by Anne Ueberbach
Assistant Director / Counsellor

The Toll of Financial Stress on Mental Health

Are you struggling to make ends meet, worrying about debt, or feeling anxious about your financial future? You're not alone. Financial stress is a common experience that can have a significant impact on our mental health and wellbeing.

Singapore, known for its economic prosperity and high standard of living, is not immune to financial stress. Despite its thriving economy, many individuals and families in Singapore face financial difficulties, which can have a significant impact on their mental health and wellbeing.

Common Sources of Financial Stress in Singapore

• High Cost of Living: Singapore is one of the most expensive cities in the world, with high housing costs, transportation expenses, and living expenses.

• Debt: Credit card debt, personal loans, and mortgages can be overwhelming, especially with high interest rates.

• Retirement Savings: Concerns about saving enough for retirement, particularly with the increasing cost of living and healthcare expenses.

• Job Insecurity: Fear of job loss, retrenchment, or reduced income due to economic uncertainty.

• Family and Social Pressures: Meeting societal expectations, supporting family members, and maintaining a certain lifestyle.

• Lack of Financial Literacy: A 2024 survey found that 55.2% of adults in Singapore are financially illiterate (understanding key financial principles empowers you to make informed and savvy choices with your money.") and 52% reported not knowing how much they spend per month.  

The Link Between Financial Stress and Mental Health

The impact of financial stress on our mental health is profound, yet often overlooked. It can erode our sense of self-worth, strain our relationships, and even affect our physical wellbeing. The anxiety, worry, and fear that accompany financial struggles can become an incessant and intrusive presence, making it challenging to maintain a healthy work-life balance, nurture meaningful relationships, and cultivate a positive self-image.

Financial stress can have far-reaching and debilitating effects on our mental wellbeing, leading to:

Breaking the Cycle of Financial Stress

So, what can we do to break free from the grip of financial stress and protect our mental health?

Seek Support

Sharing your financial concerns with a trusted friend, family member, or mental health professional can be a liberating experience. Talking through your worries with someone who cares about you can help you gain perspective, feel supported, and develop a plan to tackle your financial challenges. A mental health professional (counsellor/psychologist/psychotherapist) can also help you address underlying emotional or psychological issues that may be contributing to your financial stress. Don't be afraid to reach out for help – sharing your concerns can be the first step towards finding solutions and achieving financial peace of mind.

Create a Budget

Take control of your finances by tracking your income and expenses, and making a realistic budget. Creating a budget is a powerful step towards managing your finances effectively. By tracking your income and expenses can help you understand your usual spending habits, set financial short-term and long-term goals, and prioritize needs over wants. Some commonly known and simple budgeting strategies include the 50/30/20 rule, which suggests to allocate 50% of your income towards essential expenses, 30% towards discretionary spending, and 20% towards saving and/or debt repayment

Prioritize Needs Over Wants

Prioritizing needs over wants is crucial for effective financial management. Essential expenses, such as housing, food, healthcare, and minimum debt payments, should take precedence over discretionary spending like entertainment, hobbies, and luxury items. Be honest about what you need versus what you want and allocate funds accordingly. Set boundaries for discretionary spending and practice mindful spending. Regularly reviewing and adjusting your spending habits will help you make conscious financial decisions, reduce financial stress, and build savings and wealth. By prioritizing needs over wants, you'll ensure basic needs are met and make progress towards long-term financial goals.

Build an Emergency Fund

Building an emergency fund is a crucial step in achieving financial stability. It provides a safety net for unexpected expenses, job loss, or medical emergencies, helping you avoid debt and financial stress. Aim to save 3-6 months' worth of living expenses in a readily accessible savings account. Start with small, achievable goals, and gradually increase your contributions. Make it a habit by setting up automatic transfers. With an emergency fund in place, you'll be better equipped to handle life's unexpected twists and turns, ensuring peace of mind and financial security.

Practice Self-Care

Practicing self-care is essential for maintaining emotional and mental well-being, especially when managing financial stress. Engage in activities that bring you joy, relaxation, and fulfilment, such as reading, exercise, or spending time with loved ones. Make time for hobbies and creative pursuits that help you unwind and recharge. Prioritize rest and relaxation, and avoid overcommitting yourself. By nurturing your mind, body, and spirit, you'll be better equipped to handle financial challenges with clarity, confidence, and resilience. Remember, taking care of yourself is not a luxury, but a necessity for achieving financial and emotional stability.

How Therapy Can Help with Financial Concerns

Therapy can play a vital role in addressing financial concerns by exploring the emotional and psychological factors that contribute to financial stress. A professional counsellor/psychologist/psychotherapist can help:

• Identify Financial Triggers

• Address Underlying Issues

• Develop Healthy Financial Habits

• Improve Financial Communication

• Manage Financial Stress

• Build Financial Confidence

• Explore Values-Based Spending

Commonly used therapeutic approaches may include Cognitive-Behavioural Therapy (CBT) to identify and challenge negative thought patterns and behaviours contributing to financial difficulties; Mindfulness-Based Therapies to enhance awareness and acceptance of financial thoughts and emotions, promoting healthier financial habits; or Solution-Focused Brief Therapy that focuses on identifying and building on individual strengths to achieve financial goals.

DISCLAIMER
This article was not written by a finance expert and does not disregard the knowledge and services offered by financial experts. For personalised financial advise, it is recommended for you to reach out to a financial advisor or accountant.