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Psychology of Money — Learn How to Cope with Financial Stress During Emergencies

By Diane Amato

Published January 15, 2024 • 3 Min Read

If you’re facing a financial emergency, you’re likely feeling a range of emotions — shock, anger, stress, and fear, to name a few. To get through it, it’s important to harness these emotions and turn them to your advantage.

People and money can often feel like a complicated relationship. After all, when it comes to your money, it can be hard — if not impossible — to be completely rational. So, if you’re facing an ongoing financial challenge or an unexpected crisis, it’s worth understanding how the psychology behind your personal relationship with money may play a role in getting through hard times.

Common emotions related to money

Fear, guilt, shame and envy are common emotions when it comes to money. You may feel the fear of not having enough, guilt in having more or less than others, shame in not managing it properly, or envy of others who seem to have money all figured out.

If you’re in financial distress, shame may be the strongest emotion. You might feel ashamed you didn’t predict or plan for your situation. You may feel embarrassed about accumulating a lot of debt. Or you might feel shame that you didn’t know how to manage your money as effectively as you may have needed. The problem with shame is that it may lead to avoiding the issues at hand. And the more you avoid it, the more shame you might feel. It’s a behaviour that may lead to increasing money problems.

How to reign in financial stress

Financial worry is one of the most common stressors in modern life and can take a huge toll on your mental and physical health, your relationships with others and your overall quality of life. So, to dig yourself out of a financially stressful situation requires some emotional strength and a powerful resolve to tackle challenges head-on.

In short, dealing with financial stress isn’t necessarily about having more money or knowledge about money but about how you approach it emotionally. Here are three ways to manage emotions around financial issues:

    1. Embrace a positive mindset: No matter what situation you find yourself in, don’t belittle yourself. This is not the time to get down over past mistakes. Instead, give yourself a break and focus on the aspects you can control as you look to move forward.

    2. Take ownership of the situation: Avoiding your finances won’t yield positive outcomes. Open your bills, look hard at your bank statement, and evaluate your spending habits. Think of your next move as taking control of your money rather than your money taking control of you.

    3. Tap into the rational side of your brain:Thoughtfulness can help you assess the situation and figure out what your options are. If you’re faced with a major, unexpected expense, find out if you can start a payment plan. If you have debt, work with your lenders to come up with a schedule of repayments that can actually work with your budget. If you’re feeling overwhelmed, talk to someone who can present you with realistic options and next steps.

Dealing with a financial emergency may be one of the most stressful things you can face in life. Understanding how your emotions play a role can help you effectively deal with your situation and make smart financial decisions going forward.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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