Almost all Surevest clients are doing just fine financially and have not been adversely affected by the Covid-19 pandemic. That may not be the case for their adult children and grandchildren. Therefore, I wanted to shine some light on the potentially devasting effects of financial stress.
The American Psychological Association publishes an annual “Stress in America” survey. Guess what has been the #1 cause of stress every year since the survey began? That’s right…money.
I was surprised to learn that the United States has the 7th most stressed-out citizens in the world (2019 Gallup Survey) despite also being the wealthiest nation. This is even more puzzling when you consider that the other countries in the top 10 (Rwanda, Costa Rica, Uganda, Sri Lanka, Iran, Albania, Tanzania, the Philippines, and Greece) are stressed about things like safety, survival, and basic human rights.
Nevertheless, many Americans are stressed . The number one thing they are stressed about is money, and this leads to a cascade of physical and emotional problems…as well as lower life satisfaction.
This topic has never been more important than it is today when tens of millions of workers have suddenly lost their jobs. Even before Covid-19, 2019 marked an all-time high in credit card balances ($6,194 per American adult) as well as student loan debt ($32,731 per graduate).
The Associated Press published poll findings during the Great Recession of 2008 on the effects of financial stress. These findings are a bit dated, but the conclusions are unmistakable: Chronic financial stress leads to serious health issues. Among Americans who were stressed about their debts:
- 27 percent had ulcers or digestive tract problems, compared with 8 percent of those with low levels of debt stress.
- 44 percent had migraines or other headaches, compared with 15 percent.
- 29 percent suffered severe anxiety, compared with 4 percent.
- 23 percent had severe depression, compared with 4 percent.
- 6 percent reported heart attacks, double the rate for those with low debt stress.
- More than half, 51 percent, had muscle tension, including pain in the lower back. That compared with 31 percent of those with low levels of debt stress.
Which demographic groups are the most stressed?
- Women are slightly more stressed than men.
- Younger people (Millennials and Gen Xers) are more stressed than older generations and more likely to report that their stress level has been increasing.
- Teenagers’ top sources of stress were school (83%), and finding a job after high school or getting accepted to a good college (69%). However, I was struck by the fact that 65% of teens were stressed about their family’s finances.
Financial stress and personal relationships
In addition to affecting your health, financial stress among couples is the #1 cause of divorce and it may come as no surprise that an increase in the number of divorces is widely anticipated by divorce attorneys once the pandemic subsides.
The Covid-19 pandemic has disrupted some of the best laid financial plans. Some of the stress people are experiencing is unavoidable since millions of workers and business owners could not have known their income would be so abruptly and significantly impacted. Many Americans did not have an emergency fund, or they had one that was completely insufficient for this crisis. Nevertheless, the question now is: How do you reduce your financial stress?
How do you reduce financial stress?
The best way to attain a feeling of control over your finances and to tackle your debts is to implement a good household budgeting program. If you need to cut expenses, look at the biggest categories first. The largest expenses of the average American household in order are housing, followed by transportation, and then food, so focus on those three categories first.
It is also not uncommon for retirees and households with significant savings and investments to also worry about their finances. For these folks, the best thing they can do is develop a comprehensive financial plan and investment strategy that provides confidence.
In addition to making prudent financial decisions, the most highly recommended way to manage stress is exercise, followed by listening to music (I believe rap or heavy metal would be exceptions) 🙂
Always remember that money is a tool that can be used to create a life you love. Studies have shown that material things such as big houses and fancy cars don’t make people happy. Living beneath your means provides financial security, which creates happiness, less stress, and better health outcomes. We advise clients to use their money to spend time with the people they love (pandemic permitting) and pursuing new experiences, hobbies, and causes they care about.
Questions? Comments? Need help? Send us an email or call.
P.S. It is not all bad news…. The personal savings rate in America has increased to 9.6% from 8.5% last year since more than half of people in American households have not lost a job, still received stimulus checks, and are spending less on travel and dining out.
Have a great week.