A number of factors can cause financial anxiety, from market volatility to a lack of financial confidence.
Acknowledging and understanding your fear is the first step in reducing your financial anxiety.
Other tips for managing financial stress include having a financial plan, maintaining an emergency fund and investing for the long-term
From persistent high inflation to rising interest rates to continued market volatility, there are plenty of reasons to feel anxious about money and the wealth you’ve worked hard to build. If you’re worried about your finances, know that you’re not alone.
A recent study by CNBC and Momentive found that 70% of Americans are experiencing stress about money and over 50% are more stressed about their finances than before the COVID-19 pandemic started in 2020. What’s more, Americans rank inflation as their biggest stressor, followed by economic instability and rising interest rates.1
“The primary advantage of working with a financial professional is that they can maintain a certain level of objectivity, which helps you avoid making emotional financial decisions.”
Shannon Baustian, private wealth advisor, U.S. Bank Private Wealth Management
The good news? There are things you can do to reduce your financial anxiety and feel empowered to take control of your finances now and in the future.
Financial stress is an emotional state of anxiety or worry about money that’s often accompanied by a physical response.2 Left unchecked, financial stress can lead to serious health consequences, such as cause cardiovascular disease, diabetes and obesity, as well as mental health issues such as depression.2
Having more money doesn’t necessarily lessen the risk of financial stress. “As one’s wealth grows, so does financial complexity due to taxes, legislation and new investment choices,” says Shannon Baustian, private wealth advisor for U.S. Bank Private Wealth Management. “High net worth individuals also worry about the impact on the next generations.”
There are a few reasons you could be feeling financial stress, not related to lack of money.
If you’re experiencing financial stress, these five tips can help.
Start by recognizing that you’re feeling stressed about finances. Acknowledging a fear is the way to overcome it. Then, advises Ghodse-Elahi, pinpoint what’s causing your anxiety about money. “Are you afraid of the uncertainty in the market, or are you afraid you’ll make a bad decision that will negatively impact your finances? Those are very different fears,” she says.
In both cases, you can ease your fears by working with a financial professional to build a strategy around the uncontrollable, like market volatility, and the controllable, such as understanding what’s happening in the market. “The primary advantage of working with a professional is that they bring a certain level of objectivity, which helps you avoid making emotional financial decisions,” says Baustian.
While situational circumstances can occur that are totally out of your control, financial risk can often be mitigated with a comprehensive financial plan.
“When you partner with a financial professional, they’ll work to understand your goals and objectives, your risk tolerance and your time horizon,” says Fitzmorris. “They’re able to run ‘what if’ scenarios to help you better understand what type of risk you're taking in situations when the market is doing really well, or when the market is not doing so well. If you have a plan in place, you’ll feel a lot more confident you can weather the storm.”
“We find that when clients have a financial plan, they’re more resilient in the face of market volatility and uncertainty,” adds Baustian.
Having an easily accessible emergency fund can reduce your financial stress.
“If you lose your job or experience another unforeseen circumstance, there are expenses that will need to be handled right away,” says Fitzmorris. “If you don’t have an emergency fund, where is the money going to come from? It's all interconnected and can be accounted for in a financial plan.”
Fitzmorris suggests that your emergency fund should hold enough money to pay for at least six months of your living expenses.
A volatile market can cause anxiety about money but jumping out too soon can make it worse. “Early investors tend to buy when the market is doing well. Then, they often panic when the market drops and pull out their investments,” says Fitzmorris. “However, investing is a long-term strategy.”
Having a diversified portfolio comprising different asset classes can help ease financial anxiety and deal with any unexpected events, whether personal or macroeconomic. Don’t forget to factor correlation into your selection; asset classes that react differently to market volatility can provide better balance.
If your portfolio is allocated well and you stay the course, you’re more likely to see strong returns over the long term, says Fitzmorris. “It's not a get-in-and-get-out approach” but more of a buy-and-hold strategy when you're looking at investing for the long term.”
Financial confidence can come from education and support. One of the best ways to ease your financial anxiety is continuing to build your knowledge of investments and how market conditions can affect them. Surround yourself with trusted financial professionals who can guide you on your journey.
Fitzmorris says, “Take the time to get educated and listen to different perspectives. When you’re ready to talk to someone, we’re here to listen and to help.”
Ready to make a plan and take control of your finances? Learn how our approach to financial planning can help ease your financial anxiety and put you in control of your finances.
Setting and working toward financial goals becomes easier when you reflect on your intentions.
Rather than trying to time the market, consider holding on to stocks and other securities regardless of market fluctuations.