The psychology of financial anxiety — and how to overcome it

Financial anxiety — that is, worry, rumination, or guilt regarding money — is extremely common. If your anxiety is severe enough to harm your work, relationships, or financial responsibilities, it’s probably time to talk with your primary care physician or a therapist. But even mild levels of financial worry can negatively impact your mental and physical well-being; anxiety affects your concentration, decision making, sleep, hormones, and immune system. 

What’s more, excess anxiety reduces your ability to focus and get your finances on track. Lindsay Bryan-Podvin, a licensed social worker and financial therapist, explains this irony:

“Anxiety can lead to perfectionism and procrastination,” she says. “Anxious people often freeze. They feel overwhelmed and struggle to get started.”

So, how can you spot whether you are experiencing financial anxiety? Set aside a few minutes to reflect on your feelings about money and how it affects your life. 

Consider physical and emotional signs, such as whether concerns about money have ever led to:

• trouble concentrating or sleeping;
• feeling guilty or overwhelmed;
• sweating or racing heart; or
• fatigue or psychosomatic pain like tension headaches, muscle tightness, or upset stomach.

Also consider behavioral signs like:

• avoiding the topic of money; 
• overspending, obsessing about spending, and short-sighted or risk-averse spending (like taking some guaranteed money immediately versus more money later);
• risky behavior like gambling or excessive alcohol consumption; or
• social problems, like conflict in relationships or isolating yourself.

If you notice that you experience any of these signs of financial anxiety, then congratulations: By identifying your financial anxiety, you have taken the first step to addressing it.

What triggers financial anxiety?

As you might expect, when people don’t have enough money to afford necessities and pay debts, they are likely to experience financial anxiety. But people can have a negative relationship with money even without experiencing real money scarcity. 

Social expectations create financial anxiety, for example. Your family and close relationships can transmit fears, behaviors, and patterns of thinking, often without you even realizing it. If, for example, you saw your mother get extremely worried every month about being able to afford necessities, you may have picked up that same habit. 

According to financial therapist Carrie Rattle, societal values transmitted through media and culture can also create anxiety around money. 

“Many people develop patterns of distorted thinking from their culture, parents, neighborhood, or defining moments from their past,” Rattle says. “Social media only makes the problem worse.” 

Feeling a lack of control can also lead to financial anxiety. When people feel incapable of making a positive difference, they often develop what psychologists call “low self-efficacy.” Guilt over past spending or feeling overwhelmed can lead to low self-efficacy. Over time, the combination of high anxiety with low physiological arousal (that is, not feeling energized to do something) may lead to learned helplessness. People simply feel they can’t improve things, and give up.

Ultimately this can cause a feedback loop where financial anxiety contributes to poorer financial decisions and poverty.

How to defeat financial anxiety 

Given the causes and consequences of financial anxiety, what can individuals do to get their anxiety under control and improve their financial security?

First, make a plan for when acute anxiety kicks in. Nearly everyone has moments of intense anxiety. What’s important is to ensure that acute anxiety does not become chronic or lead to poor decisions. 

To tackle acute anxiety, decide in advance how you will tackle it next time it starts. Simply having a plan substantially increases your chance of success. Some science-backed possibilities include exercise, calling a friend or family member, and practicing mindfulness or meditation.

Also, take a moment to reflect on when you tend to experience financial anxiety. Are there certain environments or times when you tend to start thinking negative thoughts, tense up, or feel your heart racing?

You might find it useful to briefly “check in” with yourself daily. Ask yourself how you are feeling, whether you had any anxiety episodes, and what might help during these situations in the future. Consider engaging a trusted family member or partner to help you reflect and provide social support.

Second, cultivate a more positive relationship with money. The goal here is to decrease your anxiety and boost your confidence by highlighting how you can control your financial situation. 

To begin, drop any guilt. Bryan-Podvin notes that our culture often shames people for making money mistakes. But nearly everyone — regardless of background — has made financial mistakes. Most of us were never taught financial literacy growing up. Many others historically lacked access to financial resources or simply aren’t paid enough to make financial stability easy. 

Instead, aim to repeatedly engage with money in a neutral or positive way — what psychologists call desensitization. Here are a few suggestions:

• Identify what purchases are truly beneficial to you, and plan ahead to savor them.
• Reflect on one positive financial decision you made each day.
• Practice simply thinking about your income, spending a minute or two at a time acknowledging and accepting any thoughts or feelings that may arise.
• Recognize that money is not your identity. Instead focus on your strengths and values.

Third, take small active steps to regain your financial confidence. You want to pick goals that are reachable. Dr. Kristy Archuleta, a professor of financial planning at the University of Georgia, encourages people to pick a single small goal that they can achieve immediately.

“Identify a step you can do today,” Archuleta says. “What is one smart money choice you could make? Perhaps you could save $5 by packing your lunch, or wait one week before buying that new pair of shoes you’ve been eyeing.”

When you have repeated this behavior enough that it seems easy, you can add a new helpful habit. 

When possible, highlight your small successes. You could store your daily savings in a glass jar where you can see your savings grow each month before you deposit it, or you could keep a journal of good choices.

Also, consider learning more about finances in general — how to budget, various savings options, how to prioritize debts, and so forth. Financial literacy reduces financial anxiety in part because literate people make better decisions. But you do not necessarily need to make any changes to your behavior yet. Simply improving financial literacy can reduce anxiety and improve confidence. 

Create your money plan

Finally, create a longer-term money plan. Planning increases the belief that you have enough money to fulfill your wants and needs, and the likelihood that you’ll actually reach your goals.

Identify what motivates and works for you. Archuleta suggests a solution-focused process that capitalizes on each individual’s strengths, weaknesses, and motivations. 

“Financial experts might know the ‘optimal’ decisions people should make in a perfect world,” she says. “But in reality, people need to find solutions that fit their goals and lives.”

So, take a moment to think about your personal values, goals, and lifestyle. Start small. Instead of trying to make a perfect, life-long plan, begin by identifying the goals and timelines that are most important to you right now. 

“Most clients think they need to save, tackle debt, and address 99 other issues all at once,” Podvin says. “That is overwhelming! Instead, consider what is most important and what is coming up the soonest. Prioritize where to start based on where you are.”

This might mean identifying only one goal, like creating an emergency savings fund or paying off a high-interest loan. 

Develop a budget consistent with your needs and values 

After identifying your goal, draft a budget. The general idea is to clarify your income and then plan how you will spend it. Many resources are available to get you started, including low-cost financial therapists, workbooks, and free online tools.

Rattle suggests creating a budget for the entire year.

“By creating a roadmap for a whole year, you can see how small expenses and savings add up. This also helps you identify which purchases and habits really are valuable to you, and which are not.” 

As much as possible, make your budgeting automatic. This way you don’t have to practice any self-discipline, and everything is taken care of for you. For example, if you want to save $100 per month in a retirement fund, establish that your employer or bank will directly deposit the funds to the retirement account each month.

Finally, take a deep breath and get going: With a few small changes you will be on your way to reducing financial anxiety and improving your financial well-being.