New York Life | July 30, 2020
Financial worries can be a significant cause of stress but taking proactive steps will help you cope. In these uncertain times, with interest rates going up and inflation on the rise, elements of our financial lives are beyond our control. That can lead to feelings of anxiety and helplessness. However, there are proactive steps you can take to help build mental resilience and cope more effectively with financial worries. Here are five tips to help you deal with financial uncertainty.
It’s important to remember that our reactions to negative events can be as damaging as the events themselves. Stress-related reactions can include poor concentration, irritability, anxiety, insomnia, reduced productivity and interpersonal conflicts.1 These can lead to a feedback effect which magnifies the original issue until it begins to take over. Anxiety can also tempt us into high-risk behavior which has financial and health-related consequences, from alcohol misuse to gambling, and ‘retail therapy.’
Feeling some stress is entirely natural. However, we can control our emotional reactions and build mental resilience by observing our own thought processes and then using strategies to counter them. Breathing exercises are surprisingly effective, or you can distract yourself with something enjoyable and constructive like writing a blog or coming up with ideas for a side gig which you could even end up making money from.
Once you have your stress levels under control, practice being optimistic and hopeful, focusing your attention on positive steps you can take, however small. Take one day at a time, while planning for possible future challenges.
Under stress our bodies release adrenaline and cortisol, which can suppress immune, digestive, sleep and reproductive systems. Feeling stressed can also lead us to develop poor eating habits, exercise less and neglect health issues, either through lethargy or concerns around cost.
Treating your health as a financial priority will save you money in the long run through medical expenses and lost earnings. Meanwhile, exercising regularly releases endorphins which can help improve our mood and lift us out of a cycle of negative thinking.
Financial issues can leave us feeling isolated, but whatever your money worries you are far from alone: for example, according to one report, the average American owes $7,104 in credit card debt3. It’s unsurprising, then, that even before the pandemic the American Psychological Association reported 72 percent of Americans were stressed about money at least some of the time.2
As you can see, the chances are your family and friends will be able to relate to your concerns. A problem shared is a problem halved, so speak to someone. If you’re not comfortable discussing issues with a friend or family member, search online for forums where you can chat with others in the same situation, or contact an organization which specializes in helping people gain control over their finances, such as The National Foundation for Credit Counseling.
Once you’re in the right frame of mind, you’ll be able to evaluate your financial health without causing yourself more stress:
• Calculate your total income from all sources, noting any income at risk
• Add up the value of any assets you own such as your home and car
• Calculate the total of any debts
• Break down your expenditure to find out exactly where your money is going
Just as a shadowy figure looming over your bed can turn out to be something far less scary when you turn on the light, illuminating your financial situation can go a long way to making it seem more manageable.
Finally, with a clear picture of where you stand financially, you’ll be able to take steps to address the issues. Consider areas where you can save money, either through removing non-essential expenditure or choosing cheaper options. Then look for opportunities to consolidate debt and reduce repayments through lower interest rates or longer repayment terms. If possible, start an emergency fund, with the goal of saving 3-6 months of living expenses-- knowing you have a buffer goes a long way to reducing stress.
Of course, ultimately, prevention is better than cure. While we cannot predict events like the COVID-19 pandemic, inflation, or rising interest rates, we can expect the unexpected and plan accordingly. Perhaps one of the ways to feel secure and in a position to handle whatever life may throw your way is ensuring that you have adequate insurance and financial coverage that may help meet your individual needs.
1 Vinkers, Christiaan H. et al. “Stress resilience during the coronavirus epidemic.” European Neuropsychopharmacology. Volume 35, June 2020. Accessed June 08, 2020. https://www.sciencedirect.com/science/article/pii/S0924977X20301322
2 https://www.nerdwallet.com/blog/average-credit-card-debt-household/ Accessed June 16, 2020.
3Anderson, Norman B. et al. “Stress in America: Paying with our health.” American Psychological Association. February 04, 2015. Accessed June 08, 2020. https://www.apa.org/news/press/releases/stress/2014/financial-stress
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