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The Powerful Connection Between Finances & Mental Health, Part 1: External Challenges Thumbnail

The Powerful Connection Between Finances & Mental Health, Part 1: External Challenges

Miscellaneous Personal Finance

Finances and mental health are deeply connected. Your financial situation can affect your emotional well-being, and your mental health can influence the financial decisions you make every day. When one area suffers, the other often follows.

For many people, financial stress is not just about numbers on a spreadsheet. It affects sleep, relationships, productivity, confidence, and even physical health. At the same time, anxiety, depression, impulsive tendencies, or unhealthy coping mechanisms can lead to overspending, avoidance, risky financial behavior, or mounting debt.

This connection is far more common than most people realize.

According to the Mind Over Money survey by Capital One and The Decision Lab, 77% of Americans report feeling anxious about their financial situation. Financial stress impacts daily life in significant ways:

  • 43% report feeling fatigued
  • 42% struggle to concentrate at work
  • 41% have trouble sleeping
  • 25% say financial stress negatively affects their relationships

Research has even linked stock market crashes to increased suicide rates, highlighting just how serious financial stress can become.

The relationship also works in the opposite direction. Mental and emotional struggles often influence financial behavior. A Forbes Advisor survey found that 72% of respondents said they were very or somewhat likely to accumulate more debt when experiencing stress. Conditions such as bipolar disorder can also contribute to impulsive or excessive spending behaviors.

At Guide Financial Planning, we are financial professionals, not mental health professionals. As such, in this article we will focus primarily on how finances affect mental health and provide practical tools that can improve your financial life and, therefore hopefully, your emotional well-being as well.


Financial Challenges That Affect Mental Health

Financial challenges are often both external and internal. Some are practical and visible. Others are rooted in beliefs, habits, personality tendencies, or fears that developed long before adulthood. This article addresses the external challenges and next month we’ll take a look at the internal challenges. 


External Challenges

Financial Illiteracy

Many people were never taught how money works. When so much of our lives involve finances and the financial system, ignorance is not bliss. Financial illiteracy can lead to missed opportunities, poor decisions, stress, anxiety, and fear.


Debt

Debt is one of the most significant sources of financial stress. According to a Forbes Advisor study, 54% of U.S. adults with debt say they always or often feel stressed because of it. Debt can create feelings of shame, fear, hopelessness, and exhaustion. For many people, debt also creates a cycle: Stress leads to unhealthy financial behavior, which creates more debt, which creates even more stress.


Financial Instability

Uncertainty and instability can have negative effects on mental health. Financial instability comes in many forms:

  • Insufficient income
  • Irregular income
  • Unexpected expenses
  • Lack of savings


Spousal Disagreements About Money

Financial stress frequently impacts relationships and marriages. Forbes Advisor found that:

  • 60% of Americans say financial stress has led to disagreements in their relationships
  • 55% say it caused them to lose trust with loved ones
  • 55% report increased tension with loved ones

Being financially aligned with your spouse is priceless. When couples are not on the same page financially, even small decisions can become emotionally charged.


Lack of Preparation for the Future

Many people worry about the future. A separate Forbes Advisor study found that 75% of consumers say they are very or somewhat stressed about being prepared for a financial emergency. The Mind Over Money survey also found:

  • 68% worry about not having enough money for retirement
  • 56% worry about keeping up with the cost of living
  • 45% worry about managing debt levels

This is one of the major reasons people reach out to a financial advisor. They want clarity, direction, and confidence regarding the future.


Solutions to External Challenges

These external challenges are reality for many people and can sometimes feel overwhelming. However, there is a lot that you can do to combat them. 

Create a Functional Budget

According to Forbes Advisor, 42% of people in debt identified difficulties in tracking and controlling their spending as a primary reason for their debt burden. If you don’t track your spending, it makes it hard to prepare for the future and get on the same page with your spouse as well. This article will walk you through our Guide Financial Planning method for setting up a low-maintenance budgeting system that actually works. 


Manage and Eliminate Debt

Debt reduction can significantly reduce emotional stress. There are two popular ways of approaching debt payoff, the snowball and the avalanche, which are explained here. While there are multiple ways to attack debt, the best strategy is often the one you will consistently stick with.


Automate Bills and Savings

Automation reduces mental load. When bills, savings, and investments happen automatically, that becomes one less thing to think about. It also helps you prepare for the future passively and consistently. Having good systems reduces stress because they remove the need for constant decision-making.


Develop Financial Literacy

A lot of people say that they’re bad with money. For most, they’re not actually bad with money; they’re just uneducated. Financial literacy brings a sense of empowerment, control, confidence, and hope. When people understand money, they often feel less fearful and more capable. Learning about budgeting, debt, investing, retirement planning, and behavioral finance can completely change the way you experience money.


Build Social Support and Accountability

We are heavily influenced by the people and culture around us. According to Forbes Advisor, 48% of respondents attributed their debt to the influence of advertising and consumerism. While that may harm your finances, you can harness the same principle to help your finances. 

Find someone who will hold you accountable for achieving your goals and maintaining healthy practices. Find someone that will talk through financial decisions with you and encourage you. This can be a spouse, family member, friend, pastor, or financial planner. One of the best things you can do for your finances may even be just surrounding yourself with people who model healthy financial habits.


Focus on What You Can Control

There’s a lot in life that you can’t control. Focusing on it will only leave you stressed out and feeling powerless. When you focus on the things you can control, then you will feel empowered and like you’re making progress. This principle can be incredibly powerful for stress reduction.

First Peter 5:7 says, “Cast all your anxiety on him because he cares for you.” Some things outside of your control that you need to trust God with are:

  • The economy
  • Inflation
  • Interest rates
  • The stock market
  • Job market conditions

Leave those things in God’s hands, and take up these things in your hands:

  • Your spending habits
  • Your savings rate
  • Your debt payoff plan
  • Your communication with your spouse
  • Your preparation for the future


Get on the Same Page With Your Spouse

Healthy communication in marriage is invaluable. Open communication, shared goals, and counseling, when necessary, can dramatically reduce financial tension. Many couples are not actually fighting about money itself. They are fighting about fear, security, priorities, expectations, or feeling misunderstood.


Work With a Professional

Sometimes you need outside help. Financial planners, financial coaches, and financial therapists can provide that help. Coaches and therapists focus on financial behaviors while financial planners focus more on the technical side of finance. Financial planning helps you know where you are and how to get where you want to go. 

Simply knowing your true financial picture can be incredibly empowering. Some of our comprehensive financial plan clients get excited by only the first page—the net worth statement.

Merely having your whole financial picture organized clearly in one place can be powerful, and that’s before we’ve even given any advice or recommendations!

To learn more about financial planning, schedule a free introductory call with one of our Guide Financial Planning team members here. 


About Guide Financial Planning

Guide Financial Planning is led by founder Ben Wacek, who is a Christian fee-only Certified Financial Planner® and Certified Kingdom Advisor®. He has a passion for helping people of all income levels make wise financial decisions and steward their resources from an eternal perspective using Biblical principles. Based in Minneapolis, MN, he works with clients both locally and virtually throughout the country and abroad. You can follow the links to learn more about Guide Financial Planning and our team and the services we offer.