We, at Circadian Capital, help you in managing your finances with practical advice and expert insights. Let’s look at how to address the mental hurdles related to money.
Many people say money causes problems, but usually, it is not simply a lack of money that creates stress, it’s fear of experiencing it. Financial stress is more common than we realise, affecting our mental health, relationships, and overall life quality.
Understanding why people avoid money and feel anxious about it can be the first step toward making positive changes.
Interestingly, the latest report from the Mental Health Foundation found that 31% of UK adults felt anxious about their financial situation. This highlights how financial stress can greatly affect mental health.
This article will explore why people shy away from money, how it contributes to anxiety, and what you can do to break this problem. Let’s get started!
Understanding the Concept of Money Avoidance
Avoiding financial issues is more than just ignoring bills or putting off financial planning. It’s a mindset that mostly arises when we feel burdened, scared, or embarrassed about our finances. This avoidance can show up in different ways, like the following:
- Not checking bank balances
- Missing bill payments
- Failing to create a long-term financial plan
For many people, facing financial problems brings feelings of shame, scarcity, or anxiety about failure. These feelings can come from past negative experiences with money, like growing up in a household where money issues caused stress or fights. They can also derive from societal pressures that set unrealistic financial goals, such as possessing a home or keeping up with friends’ financial situations.
The Link Between Money and Anxiety
Anxiety and money are closely related. In the UK, financial worries are a major source of stress for adults. Concerns about managing debt, saving for future needs, or simply making ends meet can affect your mental health.
When you constantly stress about money, your body tenses up and releases hormones like cortisol. Over time, this can lead to chronic stress, affecting both your mental and physical health. This may lead to problems like sleep denial and high blood pressure. Worrying about money can also impact other parts of your life, leading to tension in relationships or a drop in self-esteem.
This ongoing stress about money creates a harmful cycle. You may avoid dealing with your financial problems, which raises your anxiety and makes it harder to manage your finances. This can leave you feeling trapped and overwhelmed.
If you are looking for details on the link between money and mental health, just take a look at this article: The Link Between Money and Mental Health.
The Role of Childhood and Upbringing
Our views on money often come from childhood experiences. Children who grow up in homes where financial issues lead to arguments and stress may develop poor financial habits as adults. They might either avoid money altogether or create an intense fear of economic failure.
On the other hand, those raised in homes where people discuss money positively and openly usually have a healthier attitude towards it. It’s not just about having money; it’s about how caregivers handle it. Did they plan, budget, and discuss finances clearly and transparently? Or did they hide expenses and avoid discussing finances?
These early lessons stay with us and shape how we deal with finances as adults. If you learned that money brings shame or worry, you might carry those feelings into your financial options, leading to a pattern of avoidance.
Cognitive Biases in Financial Decision-Making and Money
Our brains often make quick decisions based on past experiences. However, in financial situations, these shortcuts can be risky. Cognitive biases like loss aversion and present bias can affect our financial decisions and cause us to avoid dealing with money.
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Loss Aversion
Loss aversion is the tendency to fear losing money more than we enjoy gaining it. For instance, if you have had a bad investment or a financial setback in the past, you might be scared of losing more money. This fear can really stop you from making any financial decisions. The pain of losing money feels stronger than the joy of making money, which can lead to procrastination and avoidance.
Surprisingly, recent data from Springer Nature Link shows that people normally feel a loss of £500 is 2.41 times more disturbing than the happiness gained from achieving the same amount. This stronger reaction to losses is influenced by factors such as income, education, and financial literacy.
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Present Bias
Present bias refers to our preference for instant rewards over future benefits. This can make it difficult to save for the future or to delay spending now for long-term financial security. It feels easier to ignore retirement savings or even paying off debt because the benefits of spending are fast. In the long run, this can leave us unprepared for future financial needs and increase anxiety.
These biases can trap us in an avoidance cycle. The more we delay facing our financial issues, the more anxious we become.
To learn more about these cognitive biases and other bias types, you can check out the article: 5 Cognitive Biases That Sabotage Your Budget.
Practical Strategies for Overcoming Money Anxiety
You can finally overcome financial anxiety. By understanding how your thoughts affect your feelings about money, you can change your behaviours and outlook. Here are some practical strategies to help you stop avoiding financial issues:
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Start Small
Instead of feeling overwhelmed by your finances, break down your tasks into small and manageable steps. You can start by checking your bank account balance regularly or setting aside a small amount for savings. The key is to take small actions regularly to build your confidence.
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Seek Professional Help
If your anxiety about money becomes too strong, get help from a financial advisor or a therapist who knows about financial anxiety. These professionals can help you manage both the emotional and practical parts of handling money. They will offer personalised methods to reduce your stress and improve your relationship with money.
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Educate Yourself
Many people feel anxious about money because they do not understand how it works. Take time to learn about budgeting, saving, investing, and managing debt. When you know these topics, you can make more informed decisions and feel more in control of your finances.
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Change Your Mindset
Focus on curiosity and growth instead of fear and avoidance. View financial challenges as opportunities for learning and development. Be kind to yourself, and remember that everyone struggles with money at times.
Conclusion
Feeling anxious about money goes hand-in-hand with avoiding it, but these feelings do not have to control your life. To improve your relationship with money, begin by learning the fundamental psychological factors at play.
You can change your perspective on money with small actions, professional assistance, or a new mindset. Managing your finances and easing your anxiety is possible.
Remember, the journey to feeling relaxed about money starts with facing the fears that hold you back.