How to Manage Money Stress in the New Year to Get Your Sanity Back

Woman sitting calming with coffee, staring at the ocean

Minimizing and managing stress can have a big impact on how you feel and what you’re capable of. Lowering stress levels will naturally help you feel happier, calmer, and more at peace.

But don’t overlook the secondary benefits you’ll reap when you actively manage your stress. When you’re not running on empty, you’ll also boost your ability to make positive money changes in the new year.

Why money stress is killer for financial health

A stressed-out brain is so focused on surviving today that it can drive you to poor behaviors and flawed coping mechanisms that sabotage your tomorrow.

Neurological studies show that stress hormones such as cortisol have the biggest effect on the areas of your brain in charge of “executive functions.” This limits your “working memory, inhibition of distraction, novelty seeking, and decision making ” — mental functions that many healthy financial behaviors rely on.

Yet making smart financial decisions requires exactly the kind of brain power and mental bandwidth that’s limited by stress.

This can create something of a cycle. When you’re stressed, you don’t have the same ability to self-regulate money behavior — which can lead to poor financial choices. The negative consequences of those money mistakes can then cause additional stress.  (This scientific study illustrates how financial scarcity and stress can feed into each other.)

Working to lower your stress levels, on the other hand, can lower stress hormones that limit cognitive function. It puts you in the right frame of mind to make wise and rational financial choices.

As you review the past year and look ahead to the new year, think about what weighed heavy on you. What stole your sleep, your clarity of mind, your mental energy, your joy? These things drain and burn you out, leaving you in no shape to manage money or your life — let alone improve it.

Investigate money stressors and make a sanity-preserving action plan

You don’t need that kind of negativity holding you back this year! So consider what changes to your finances need to happen to lower stress and free up mental energy.

Sometimes money stress arises from a concrete concern or financial issue. Other times it’s carried over from other areas of our life or mental health.

Review your biggest money worries to see exactly where they come from and what they’re really about. By pinpointing your biggest money stressors or triggers for financial anxiety, you can work more constructively toward a solution to both a money problem and any out-of-control stress levels.

Dig deeper into financial worries

If you’re constantly stressing over your money, consider what changes you could make to lower your anxiety about your finances. Inspect exactly what it is about your money that’s stressing you out, and identify a concrete step you can take to address it. Here are some examples:

Do you always worry about the unexpected or feel like you don’t know what’s going on with your money? That’s a sign that it’s time to take a full inventory of your finances and then establish regular, ongoing reviews of your accounts. You might also benefit from establishing an emergency fund to help you feel more financially secure and act as a buffer against tough times.

Does reviewing your spending make you feel overwhelmed, guilty or regretful? (Raises hand sheepishly.) For me, this is a sign that I needed to set a budget that was more realistic, less restrictive, and allowed me more room to be, well, human. It was also a sign that I needed to work more on viewing myself as something worth spending money on.

You might have similar issues, or it could be that you feel guilty for good reason — that you overspent when you couldn’t afford to. In this case, feelings of overwhelm or guilt are your signal to work on controlling spending impulses.

Is there a specific money responsibility that’s weighing on you? For example, perhaps your car payments are uncomfortably high or your credit card balances aren’t going down fast enough. Or you might be worried that you’re behind on retirement.

Find strategies for managing both money and stress

As you work through what’s stressful about your finances, look for opportunities to actually address and limit those stressors.

You might not be able to fix your finances overnight or completely eliminate a stressful money task. But you can start putting together an action plan to get headed toward a less stressful financial life.

Putting together a stress-reducing money strategy will offload the worries about this concern onto paper. That frees up brain power that was being used to obsess over it and helps you feel more in control of your financial situation.

Then, of course, you must follow the action plan you’ve made (!) and work toward those money stress solutions.

Buy back some sanity with stress-reducing purchases

Don’t limit this review of stressors to your finances, however! In addition to thinking about how you can worry less about your money, look at whether you could use the money you have to target other causes of stress.

This can be particularly effective for people at a stage of life that makes them way more short on sanity than they are on money.

Think about worries in your own life that you could alleviate with by purchasing a service or good.

  • If your mental health has been slipping or your relationship has been rocky, some therapy can help you work through it constructively with effective tools and support.
  • If work-life balance is out of whack, maybe you need to book a getaway or invest more time and money into a hobby.
  • Maybe you’re worried about that weird noise your car has been making, or whether the roof on your house is in decent shape. You can spend a bit to get it checked out and stop worrying so much about it.

Once you’ve identified a stressor that you can fix with money, the next step is to work on how to pay for it. Review your budget and see if you can rework it a bit to begin saving for or spending on your stress-lowering solution. You can even add a line item to your budget specifically for stress reduction!

My most recent investment in reducing my stress

I just recently made this move and spent some money to target a source of anxiety in my own life.

My family sleeps in the basement of our house, even though there are no egress windows installed on this lower level. That means there’s only one exit out of our basement — a definite safety hazard that has been a frequent topic of worry.

(As in, I’ve had to actively stave off mental images of a house fire starting and my family all dying in our sleep because there’s no second exit in our sleeping areas. Yeah, my brain can be a little dramatic and prone to anxious obsessions.)

We’d been putting it off hoping we could DIY part of it to lower costs, as egress window installations ain’t cheap. But I decided enough was enough and we needed to stop putting it off — both for my family’s safety and my own sanity.

We used some of our savings to pay for egress windows in each of the basement bedrooms, which will be installed by the end of this month. Ultimately, getting this insurance against the worst-case scenario in place ASAP is more important to me than having that money sit in our savings account.

As you move into the new year I want you to ask yourself more than just what is the smart money move. I want you to make wise money goals that get your finances under control and help you feel better while improving your quality of life.

So as you set your resolutions and goals for the new year, make minimizing stress a top priority. I promise: your health, happiness, and money habits are sure to benefit.

Featured image courtesy of Cynthia Magana.

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  • Reply
    Karalee Garber
    January 10, 2019 at 5:09 pm

    Way to tackle a brave saver topic right off the bat. It’s funny because this year I am really approaching our budget this way. I was asking myself and Todd, “What things are stressful and how do we get ahead of them/plan for them?” This article was insightful and I am definitely going to have him read it so we can chat about it.

  • Reply
    Megan Mason
    January 10, 2019 at 11:06 pm

    I love your story about your windows. That’s so true. Sometimes it’s way more worth investing in the expense at the moment, rather than waiting for disaster to strike, and it helps avoid the anxiety in the long run. I think about that with our cars all the time.

  • Reply
    January 11, 2019 at 12:35 am

    When I first read through this article I definitely tried to trick myself into thinking I have no money stressors. Hilarious! A second time through and the information is actually sinking in.

    I definitely feel guilty after purchasing stuff for myself. I haven’t created a budget since I got divorced last year and every month I’m kind of winging it. Making a budget is something so obvious that I haven’t done yet. Thank you for inspiring me!

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