For most of us, financial strain persists; however, unless addressed, it can lead to other mental and physical health-related problems. Establishing a healthy relationship with money and understanding personal finance as a young adult helps avoid financial stress and improves overall well-being.
It is not about a specific high-paying wage or owning some expensive item. It’s about controlling your daily finances, having protections to ensure financial security, and working toward and enjoying those larger financial goals.
If you are a recent college graduate or just starting in your career, here’s what you should know about how money is impacting your mental health and some strategies you can implement to help achieve financial well-being.
What is Financial Stress
Financial stress is a feeling of tension and anxiety over money. It may take the form of daily stuff, not having enough money to get through the day, such as buying necessities or, more generally, a feeling that you don’t have control over debt, or even to achieve individual goals, for example, buying a house or affording a car due to shortages in funds.
For young adults early in their careers, financial stress can often be overwhelming, particularly during major financial responsibilities that could be the first the individual has faced.
Effects of Financial Stress on Your Health
- Anxiety and depression: Continued worrying about money can lead to increased feelings of anxiety and depression, which in turn affect the general mental well-being.
- Sleep disturbance and insomnia: The American Academy of Sleep Medicine cites a study that discovered 87% of people worry about losing sleep over finances.
- Physical health problems: Chronic long-term stress can turn into physical health problems such as headaches, digestive problems, and a weakened immune system.
- Poor productivity and performance at the workplace: Financial stress may make one less productive and focused, affecting one’s performance at work as well.
- Withdrawal from social life: People experiencing financial stress may find it difficult to seek assistance from their friends or acquaintances due to a lack of funds or shame in the matter.
- Self-esteem effect: Since money is very much related to worth and value, financial pressure may lead some people to believe that they are a failure, causing low self-confidence.
Methods of Coping with Financial Stress
Here’s a step-by-step plan for managing financial stress and healing your relationship with money:
#1. Know Your Money Habits
Before you get into budgeting or setting savings goals, you want to do a deep dive into your finances to see where you stand. There are five steps to getting the figures you need, and you will get the answers from within by asking yourself these questions and then going through your bills and banking and credit card statements:
- What is your take-home pay?
- What’s the minimum you need to pay in order to keep a roof over your head?
- How much do you need to live comfortably?
- How much do you need in savings?
- How much do you spend on debt and interest?
What is my take-home pay each month? How much are my fixed monthly bills? To include rent, car payments, student loans, insurance, gym, subscriptions, etc. How much money “left” am I after paying my bills? This exercise can be very enlightening if you have never stopped to look at exactly where your money is going.
#2. Establish a Monthly Budget
Now that you have your numbers, you can start working on your real budget. If, at the end of this step, you are short of a sufficient leftover cushion to live on, then you will need to revisit your bills and start cutting back or looking for ways to increase your income.
#3. Build and Maintain Your Emergency Fun
Start by automating a set deposit amount into a separate account with each paycheck. Contribute what you can, adjusting as needed based on the budget you created and your income over time. Even though it may take some time to fully fund your emergency savings, knowing you have a few hundred dollars set aside in the meantime to cover an unexpected expense—rather than having to go into borrowing mode—is empowering and gives some peace of mind.
#4. Find Extra Sources of Income
The majority of people work a regular job and increase their income over time as they gain experience. However, if you also find ways to introduce various streams of extra income, you might be able to fast-track your financial goals and sometimes create space in the budget.
#5. Using Education for Empowerment
People generally worry more over things they do not understand or that are vague to them, and this can most definitely be the case when it has to do with finance. Once you know, you will exorcise demons that once seemed so complex, and you will not feel as threatened.
The Bottom Line
Good financial health is a vital part of overall mental well-being. Being proactive about changing your financial situation helps you be in charge of your money and get the best use from it, rather than the other way around—you working to pay the bills. This can decrease stress regarding finances and build a better financial mindset.