7 Tips for Coping With Financial Stress

Many Canadians experience financial stress at points in their lives, especially during volatile economic times, with markets gyrating up and down and the cost of living continuing to rise. One study found that Canadians hold just over $20,000 in consumer debt, while nearly half of us say we’ve lost sleep over money. 

That pressure can take a toll on your body and mind. Your brain may be working overtime, crunching numbers and dreaming up scenarios, while your heart could be pounding, as the adrenaline around how to fix your money woes kicks in.

Research suggests that money worries increase our levels of psychological distress, which can impact both physical and mental health. Those who feel financial strain are twice as likely to report poor health and four times more likely to suffer from headaches, sleep problems and other illnesses. Living with the pressure of financial stress can also increase the risk of heart disease and high blood pressure.

Fortunately, there are strategies that can help alleviate money-related anxiety and put you on the path toward greater financial stability. Here are seven steps you can take right now to manage financial stress.

Get to the root cause of your financial stress

Financial hardship often comes with shame that can prevent you from doing a deep dive into your finances. But it’s important to have a clear understanding of your current situation to determine why you’re feeling the way you do.

One report found that the increased cost of living is a main source of stress, with rising grocery prices and inflation hitting people’s wallets and mindset. Climbing housing prices and rents are weighing on Canadians, too, especially younger generations.

Of course, there may be many more reasons why you’re feeling stress, whether it’s a recent job loss, a mortgage renewal at a higher rate or an unexpected expense to deal with. Identifying what behaviours or circumstances are making you feel stressed can help you move forward with a plan.

Create a budget

Building a budget is critical to finding financial peace. Using paper, an online spreadsheet or an app such as RBC’s NOMI, its important to review your expenses against your income. First, allocate funds to essential spending such as housing, utilities, groceries and necessary daily expenses. Then see how much you have left to put toward other expenses. You may want to prioritize some areas of these over others, such as an annual winter getaway or a monthly night out. 

One popular budgeting strategy is what’s called the 50/30/20 rule. Every time you receive a paycheque, you put 50% of those funds toward your basic needs. Then you allocate 30% of those funds to the fun stuff, such as trips, entertainment and streaming services. This is the allocation you can look to cut if you’re basic needs and debt exceed the allocation. The remaining 20% goes toward savings and paying down debt. The less debt you have, the more of this bucket can go toward your savings goals, whether that’s retirement, home ownership or education.

Consider debt consolidation

Debt can be a major source of stress, so you may want to prioritize paying off your loans. While budgeting will help make sure you’re setting aside money each month to reduce debt, if you feel like you have too much, you could reach out to your financial institution or credit card company to see if they have any payment or debt consolidation options.

With the latter, you could potentially merge mortgage and line-of-credit debt into one easy-to-make payment that’s potentially at a lower rate, which could help free up cash flow. There may be other temporary relief options, too, such as making interest-only payments or, for those who may have lost a job or are facing some other unusual circumstances, skipping payments until you’re ready to resume.

If you do need help, it’s important to maintain honest and open communication with your financial institution or credit card company. The more you can do to push yourself in the right direction to lowering debt, the easier it will be to deal with financial stress.

Find new sources of income

If you do need more cash, you could consider finding ways to make more money. Most of us have some sort of creative pursuit or potentially extra time that can be turned into a side-hustle. Whether it’s delivery driving, selling something you’ve created or tutoring in the subject you aced in school, there are several gigs you could test out to supplement your income.

Getting started doesn’t need to be difficult. Setting up an e-commerce store, for instance, has never been easier, while social media can help you get the word out about your wares.

Set up an emergency fund

Financial stress often occurs when an emergency happens, and you have to spend a lot of cash or tap into debt to fund that unexpected expense. Many experts suggest setting up an emergency fund for that reason – to have a pool of money you can use in a pinch. You might need it to buy a new car after an old one breaks down, to pay for an unplanned roof repair or to cover costs related to being off work for an extended period of time.

How much you should put into an emergency account will depend on several factors, such as your income, expenses and if you have a spouse or partner who earns money, but many suggest setting aside enough to cover six months of costs. While the number can change, saving at least some money in an emergency fund is the most important thing. Automatically deposit a small amount from each paycheque into an account so you can rest easier knowing you have something put away to help get you through tough times.

Seek professional financial advice

It’s hard to manage money on your own. That’s why there are financial advisors who work with you to create a budget, set up an emergency fund and offer more general support to help their clients rebuild while experiencing and after financial stress. The services advisors provide have evolved significantly over the years, shifting from mainly investing to being a sounding board for all your financial needs. They can offer educational resources, expense tracking help and, perhaps most importantly in these situations, emotional support.

Having a support network you can talk to about what’s on your mind – whether an advisor or trusted family or friends – has been proven to help people deal with stress. Make sure to find an advisor you trust and who has experience assisting people deal with financial challenges. 

Practice self-care and stress management

Finally, make sure to take care of yourself. Go for walks to de-stress, meet up with friends, take up meditation, play guitar if you know how; do what you need to do take your mind off your money. Sleep on any big financial moves you may need to make and watch your mood, which can impact how you handle financial pressure and make decisions.

Financial stress may be challenging to deal with, but it’s something many people go through at some point in their lives. The key is knowing how to manage and overcome it so you can stay on track to meet your future financial goals.