Take control of your finances: how to stop worrying about money

Financial stress is a pervasive aspect of modern life, with its impact extending beyond simple economic implications. At its core, financial stress involves the strain and anxiety experienced when individuals grapple with challenges related to their financial wellbeing and financial situation.

While various factors contribute to financial stress, a notable facet centres around investment-related anxieties. The psychological toll of money worries, particularly in the context of investments, can influence our decision-making processes and overall mental health.

Understanding financial stress

Financial stress is not confined to a specific income bracket or financial status; it affects individuals across various socioeconomic backgrounds. It can arise from a range of factors, including unemployment, student loan debt, credit card debt, spending habits, and the constant pressure of meeting financial obligations.

In addition, investment-related anxieties add a layer of complexity to this stress, as individuals navigate the dynamic and sometimes unpredictable world of financial markets. Investing can be intimidating, but it’s the ticket to building real wealth and making your money work for you long-term.

Understanding the root causes of financial stress is crucial for managing it effectively. Common triggers include:

• • • Losing a job or facing redundancy can be a significant source of financial worries
    • Being unemployed or struggling to find sufficient work contributes to ongoing financial concerns
    • The inability to pay off debts creates a persistent sense of financial insecurity
    • Worrying about future financial difficulties adds to the stress load

Not sure if you’re ready to start investing, use our decision tree to help start you in the right direction.

Symptoms of financial stress

Recognising these factors is the first step towards addressing financial stress and working towards a healthier financial future. Although any type of stress can, cause poor mental health, stress related to financial issues, like those listed above, can be especially toxic — and often ignored. 

The connection between mental and financial health is often cyclical. Studies from the Clinical Psychology Review show that individuals in debt are more likely to experience mental health issues such as depression and anxiety*.

Financial stress can lead to unhealthy coping mechanisms, ranging from overeating to substance abuse. A survey by the American Psychological Association found that 33% of Americans reported turning to unhealthy eating habits to cope with stress**.

It’s important to remember that financial stress can trigger a chain reaction, impacting mental wellbeing, which, in turn, further deteriorates financial health.

Investment specific anxieties

Investment decisions inherently carry a level of risk and uncertainty, contributing to the anxiety surrounding  personal finance. The fear of losing money, making poor investment choices, or missing out on potential gains can intensify financial stress. Common investment-related anxieties include:

• • • Market volatility: Fluctuations in the financial markets are inevitable, and while they present opportunities, they also generate anxiety. The fear of market downturns or sudden shifts can lead to apprehension about the safety of investments.
    • Fear of loss: The prospect of losing hard-earned money in the market is a significant source of stress. Investors may grapple with the fear of making incorrect decisions that result in financial setbacks.
    • Information overload: The abundance of financial information available can be overwhelming. Investors may experience stress in sifting through data, interpreting market trends, and making sense of conflicting advice.
    • Long-term goals: Planning for long-term financial goals, such as retirement or education expenses, introduces a sense of responsibility and concern. The fear of falling short in achieving these objectives can contribute to financial stress.

It’s important to remember the you should never be investing any money that you can’t afford to lose. You should first have an emergency fund and savings should you fall on hard times and need easy access to funds. 

The psychological impact of, money stress particularly in the realm of investments, is multifaceted and can impact those who are new to investing in a more profound way:

• • • Decision paralysis: Excessive worry about investments can lead to decision paralysis. Fearing making the wrong choice, individuals may delay or avoid investment decisions altogether, potentially missing out on opportunities for growth. Learn more about how to confront your investment fears. 
    • Cognitive biases: Financial stress can exacerbate cognitive biases, such as loss aversion and recency bias. These biases may cloud rational judgment, leading to impulsive decisions driven by emotional reactions rather than strategic planning. We all have biases and these four could be affecting your money decisions. 
    • Strained relationships: Financial stress can strain relationships, both personal and professional. Differences in risk tolerance and financial priorities may lead to conflicts, adding interpersonal stress to the existing financial burden. This can be avoided by learning about to discuss and manage money as a couple. 

