Defining financial stress as the unpleasant feeling that one is unable to meet financial demands, afford the necessities of life, and have sufficient funds to make ends meet. The feeling normally includes the emotions of dread, anxiety, and fear, but may also include anger and frustration. Economic hardship may be due to such things as the loss of a job, unexpected medical or legal expenses, chronic overspending, investment losses, or gambling. The economic hardship may be acute or chronic, anticipated or unanticipated, and it may be attributable to uncontrollable forces (such as the economy) or controllable forces (e.g., poor personal financial management).
When looking at one’s financial situation is of less interest to psychologists than is one's perception of the financial situation because it is this perception that produces the financial stress, which in turn is implicated in a host of individual, familial, and social consequences. If one fails to realize the dire predicament of one’s financial situation, then one will not feel financial stress.
One of the most consistent findings in the literature is that financial stress is associated with a higher incidence of mental and physical health problems. This point comes first from observational studies conducted in the 1930s (Jahoda,1979), second from analysis of annual population data (e.g., Brenner, 1973), and third from surveys of individuals going through financial stress (e.g., Price, Choi,& Vinokur, 2002). Brenner (1973), for instance, analyzed data collected annually by the State of New York between 1914 and 1967 and found a strong and consistent correlation between economic indicators (e.g., manufacturing employment index) and admissions (voluntary and involuntary) to state psychiatric institutions, particularly for men. As the economy worsened, admissions increased. Brenner also reported that as the economy soured, incidence of suicide and alcoholism also increased significantly. Based on US government data, Brenner demonstrated that as the rate of unemployment increases, cigarette consumption
increases, as does the proportion of people living alone. As the rate of business failures increase, so too does alcohol consumption. Findings that financial strain is associated with poorer physical health and with mortality have been reported in the United Kingdom. Fox and Chancey (1998) analyzed the responses of 366 randomly selected adults from urban southeastern US and found that financial stress was correlated negatively with perception of one’s health, self-esteem, marriage satisfaction, and family functioning. They also found that as financial stress increased, couples were more likely to fight, and were more likely to break up. Also, people who had a greater degree of financial hardship were more likely to report headaches, stomach aches, or insomnia daily or at least a few times a week.
Innumerable studies show that financial stress increases levels of both depression and anxiety, and decreases quality of life in men and women. In addition to the effects that financial stress have on mental and physical health, financial stress also has an adverse effect on marital relationships. Several studies indicate that as financial stress increases, couples argue more – particularly over money. Financial pressures increase, couples become preoccupied with financial issues, and their perceived lack of control over the situation often leads to frustration, anger, and general demoralization. As individuals become more depressed, they withdraw more from their spouse, offering less emotional support and spend more time arguing and blaming each other. As financial stress increased, couples were more likely to fight and more likely to break up.
Once depression sets in, several other things begin to happen. First, people who are depressed become pessimistic about their future, come to see themselves as failures, stop taking care of themselves, and become irritable with, if not hostiletoward, others. Depressed people are not fun to be around, and therefore it is not surprising that under such conditions, alcohol and drug use increases (Peirce et al., 1994), and family discord emerges (Conger et al., 2000). Satisfaction with the marriage suffers and many relationships end (Fox & Chancey, 1998). Children who would otherwise receive warmth, encouragement, and compassion from their parents now receive distracted attention, criticism, and punitive and inconsistent discipline (Mistry et al., 2002). These changes in parenting lead to changes in children's behaviour at school in terms of a drop in academic performance and increases in disruptive and antisocial behaviour (Flanagan & Eccles, 1993). Children of depressed parents are at increased risk of developing depression themselves, and are also at increased risk of developing alcohol and drug dependencies (Conger et al., 2000). Soon, financial stress cascades into a series of stressors that overwhelm one's ability to cope.
With headlines declaring that the economy is getting worse each day, it can be hard not to get stressed out about how this will affect your personal finances. Fortunately, there are strategies you can utilize to quickly help manage anxiety during this economic crisis. Here are five simple methods:
1. Do a reality check by making a budget . This is the number one thing you can do to decrease financial anxiety. By making a budget, you will become aware of where you are spending money, how much you owe, and where you may need to cut back. Not knowing where your money is going can cause you a great deal of unnecessary stress, so get organized and create a budget.
2. Don’t stress about what you can’t control. Just as you can’t control if the weather is going to be bad tomorrow, you can’t control whether the $700 billion bailout package is going to improve the economy. What you can control, however, is your own finances, which will help improve your self-efficacy and reduce stress. So stop thinking about things you can’t control and focus on the things you can.
3. Start being more careful with credit cards. Simply because you have credit available doesn’t mean you should be using it, so start trying to pay with cash more often than credit cards. This will help you feel more in control of your finances and save you the stress of receiving a large bill at the end of the month that you may not be able to pay in full.
4. Get some exercise. Research has shown time and time again that exercise is one of the best ways to reduce anxiety and stress. In fact, exercise has been shown to be just as effective as therapy and medication when it comes to improving some symptoms of depression. You don’t have to exercise for long period of time or even have an intense workout. Consistency is the key, so aim for exercising for 20-30 minutes 3-4 times a week doing your favorite kind of physical activity.
5. Focus on what’s most important in life. Make a conscious effort to start spending more time doing things you really enjoy. This doesn’t have to be anything major but rather, spending time doing simple things that make you happy such as hanging out with family and friends, finally starting that hobby or project you have been putting off, or even doing some volunteer work to help other people.
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