Money Stress: Is it a Disorder Issue?

Since 2007, the American Psychological Association has produced an annual report titled Stress in America, a survey examining “how stress affects Americans’ health and wellbeing.” The 2013 edition (issued February 2014) finds “people continue to experience stress higher than what they believe to be healthy, struggle to achieve their health and lifestyle goals, and manage stress in ineffective ways.”

What stresses us out? Here are the top three reported sources

Money                  71%

Work                     69%

The Economy       59%

Since the surveys began, “money” as a source of stress has topped the list every year, and was reported 30% more frequently than “personal relationships,” which placed fourth in 2013.

For many Americans these unhealthy stresses exact a physical and emotional toll. Respondents report irritability, anger, anxiety, depression, a lack of motivation or energy. They acknowledge the stress impacts their personal and professional relationships, and causes them to sometimes neglect their responsibilities.

 What is so Stressful about Money?

Why is “money” at the top of the stress list? The immediate response is “because we don’t have enough of it!” But in many ways, the reverse might be more accurate: We get stressed because we have to deal with so much of it, and so often. Even Americans who consider themselves less than wealthy have many decisions and transactions involving money every day, for almost everything. Because it is inextricably intertwined with almost every part of our lives, money significantly influences our sense of well-being. If we mess up with money, it messes with our contentment. And it’s not hard to mess up.

Consider the knowledge required to handle these common financial instruments:

Checkbooks                    Insurance policies     Auto loans            Property taxes

Investment accounts    Mortgages/Leases     Deeds                    Credit Cards

Retirement plans           Wills and trusts           Income taxes

 Besides dealing with a wide array of financial instruments and institutions, there is the frequency and/or infrequency with which these transactions occur. Some items happen so often it’s easy to lose track (the daily in-and-out activity in bank accounts); others occur so infrequently we may not be prepared for them (new tires for the car, semi-annual property taxes). And transactions can be executed with cash, checks, electronic transfers, credit cards – each with its own receipt, confirmation, or statement. Even if we understand the details, keeping track of all the pieces can be time-consuming.

The volume, complexity and variation make mistakes likely – we may miss a payment, pay too much interest, have gaps in our insurance, misallocate retirement accounts. Or, at least we think we might be doing this; the daily torrent of new financial decisions can make it hard to assess what just happened. In summary: We’re required to make new financial decisions every day – with a vague sense we might be missing something – knowing any mistakes will have a negative impact. Yep, that sounds like a surefire recipe for stress.

Stress Management or Stress Resolution?

The APA’s report also provides a list of strategies Americans employ to deal with their stress. The top five reported stress management activities:

 Listening to music                                                       – 48 %

Exercising or walking                                                 – 43 %

Going online                                                                  – 42 %

Watching TV/movies for more than 2hrs./day      – 40 %

Reading                                                                          – 39 %

Note these are actions to cope with stress, not resolve it. Listening to Sinatra or taking a 25-mile bike ride usually won’t resolve a money issue; it just allows us to live with it for another day. Stress management may provide short-term relief, but it can also keep us from long-term solutions. Following the 2011 APA report, a January 2012 USA Today article said, “People have been under so much stress in the past few years that they’ve adapted to it… (and) more or less accepted it as a way of life.”

Does money stress have to be a way of life? If your health is a source of stress, exercise or improved eating habits might be more productive than listening to music or watching TV movies. The same perspective could be applied to money stress: better to identify some actions that might alleviate or eliminate it. Every situation is different, but many Americans have the resources to pursue practical resolutions for many of their money stresses.

Establishing Financial Order, Regaining Your Balance (Sheets)

One starting point in reducing money stress is establishing financial order. The entirety of your financial life – your cash flows, assets and liabilities, risk management – should be organized to concisely show you where you are, and what you can do. If your personal finances were a business, you’d have an accountant, or at least a bookkeeper to make this happen. But personal accounting is usually a do-it-yourself project – meaning it’s a “usually-not-done” project. It does not have to be this way.

The same technologies that make it possible for you to deposit a check by taking a picture of it with your Smartphone can collect, consolidate, update and analyze your financial life. Once established, these personal finance programs can archive copies of documents and statements, continuously update your accounts, and provide both real-time snapshots and historical context regarding your financial condition. And many financial institutions offer complimentary personal finance programs for their customers that include expert assistance with the set-up and maintenance. In the time it takes to watch two “Law and Order” reruns on cable TV, you could make substantial progress toward getting your financial house in order.

When net worth statements, monthly cash flow summaries and other balance sheet reports are at your fingertips, the uncertainty about your finances decreases and your ability to make productive financial decisions increases. The result should be tangible bottom-line improvements – and less stress about money.

 “Off-Balance-Sheet” Benefits of Financial Order

Accountants characterize an off-balance-sheet item as “an asset or liability in which the company does not have a legal claim or responsibility for,” and thus cannot post to a financial statement. This item may be good (a pending sale) or bad (a potential lawsuit). Even though off-balance-sheet items don’t have a numeric value, knowing about them can impact an assessment of a business’ condition.

Order in your financial life is an off-balance-sheet item; it doesn’t have a dollar value. But its intangible benefits may be even more valuable. The 2013 Stress in America report led with a feature titled, “Are Teens Adopting Adults’ Stress Habits?” Check out the most commonly reported sources of stress for teens:

83%    -   School  

69%    -   Getting into a good college, deciding what
to do after high school

65%    -   Financial concerns for their family         

Wow. Money is almost as big an issue for teens as it is for their parents. The APA notes that the money stress for parents appears to spill over to their children. But conversely, “Young people learn a lot about healthy behaviors from watching and imitating adults, especially their parents.” Getting your financial house in order is not only good for you, but also benefits your children, both now and in the future.

Do not underestimate the psychological benefits of getting your financial world in order. Wealth with tranquility is an optimal combination. Order can sharpen your financial awareness and expand your wealth. It may also minimize the time you have to spend on money, allowing you to focus on your family and other pursuits. If your money stress is a result of disorder, take advantage of the technology and assistance and take steps to regain your financial balance and reduce stress.

 

 

 

 

 

 

 

 

 

 

 

 

 

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