The economy is strong — the stock market is up, unemployment is down and inflation is under control — and yet, millions of Americans are stressed about their finances.
According to a recent Capital One Mind Over Money Study, 77 percent of Americans feel anxious about their personal financial situation. The study also revealed:
- 58 percent said finances control their lives.
- 52 percent have difficulty controlling their money-related worries.
- 68 percent are worried about having enough money to retire.
All this stress is taking a toll in various ways. The study surveyed 1,000 adults and found respondents reported feeling fatigued (45 percent), having difficulty concentrating at work (42 percent), sleep problems (41 percent) and a negative impact on relationships (25 percent).
Stress leads to poor decision-making
Stress negatively impacts our ability to make informed and rational financial decisions, according to the behavioral science experts at The Decision Lab, who did the research for the Money Over Matter report.
When we’re stressed we feel less in control, tend to be worse at saving and budgeting, and become more impulsive with how we spend our money.
These negative repercussions were present, even when the researchers controlled for income and credit score. This shows that “mindset impacts everyone, regardless of financial circumstance,” they said.
“Ideally, we would just tell people to be less stressed and they would listen and that would solve everything, but it doesn't work that way,” said Brooke Struck, research director at The Decision Lab. “Stress is really hard to address … it’s not something we're going to be able to fix.”
Just look at these posts on Reddit from people who are struggling with debt and reaching out for help:
“Most messes in life are very hard ... but a financial mess is absolutely devastating, stressful beyond belief and terrifying.”
“I’m 24 and I feel like my financial situation will suffocate me for the rest of my life. I guess I’m frustrated because I feel like I am always working, day and night and at the end of the month I have absolutely no money left. I’ve gone into a deep depression because I haven’t been doing anything fun in my world…”
“$35K in debt. Don’t know what to do. I make $62,000 a year and I never have any money. It’s embarrassing and exhausting.”
What can you do? Think big picture
The Decision Lab researchers found that getting someone to deal with their stress, shifting their mindset from the small things to a bigger-picture viewpoint, can help mediate the effects of stress on their financial decision-making.
Brooke gave this example: You’re at the store and you’re trying to decide which color of a certain product you should buy. The bigger-picture view would be to ask yourself: Do I really want this product? Is it really something I need? The right mindset is not to choose a color; it’s to decide not to buy that item if you don’t need it.
The Decision Lab’s research shows that thinking about your long-term goals, even for a few seconds, can help mitigate the negative effects of stress on your financial decision-making. Individuals who think more about the big picture are:
- More likely to feel in control of their life and finances
- More likely to have a written budget
- Less likely to spend their paycheck as soon as they get it