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Why Does Money Cause Anxiety? 5 Finance Habits to Transform Your Peace of Mind

No matter your financial situation, money and mental health are closely connected. Experts explain why this link is so strong and ways you can spend better, stress-free.

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Money and your mental health

Money is the top source of stress among Americans, according to the American Psychological Association’s latest “Stress in America” report. And this pressure is taking a toll on our collective mental health. Another poll conducted in July revealed that almost 90% of us are experiencing anxiety over our finances and the ever-rising cost of living.

Money can hold such power over mental health because it plays a big role in how we navigate our place in today’s world. Our financial perceptions and experiences closely overlap with our sense of self-worth, confidence, and personal power, explains Jonathan D. Friedman, PsyD, Clinical Psychologist with Baker Street Behavioral Health. That’s why “financial anxiety is a mix of material and psychological concerns,” he says, which can be based on both concrete and perceived realities. This means that freaking out about money may stem from a range and combination of situations, from the actual lack of funds to pay bills to social pressures and obligations.

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Why does money cause anxiety?

Your life experiences with money have a big effect on your current relationship with it, explains Aja Evans, LHMC, a counselor who specializes in financial therapy. At a base level, if you grew up in a financially insecure environment, many people will bring this anxiety-ridden scarcity mentality with them into adulthood—spending money feels wrong or dangerous, even if it doesn’t necessarily reflect their current reality. But other messages stick with us, too.

Maybe money was ignored or never discussed in your family, so dealing with finances as an adult makes you feel overwhelmed. Studies show that this type of anxiety often snowballs into to avoidance behaviors, like neglecting your finances. Whether that means you avoid checking bank statements, delay saving (or learning about money-saving methods), or don’t form a budget, “[this] can easily lead to a cycle of overspending and always trying to catch up with financial responsibilities,” says Jason Hunziker, MD, a psychiatrist at Huntsman Mental Health Institute.

Or, if you grew up experiencing money as a way to deal with problems or your feelings, that can help explain your attitude toward “retail therapy” impulse buys today, Evans says. Similarly, society props up wealthier people as being smarter or happier, she says—cues we’re exposed to from a young age that are difficult to unlearn, even if we know better. And social media makes these messages stronger than ever. According to a survey from Allianz Insurance, 57% of people spend money they hadn’t planned to because of what they see on social media.

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Why do I keep overspending?

“Our emotions or moods govern a lot of our actions,” Evans says. Often, she says, overspending and impulse-buying are coping mechanisms to deal with uncomfortable feelings. And research confirms that we’re more likely to spend money when we’re stressed out.

A major part of this tendency is that it works, in a sense. Spending money is a form of instant gratification, triggering a rush of dopamine through the body. But when this feel-good hormone wears off, we’re left back at where we started—and potentially with some added guilt or stress about that spending. That’s why overspending can be a vicious cycle.

“Looking for a quick fix to a problem, a temporary solution is extremely appealing when you just want to feel better,” Evans says. “At some point, the overspending and impulse buying becomes the go-to problem solver”—whether the problem you face is boredom, a bad day at work, or something deeper.

Plus, advertisers and marketers know this human tendency inside and out—and they’re good at using it to their advantage. “Our email inbox, home mailbox, ads on television, and social media are full of advertisements telling us that our life is incomplete unless we have the item that they are trying to sell,” Dr. Hunziker adds. “Because this information is present in all aspects of our lives, it makes it easier for us to impulsively make purchases, even when it falls outside of our financial budget.”

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How to build better money habits

Tap into your feelings

Before heading into a store or opening a shopping app, take a pause, Evans urges. “What are you feeling? Are you upset, hungry, angry, lonely, tired? Recognizing that you are trying to deal with discomfort through spending helps you to shift the behavior.”

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Find other ways to get that feel-good hit

It will be hard to break an impulse-buying habit at first. But Evans recommends that once you realize that you’re shopping to mask a bad mood or emotion, be deliberate about getting gratification from another source. “Talking to a friend, taking a class, exercising, journaling, cleaning your home—literally anything that will take you out of the desire to shop,” she says. “You won’t get it right every time, but slowly you will begin to learn that you can shift your mood without spending money, and your brain will adjust to getting that rush from something other than spending.”

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Allow permission to treat yourself

Just like with fad diets, totally depriving yourself isn’t sustainable—and trying to justify every single dollar you spend can create more anxiety. That’s why as you work on your spending habits, leave some room in there for the occasional indulgence. Just make sure that you’re spending with intention and in a way that aligns with your values.

For example, ask yourself: will spending this money save you time, make your job easier, bring you relaxation or genuine connection with a friend? “You can make it a personal rule to never purchase anything impulsively,” Dr. Hunziker offers. “Wait a least one night to ‘sleep on it’ before making a purchase.”

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Reframe your shame

Whether it’s the vacation you’ve always wanted, a new laptop for work, or a morning latte, if intentionally spending money still brings you feelings like shame and guilt, try this science-approved trick. Researchers found that shame around spending money creates a self-reinforcing cycle of financial anxiety. But their review of studies, published in Organizational Behavior and Human Decision Processes, found that you can counter this feeling by “reaffirming valued aspects” of yourself, like your kindness or your hard work.

Over time, this process retrains your brain not to associate all spending with shame—but removing this barrier doesn’t mean you’ll just start spending frivolously. The study shows that taking shame out of the equation eases money anxiety while reducing poor or counterproductive financial decisions.

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Understand your finances

Avoidance behaviors work to keep you stuck in a cycle of money anxiety—so the experts say it’s important to take an honest look at your finances and spending habits for lasting peace of mind. “Start learning about the different aspects about money you don’t understand,” Evans says. Tackling your avoidance behaviors head-on is an important part of stopping the financial anxiety cycle. But “building comfort in navigating your money gives you a sense of control that reduces stress,” too, so you’re more resilient if something unexpected happens financially.

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Sources

People

Jonathan D. Friedman, PsyD, Clinical Psychologist with Baker Street Behavioral Health

Aja Evans, LHMC, a counselor who specializes in financial therapy

Jason Hunziker, MD, a psychiatrist at Huntsman Mental Health Institute

Websites:

American Psychological Association: Stress in America 2022

American Psychiatric Association: "Americans Anxious Over Inflation; Almost Twice More Likely to Lean on Family and Friends Than Speak Openly About Feelings After a Traumatic Event

Allianz: "2018 Allianz Generations Ahead Study"

Journals:

Journal of Anxiety Disorders: "Rethinking avoidance: Toward a balanced approach to avoidance in treating anxiety disorders"

Journal of Marketing Research: "The Effect of Stress on Consumer Saving and Spending"

Organizational Behavior and Human Decision Processes: "Financial shame spirals: How shame intensifies financial hardship"

Leslie Finlay, MPA
In addition to The Healthy, Leslie has written for outlets such as WebMd.com, Fodors.com, LiveFit.com, and more, specializing in content related to healthcare, nutrition, mental health and wellness, and environmental conservation and sustainability. She holds a master's degree in Public Policy focused on the intersection between public health and environmental conservation, and an undergraduate degree in journalism. Leslie is based in Thailand, where she is a marine conservation and scuba diving instructor. In her spare time you'll find her up in the air on the flying trapeze or underwater, diving coral reefs.