If you’re frequently stressed out, do you tend to make bad money decisions? My answer is yes. If you know you’re under stress, keep an eye on your bank account and your budget, if you have one. And it’s not just financial stress that causes bad financial decisions. Sometimes the necessary pursuit of money itself causes its own set of stress. A recent AARP study shows more older people turning away from higher-paying jobs for work that comes with more satisfaction and less stress. Clearly, money and stress share a complex, intertwined relationship.
Right now, I’d just ask you to think about the impact of general life stressors on our financial behavior. Below are some of the ways I’ve come up with that various types of emotional and psychological stress cause you to “gain financial weight,” so to speak.
If you’re in a hurry, you might be inclined to spend on timesavers. Whenever I’m feeling rushed or too busy to think about anything but what’s immediately on my plate, I don’t give much thought to my budget if I know that the immediate short-term benefits of buying xyz will help alleviate my stress. This is definitely not ideal.
When stressed, it’s easier to forget things. Did you order the product you needed last week, or not? I know I’ve managed to be so tunnel-visioned that I’ve ordered the same book twice – in a number of cases. Did you leave enough cash in your checking account to cover the checks coming out? It might make sense to get some overdraft just in case. I’ve paid my share of NSF check fees before!
You might be tempted to put your investment plans on pause and spend that money instead. Especially if you’re stressed financially, you might be tempted to remove some of your automatic payments into your IRA or RRSP. Or you might choose not to send a check this month for your dividend reinvestment plan. Guess what that means? You’ll be spending the money instead.
Worse, you might be tempted to buy more stuff to help alleviate the stress. From yoga mats and exercise balls to your favourite emotional binge meal or electronic toy – we buy things that make us feel better or think they will help us improve our lives. I’m not totally knocking this practice, because certain activities just really do require certain equipment, and if you want to participate, you’ll need it. But watch yourself carefully so that you don’t go on a binge buying stuff that you think you’ll need or use. Instead, make running a habit first before buying that new pair of shoes. As Trent explained in a recent article on The Simple Dollar, you’ll also be able to learn what you need before paying for it.
How To Prevent Stress From Causing Financial Slip-Ups
For almost all of these items, having a budget can certainly help, but do you really want to include a line in your budget for “things I buy when I’m too busy or strung out”? The problem lies at the deeper level of awareness rather than with what you have in your budget. I’m guessing that ultimately, no one wants to budget for unconscious (i.e., deliberately unexpected) spending. You might have a category for “fun,” but that’s because it’s for things you know will provide you with enjoyment.
Plan ahead with as much of your life as possible. Financially speaking, a plan is a budget. I won’t go into details on how to do up a budget here. But the more you can plan ahead, the less rushed you’ll be with each decision and action you need to take. If you can leave on time, you won’t need a cab to rush you wherever you’re going. If you check the weather, you won’t be caught having to buy an umbrella when you’re out. etc.
Keep a pad of paper handy so you can keep track of what you need to remember. Don’t be fooled by the simplicity of this statement. Having a “notepad” system that works for you requires much trial and error.
Learn your own pattern of “financial weight gain” under stress. Do you forget to pay bills? Automate them. Do you tend to overspend when stressed? Learn to catch yourself before each purchase. The mere act of being aware can help you to remember what you really need, what your budget is, or how you really don’t want or need xyz after all.
Advice On Money Stress From The Wealth Pilgrim
I’ve been focusing on the negative effects that general stress can have on your money habits, but a much more notable form of stress, of course, is the stress that simply comes from money problems of all kinds. One of the best people you can talk to about this (please check out his blog) is Neal Frankle, founder of the Wealth Pilgrim. I want to highlight some of his great posts on this topic below.
Finding Your Financial Balance
Be At Peace With Money – No Matter What!
The First Step to Financial Serenity
This is just a small sampling of the many insightful articles on his site, so I’m sure you’ll find something useful amidst all of that.
How have you handled the side-effects of stress on your financial life? Or how have you prevented the feedback loop that starts with money stress, which causes more stress, which might lead again to further bad money decisions? I spoke with Dawn from Frugal For Life (@frugalforlife) about this. She said “when I get stressed, I don’t want to argue about things, so the spendthrift in the house gets their way more often than me, the frugalist.”
Let me know what you think below – what’s the relationship between stress and money, either for yourself or how you see it affect others?
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Sadly, when I’m stressed about money, I sometimes get lax about it. I feel hopeless and suffer from what I call the “might as well” syndrome. I’ve gotten better about it, preferring to sleep on it so that I feel better the next day, but it is one of the paradoxes of money stress.
@Miranda – sounds similar to something I do, at least, getting lax with any budget I had…. for me it’s like the “why not?” syndrome:) or maybe worse, rationalizing it into “you only live once” when it comes to really large deviances from the budget:)
I agree with you. When I’m stressed I go to the mall to shop. It helps sooth the stress but at the end of the day, I spend money that I don’t have. So too, when you are hungry don’t go to the grocery store.