How Does Money Affect Mental Health?

While having financial stability provides wellbeing and peace of mind, financial problems can affect mental health, contributing to the onset of mental health disorders. Find out more in this article.
How Does Money Affect Mental Health?

Last update: 01 October, 2021

To say that money buys happiness may sound like a superficial phrase. However, the truth is that, in one way or another, money can affect mental health. Having money can provide comfort and peace of mind knowing that you have the ability to respond to any emergency that arises.

When you don’t have money, the effects are different. If you can’t meet your basic needs, then frustration and worry about this can arise. There are other situations having to do with money that also influence mental health.

Unexpected expenses, the cost of medical treatments, inability to have savings for retirement, among others, are just a few examples.

Why should we pay attention to this issue? What can we do to manage it?

We’ll tell you what you need to know.

How does money affect mental health?

A man using a calculator.
Lack of money to meet basic needs can lead to mental health problems.

A report from the American Psychological Association found how money affects mental health, analyzing the chronic stress that financial challenges produce.

The study detailed that those most affected are younger generations, families with children, and people with low incomes–especially youth and women.

In addition, the report emphasized that the anxiety that monetary issue issues produce can lead the person to other high-risk behaviors. These behaviors could be the abuse of alcohol, drugs, sedentary behaviors, or excesses with food.

So, there’s a relationship between financial challenges and mental health problems. Thus, having financial difficulties can affect mental health, leading to stress, anxiety, alcoholism, or depression. If young people have the need to drop out of school, then the situation can worsen.

Financial problems don’t only affect individuals. Rather, research has also shown that a country’s economic crises can have an impact on the mental health of the population.

How to handle this situation?

To lessen the impact of money on mental health, you can follow the recommendations we’ll suggest below:

  • Don’t downplay the importance of the issue: In the same way, don’t put off addressing the problem. Later, it may become worse. Therefore, you should take action as soon as possible.
  • Seek support from an expert in financial matters. A financial advisor can indicate the precise steps to take in each particular situation.
  • Stop ignoring bills: Especially those for basic services such as water, gas, or electricity. A useful recommendation is to contact the companies that provide the service and request information on options for customers who can’t pay in full at the time.
  • Suspend large purchases or those involving major expenses. Or, listen to the financial advisor’s recommendations in order to determine the best way to assume these expenses, at the appropriate time.
  • Financial planning can help give you clarity regarding priority expenses.
  • Avoid using money to improve mood: If there’s an underlying problem at an emotional level, it’s best to seek psychological support and treat the underlying problem to avoid making impulsive and unnecessary purchases.

If the situation’s really difficult, you should seek medical support to alleviate the symptoms and learn how to manage stress.

Final considerations

A young girl putting money in a piggy bank while sitting on her mom's lap.
Learning to plan expenses and be more orderly in financial matters can help avoid the mental problems associated with a bad financial moment.

Today, there are also more accessible options, such as apps and free online resources for budgeting at home, prioritizing expenses, and setting savings goals.

Some people follow the 50-30-20 rule. That is, they allocate 50% of the funds for fixed expenses, 30% for miscellaneous expenses, and 20% is reserved for savings.

By following a few tips for saving each month, it’s possible to have a considerable amount of money at the end of the year. The role of the family in saving is also important. That’s because, with a good financial education, it’s possible to protect everyone’s future.

Similarly, you need to analyze the habits that a person may have, as these could have a negative impact on the good economy. It’s important to analyze the way in which we relate to money and the beliefs we have about money, and the use we should make of it.

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