Did you know that 29% of Europeans feel they are in a precarious financial situation. And 48% believe they will face a precarious financial situation in the coming months. It’s called financial stress. But its repercussions go far beyond just stress. Psychologists have found that it can lead to anxiety and constant worry, depression and hopelessness, shame and self-criticism, relationship strain and even damage to your physical health. 

In short, the interplay between money and mental health is real and backed by research. The good news, however, is that financial literacy can help with smart money management, so you can lead a better quality of life. 

The Brain Under Siege: How Financial Stress Affects You 

When you’re worried about money, your brain reacts as if it’s facing a physical threat. This triggers a “fight or flight” response. Your body releases stress hormones, like cortisol. High levels of cortisol over time can damage areas involved in decision-making and memory.  

Research also shows that poverty and financial worries can reduce cognitive function, equivalent to losing 13 IQ points. This isn’t because people are less intelligent. It’s because their mental bandwidth is consumed by financial concerns.  

This impact can go beyond cognitive function. Chronic financial stress can lead to or worsen anxiety and depression. The International Your Money Financial Security Survey, conducted in 2024, found that at least 50 of the adults worldwide are stressed about their finances. The numbers are higher in the US (70%), Australia (70%), Spain (72%) and Mexico (73%). This ongoing stress can manifest as sleepless nights, irritability, and even physical ailments like headaches and digestive issues. 

The Ripple Effect: How Financial Stress Shapes Your Life 

The effects of financial stress aren’t confined to your mind. They seep into every aspect of your life. Your daily choices become coloured by your financial worries. You might avoid social gatherings because of the cost. This can lead to feelings of isolation. You might delay seeking medical attention due to fear of medical bills. This can worsen health problems. 

Work performance can suffer too. A PwC report highlights that financial stress can significantly hurt work performance, leading to decreased productivity, increased absenteeism and higher staff turnover. Concentration becomes difficult, decision-making is impaired and this can create a vicious cycle. Relationships are also strained under the weight of money worries. In fact, arguments about finances are a common source of marital conflict worldwide.  

Breaking the Cycle: 5 Simple Ways Building to Healthier Habits 

Recognising the problem is the first step. The next step is to take action. Building healthier physical, mental and money management habits can help reduce financial stress over time.  Healthy money habits include practices like making conscious decisions about spending, saving and investing to achieve your financial goals, both short-term and long-term. Here are some ways to build healthy money habits: 

Acknowledge and Talk About It 

Talk to a trusted friend, family member or a professional. Sharing your worries about money can lighten the load. It can also help you find solutions, such as planning your monthly budget, creating a plan that ensures your bills are paid on time, or just receiving emotional support to lower anxiety. 

Understand Your Money 

Create a simple budget. You don’t need fancy software. Just track your income and expenses. Knowing where your money goes is empowering. This helps you identify areas for improvement. 

 Start Small with Savings 

Even a few euros a week can make a difference. An emergency fund, no matter how small, provides a buffer that can reduce unexpected financial shocks. 

 Focus on What You Can Control 

You can’t control the economy. But you can control your spending and saving habits. Focus on actionable steps, Such as tracking every cent to identify unnecessary expenditures, differentiating needs from wants and setting a strict budget. You can also automate transferring money to a savings fund to build the habit. This may shift your mindset from helplessness to empowerment. 

 Seek Legit Information  

 Don’t be afraid to ask for guidance or help with money. Make the most of free resources like Snappi’s “What The Finance,” which offers valuable financial education and tips for money management. 

Financial stress is a very real concern for many people. At Snappi we want to give you the resources and support you need to manage your finances effectively. By building strong money management habits you can reduce financial stress and protect your wellbeing.