7 Ways Stress Is Affecting Your Finances

7 Ways Stress Is Affecting Your Finances

Over 70% of Americans report regularly experiencing physical or psychological symptoms caused by stress according to The American Institute of Stress (AIS).

Close to half of the respondents answered that stress harms their day-to-day life, which doesn’t include the rest who might not realize how much stress is contributing to their life problems.

Chronic stress has real measurable effects, and apart from its health implications, it is also taking a toll on our finances. Here’s how.

Makes You Splurge Unnecessary

Emotional spending is a form of self-prescribed “therapy” that people under stress turn to as a temporary escape from their stressor. The problem is that unlike real therapy, buying stuff under the emotional influence is neither effective nor efficient.

While treating yourself for a job well done is a smart way of keeping yourself motivated, emotional spending is nothing like a self-reward. First, its effect is temporal and second—it is addictive. Before you know it, your monthly budget has reached the red zone, and you are tapping into your life savings. Here are some tips on how to control stress-induced spending.

Raises Your Health Expenses

Chronic stress is making you mentally miserable but also comes with physical side-effects. Give it enough time and living in a constant state of stress leads to lifestyle habits that can result in developing heart disease, cancer, and diabetes—the leading causes of premature death among Americans.

All of these illnesses are potentially deadly, but before that, they bring along suffering and high medical bills. The CDC reports that “90% of the nations $3.3 trillion In annual health care expenditures are for people with chronic and mental health conditions.” This comes to close to $10 000 a year. Find more about chronic Disease in the US here [PDF].

Increases Your Premiums

It shouldn’t come as a surprise, but people who live under chronic stress tend to get into more accidents which makes Them a high-risk in the eyes of insurance companies. According To The Safety and Health Magazine, “job stress may lead to a loss of focus, a common cause of workplace incidents.” Being stressed also has an impact on your driving behavior leading to more aggressive driving and higher chances of getting into an accident.

The aforementioned stress-related conditions, like heart problems and diabetes, also affect life insurance premiums and even the chance of getting insured. For example, it is more expensive and harder to get life insurance after a heart attack than according to American Term—insurance consultancy agency specializing in high-risk insurance.

Clouds Your Judgement

Esteemed publications—from Harvard Business Review (HBR) to the Association for Psychological Science (APS), warn that stress affects people’s judgment. HBR reports that because our brains are wired to think in “binary” mode when under stress “in tough moments, we reach for premature conclusions rather than opening ourselves to more and better options.” These “tough moments” include money-related decisions.

Research by MIT neuroscientists also confirms that “stress can lead to risky decisions.” The study was done with mice but what the scientists found was that when put under chronic stress mice tended to favor high-reward options despite coming with high-costs. This is consistent with another study published in the APS which found that under chronic stress people tend to focus more on positive outcomes, i.e., they look at the good and neglect the bad.

Makes You Unproductive

The notion that people do better work when stressed is outdated and untrue. Studies have proven That employees placed under high levels of stress are more disengaged from their job, less productive and miss more workdays. In other words, working under stress makes it more likely that you’ll exhibit behaviors that will get you fired. Few things are worse for somebody’s budget than being left without a job.

Ironically, the stress that can cost you your job is often caused by your job. A survey by the AIS says that a quarter of the respondents identified their jobs as the leading stressor in their lives. Ten percent even said that they work in a place where physical violence has occurred because of job stress. These worrying statistics are showing how much negative impact stress has on productivity and on the stability of jobs which are the primary source of income for the majority of people.

Ruins Your Personal Life

Stress from one area of your life can easily transfer elsewhere. Just like your job-related problems can take a toll on your personal life the opposite can happen. In either case, having strained relations with your partner comes with a heavy emotional load further contributing to you feeling down.

But that’s not all, while the psychological cost of poor personal relationships is unmeasurable, divorces do come with a financial tag. A divorce proceeding costs on average $15 000–$30 000. After that comes alimony and child support (avg.: $5150/year). Click here for advice from the Gottman Institute on how to rescue your relationship from stress.

Turns Into a Vicious Cycle

Stress feeds on stress. When you are living with chronic stress, every part of your life suffers which brings even more grief. Emotional spending spirals out of control, which causes you to stress to the point where you end up with ruined health which in turn renders you unable to be productive at work. Then even more stress comes along.

At one point all this stress and anxiety can turn into a full-blown depression—a condition that for decades was considered superficial. But depression is real and affects millions of people in the US alone. Fortunately, it is becoming the norm to talk about depression and to openly seek treatment. The alternative, keeping it bottled up or waiting for it to pass, only makes things worse, having tangible effects on your health and wallet.

Stress is all around us and at times might seem like there’s no escaping it. It feels this way because it’s true—we can’t escape stress because it lives within us. It is nothing more than our way of reacting to situations that are making us uncomfortable. What we can do, however, is make use of the many tools available at our disposal for managing stress and not letting it take over our lives and pockets. Mediation, making healthier choices, and seeking professional help are all investments in ourselves that come with a quick pay-off.

 

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