre of our brains, activates when we are in a stressful situation, triggering the release of our fight or flight response and drowning out our frontal lobe’s instruction. This response can be exacerbated by past traumatic experiences, causing heightened fear responses in the future.?

Fear is a toxic emotion that reprograms our systems to more readily take in even more toxicity, eventually breaking us down from the inside out. From a psychological standpoint, inflation triggers our fear pathways and enacts that fight or flight mechanism that makes us feel as though we need to do something drastic in order to counter a threat or avoid it. Recognizing our emotions and managing them in a healthy way is key to keeping calm and not turning our fear into self-sabotaging actions.

Case in point, in 2008, I panic-sold my entire investment portfolio. It was a mistake I deeply regretted later on as the market recovered within a year or two. For those who ignore their feelings, and subsequently their economic situations, they often end up worse off than before, now unable to secure housing, healthcare, or vital education due to poorer financial health.

Financial stress affects us all in varying ways, but the economy is cyclical. How we feel about and act toward our finances shouldn’t mimic that movement. So how can we manage ourselves and keep calm through that process, while also maintaining our dignity and autonomy? What creative ways do we need to enact to reach those important milestones on Maslow’s Hierarchy of Needs, such as belonging and self-actualization??

Find Comfort In Education (But Don’t Overdo It)

The number one combatant to many economic stressors is education. Not only understanding where your anxiety and harmful patterns surrounding money come from, but also having a full picture of your financial situation and some financial literacy can go a long way in alleviating fears. Number one, you’ll be able to recognize triggers in time to respond constructively. Two, you’ll be able to create a financial plan that includes budgeting, increasing your financial earning power, and strategizing to save for an inevitably uncertain future.

However, beware of the trap of sensationalized media headlines, as such content is specifically designed to invoke fear. Though it may feel like a good idea to learn everything you can about what’s happening in the market in real time, it can actually be counterintuitive. During times like these, it’s best to limit traditional and social media consumption to sever our brains’ addiction to the fear-feedback loop they are structured to create.?

Keep a Long-Term View

Dealing with economic stress and financial trauma is an ongoing process that will not happen overnight. Focus on the things you can control. In recent months, I’ve unsubscribed from a few major financial news outlets and have stopped going on Facebook news feeds for an extensive amount of time. Having the knowledge of triggers that stem from my previous financial trauma has helped me to not panic this time around. I’ve also spent more hours with my therapist as I acknowledge my emotions.

Remaining proactive with our self care and financial health now is invaluable. Our emotional systems are not equipped to handle the ups and downs amplified by panic-filled media or our lack of the proper financial education. When we’re constantly trying to mitigate risks every single moment of every day, we lose the ability to easily recognize other things that make us happy, further reducing our access to creativity and innovation. But keeping a long-term view of the market and our own finances can help us keep a balanced perspective of the present, no matter how tumultuous it seems.