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Worrying about money can be useful: it motivates one to work harder and spend less. But only if it is not too strong.
Focusing solely on money impedes living, and unfortunately, many individuals experience this. Surveys indicate that people primarily associate money with stress, and a recent American study revealed that people were five times more concerned about finances than their health during the pandemic.
People who worry about money on a constant basis exhibit lower performance on cognitive ability tests and often make suboptimal decisions in real life, including in terms of finances.
Increased cognitive load is the main issue here. The search for money constantly occupies the brain and inhibits its ability to analyze events. However, improving the financial situation does not necessarily alleviate this anxiety. Some individuals continue to worry excessively despite having enough money for their needs. These five tips will assist you in viewing the situation differently.
TIP #1 – Evaluate whether it is really worth worrying
Visual proof that financial anxiety exists even for those whose money issues have been resolved, comes from a study by UBS. They surveyed wealthy Americans and found that 52% of millennials with over $1 million in capital are very afraid of running out of money in the future.
Financial psychologist Matvey Zotov suggests staying grounded in reality to avoid wasting one’s life worrying about irrelevant problems. One must choose the statement from the list that best describes their situation.
- I have enough only for food.
- I have the opportunity to purchase slightly more expensive products.
- I can buy household appliances. It will be noticeable for my budget, but I won’t have to suffer or look for funds.
- I have enough funds to purchase a new car without a loan.
- I can buy an apartment, a house, and luxurious items.
Financial difficulty is indicated only by the first point on this list. Affording other expenses besides food should make you breathe a sigh of relief. Of course, almost everyone desires to earn more, but appreciating what we already possess is extremely important. Without it, life will never be good enough.
Tip #2 – Make a plan
If you have a safety cushion that will last you for several months – that’s already quite optimistic, because people tend to have no savings. If you don’t have any either, it’s important to fix that. Determine how much you need to save or add to your existing savings to feel more secure. It’s important to have a specific amount in mind, otherwise you won’t even notice when you achieve your new financial goal.
Calculate what percentage of your income and how long you need to save to accumulate the desired amount.
Your expectations should be realistic, or failing to meet the plan will only increase anxiety. The well-known 50/30/20 rule suggests allocating 50% of the budget to basic necessities like food and rent, 30% to other expenses such as entertainment and clothes, and saving 20%. Saving even a lower percentage is already good.
Analyze the expenses for the last few months in the banking application.
Which ones can we avoid for a period of time to provide a safety cushion?
List ways you can increase your income.
Maybe you should ask for a raise or change jobs. Alternatively, you could consider taking on a side job. Listing all of these options can reduce anxiety and demonstrate that increasing income is feasible.
And yet it’s better not to postpone real actions.
Think about what you can do in a day to increase your income, and do it. For example, update your resume, search for information on courses to improve your qualifications, or write a message to a potential client. Even if the step is very small, it can instill confidence and inspire further action.
TIP #3 – Explore the causes of anxiety
Negative experiences often cause individuals to experience unfounded anxiety and real financial difficulties. A child from a poor family may save excessively due to a constant fear of going hungry again, despite becoming a top manager with a high income. Conversely, they may fall into debt due to a childhood belief that poverty is inevitable and not save money.
To better control financial anxiety, investigate the factors behind it. Start by comprehending what in your past is causing distress.
Did someone in your family suddenly lose their income when you were a child? Did your parents have to cut expenses on everything? What happened to your finances as you grew up? Monetary concern can be linked to an experience like loss of savings, struggling to start a business, or having to pay off a loan with high interest rates for years.
Now answer the following questions. Perhaps the answers to them will help you understand that your worries are unwarranted.
- How does this experience affect your life today?
- How likely is it that this will happen again?
- Do you currently have any experience or skills that will help you overcome such a problem easier?
Why are financial decisions so difficult to make?
When financial issues arise, it can be especially difficult to make the best decision. Neurobiologist Sam Barnett explains that the human brain excels at making binary decisions such as “fight or flight”, but becomes stuck when faced with multiple options without one clear right answer.
For example, storing savings has no single correct method. One can either leave a reserve on a savings account or make investments, each with their advantages and disadvantages. Opting to become an investor necessitates the decision of where to invest one’s money, thereby increasing cognitive load, which may prove challenging for some. Some individuals may ultimately make impulsive decisions, while others may not take any action.
Simplifying decision-making by creating straightforward rules such as categorizing expenses into living expenses, savings, and discretionary spending can greatly reduce cognitive load and alleviate stress.
TIP #4 – Think about what you would do without financial constraints
In 1999, Harvard scientists had volunteers watch a video of basketball players passing a ball to each other and count the passes. Almost all participants correctly counted the passes, but the scientists then asked them: “Did you notice anything unusual?” More than half of the participants answered negatively, even though a person in a gorilla suit had appeared on the field during the game.
This experiment shows that while a person is focused on something, their attention is limited. This is how financial anxiety works as well: it forces one to focus on the thought of having little money and not see opportunities.
Ask yourself: what would you do if you had enough money? If you knew you would never have to worry about financial needs? Such questions help to broaden your focus and look towards the future with greater confidence. Perhaps many of your coveted desires can actually be achieved right now.
TIP #5 – Remember what else you are rich in
What good things in your life are not related to money? Write down the intangible wealth: personal qualities such as hard work and kindness, relationships with people, achievements in work and hobbies. Try keeping a gratitude journal: write down 3-5 things every day that you are grateful for yourself, others, or just fate.
Remembering about non-material wealth is important because a fixation on money pushes happiness further away. A person builds their self-esteem around financial achievements and spends all their time trying to earn more. However, in the end, they do not become any happier. Close relationships with family members and friends, on the other hand, really help on this path. Do not forget about them if you want to not only be rich but also happy.
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