Financial Stress? These 5 Financial Decisions Might Positively Impact Your Mental Health

Let’s not fool ourselves – there is a HUGE connection between financial stress and mental health.

Researched, written by
Updated on December 28, 2022

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Please note: This is not financial advice. These are opinions of article authors. All content on this site is information of a general nature and does not address the circumstances of any particular individual.

When discussing financial stress, or finances in the context of mental health, it is easy to jump straight to the cost of health care. The high price of healthcare is a common topic of discussion in the US, with entire political campaigns running with this at their center.

However, there is a greater connection between finances and mental health than just the cost of care. Various money problems can become a strain on a person’s mental health, and poor mental health can lead to even more money problems. This can create a vicious cycle of financial stress – one that is pretty hard to break out of.

Even though financial stress is a common (and natural) part of many peoples’ lives, there are certain financial decisions we can make which might positively impact our mental health and reduce the amount of financial stress in our life.


What Is Financial Stress?


Financial stress can be described as having distress about your financial situation, experiencing worry and anxiety due to various money-related issues and feeling unsure about your future financial prospects. Interestingly, having financial stress can even reduce your physical pain threshold.

In order to lower the amount of financial stress in your life, consider taking care of the following important decisions.


5 Ways To Lower The Amount Of Financial Stress In Your Life


1. Considering Life Insurance


You might think that talking about death would negatively impact your mental health and, in some cases, this may be true (especially if you are obsessing over existential questions). However, when viewed through a practical lens, it can actually reduce financial stress and give you a sense of control.

Preparing for what happens after you die can give you a lot of peace of mind, because it means you can help your family – even after you pass.

For those who are unsure if life insurance is worth it, consider the fact that it gives your family a cushion to land on at the worst time in their lives. It also helps to relieve some of the anxiety you might feel about their future once you’re not around anymore.


2. Writing a Will


Writing a will has an impact too. You are ensuring that everything is in place for your family if something happens to you. There won’t be any fighting over what you want to be done with your possessions or about who inherits what.

A loved one’s death often strains family relationships, as everyone tries to deal with it in their own way. You can improve your peace of mind (and lower financial stress) by giving your family the guidelines they might need.


3. Starting a “Rainy Day Account”


When it comes to saving money, a lot of people think that their retirement fund is enough. In case you are not familiar with this term, retirement fund is money that you automatically put away every month, and that is not taxed until it is withdrawn. It is invested and grows through the decades, giving you a nice amount of cash for retirement.

However, your retirement fund does not give you the peace of mind you need in case of an emergency. An unexpected expense can cost a lot of money, and a lot of unwanted financial stress.  Having some extra cash in savings can make you feel a whole lot better.

Many people experience severe anxiety because of the possibility that something will go wrong and it will be very expensive to fix it. With a savings account to which you have access, you can create a cushion for yourself.


4. Debt Consolidation


Most Americans (around 80%) had debt in 2021. In fact, if you don’t have any debt, you’re in the minority.

Debt can easily make you feel ashamed of your spending habits. You can also have a lot of anxiety and financial stress simply thinking about the impact debt has on your life.

Changing your perspective regarding debt is possible, but there are also financial decisions you can make to improve your situation.

If you’ve got some extra money (in addition to your “rainy day fund”), consider paying off the debt that is costing you the most. This will likely include private unsecured loans and credit cards. If you don’t have the extra cash, there is still a significant step you may be able to take.

You can find out from your bank if you qualify for a debt consolidation loan. Debt consolidation refers to taking out one big loan to pay off all of your other loans. It can benefit you in a number of ways. For one thing, it helps you feel more in control of your debt, knowing that you are paying off one loan rather than many. This can greatly reduce financial stress you experience.

But the biggest impact it can have on your finances is lowering your interest rates. A debt consolidation loan with relatively low interest can be used to pay off your high-interest debt. This not only improves your financial situation but also gives you the peace of mind that you’re not spending an arm and a leg on your debt.

Burning Dollar As A Symbol Of Financial Stress

5. Considering Government Help


If you need to work on your financial situation before taking care of insurance and other stuff, government aid can be helpful. It allows you to feel more financially stable until you improve your job or other earning options. The following governmental resources might be useful depending on where you live:




Financial decisions can impact our mental health. The above decisions can make a positive difference, especially in terms of your peace of mind and the amount of financial stress in your life.

Make sure to consult a professional before any financial decision to make sure it’s right for you.


We hope this guide to lowering financial stress has been useful. Scroll down for more ideas below.

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