Strategies for managing investment-related stress

To mitigate the psychological impact of financial stress related to investments and avoid mental health problems, individuals can employ various coping strategies:

• • • Enhancing financial literacy can empower individuals to make informed investment decisions, reducing uncertainty and anxiety. Those looking to learn more about investing may consider our free Demystifying Investments course.
    • Spreading investments across different asset classes can help manage risk, providing a more stable foundation for financial portfolios. Diversification in any portfolio is important, but remember that it is possible to over-diversify as well. 
    • Seeking advice from financial professionals can offer valuable insights and alleviate the burden of navigating complex investment landscapes alone. Website like unbiased.com can help find the right financial expert for you. 
    • Incorporating mindfulness practices and stress-management techniques can foster a healthier mindset, enabling individuals to approach financial decisions with greater clarity and resilience.

Building a strong financial foundation

Having a solid financial plan isn’t just advisable — it’s essential. A well-structured financial plan serves as a roadmap, it serves as a guiding framework that aligns financial decisions with overarching life goals, be it buying a home, funding education, or planning for retirement.

Life is unpredictable, and financial plans act as a buffer against unforeseen circumstances. Whether facing economic downturns, market fluctuations, or personal emergencies, a well-thought-out financial plan provides a structured approach to navigate challenges while minimising financial setbacks.

As mentioned above, diversification is a great strategy to mange stress in your investments. By not putting all your eggs in one basket, investors can mitigate the impact of poor performance in any single investment, fostering a more stable and resilient portfolio. It can also aid in long-term growth by capturing opportunities in different sectors. This not only reduces the risk of significant losses but also positions the portfolio to benefit from growth areas in the market. Beginner investors may consider a multi-asset fund to help ensure diversification in their portfolio. 

A solid financial plan, coupled with diversification and realistic goal-setting, all helps investors build a strong financial foundation and can help aid in reducing stress and build a foundation for a secure and prosperous future.

Balancing life and investment

Maintaining a healthy balance between investment activities and personal life is crucial for overall wellbeing and sustained success. While financial pursuits are essential for securing one’s future, an excessive focus on investments can inadvertently lead to stress, strained relationships, and a diminished quality of life.

While staying up to date on your finances – and investments – is important, it’s also important to make sure it doesn’t take control of your life. Constant preoccupation with investment activities can induce stress and anxiety. Striking a balance allows you to step back, assess your financial decisions with a clear mind, and avoid the detrimental effects of chronic stress on both your mental and physical health.

The pursuit of financial success can be demanding, leading to burnout if not managed effectively. Balancing investment activities with leisure and relaxation helps prevent exhaustion, ensuring individuals can sustain their efforts over the long term.

One way to think about this is: why am I investing? 

Chances are you want a better quality of life, be it investing for your first home, retirement or even to give your kids a better start at life. But it’s important to step back and think about where you are now. It might not be exactly where you want in 10, 20, 30 years but finding a balanced approach to your life is essential. Ultimately, neglecting your mental and psychical health in pursuit of financial success is counterproductive.

Here are three ways you can balance your financial pursuits and your own wellbeing:

1. Set clear boundaries between work, investments, and personal time. Designate specific periods for focused investment activities and equally commit to personal downtime.
2. Recognise the importance of self-care and make it a non-negotiable part of your routine. This includes both physical and mental well-being, ensuring you remain healthy and resilient.
3. Periodically assess the balance between investment activities and personal life. Adjust priorities as needed, considering changing circumstances and evolving life goals.

Wrapping it up

In summary, navigating financial wellbeing requires addressing the pervasive issue of financial stress and the complexities of investment-related anxieties. Rooted in factors like unemployment and mounting debts, financial stress, particularly concerning investments, can detrimentally impact mental health and our decision-making processes.

A solid financial plan, incorporating diversification, serves as a vital foundation, acting as a buffer against unforeseen circumstances while fostering stability and growth. However, achieving a balance between investment activities and personal life is equally crucial.

Ultimately, financial success extends beyond simple monetary gains. By proactively managing financial stress, implementing sound investment strategies, and embracing a balanced lifestyle, individuals can forge a path towards a stress free relationship with their finances.

*Source: Clinical Psychology Review, The relationship between personal unsecured debt and mental and physical health: A systematic review and meta-analysis, December 2013

**Source: American Psychological Association, Paying with our health, February 2015