May is National Mental Health Awareness Month and we want to shine a light on how financial stress impacts our mental wellbeing. It’s an important topic that’s related to our mission here at PadSplit.
The reason is simple: Unaffordable housing consumes finances and the research is clear that financial stress affects mental health.
Unaffordable housing negatively affects our mental health
As the whole world is going through economic turmoil with countless people experiencing financial stress from job insecurity, pay cuts, and increased living expenses (like rent), individuals are struggling to make ends meet–and it’s resulted in mental health issues ranging from anxiety and depression to burnout.
Studies have shown that financial stress can lead to a decline in mental health. According to a research study published in the Journal of Economic Psychology, individuals with low income, high debt, and low savings experienced greater stress and anxiety than those who have a stable financial situation. These findings suggest that financial stress has a negative impact on mental wellness.
Furthermore, people who are experiencing financial stress are more likely to suffer from depression. A recent study published in 2022 found a positive association between financial stress and depression in both high-income and low-and middle-income countries with a stronger presence among populations with low income or wealth.
Money is tied to our basic human drive to survive
“Financial stress seems to trump almost every other kind of stress except health stress,” Elisabeth Donati, a financial coach who teaches financial literacy through educational camps was quoted saying on Marcus, a Goldman Sachs site. “When that drive can’t be attained–you can’t pay your rent, you can’t pay for your car, you can’t feed your kids–it compounds the stress,” she concluded.
The research is also clear that financial stress affects physical health. People with high levels of stress also experience higher levels of inflammation that contributes to chronic illnesses such as heart disease and diabetes.
The impact of financial stress on mental health not only affects individuals but also their families. Parents who are under financial stress are more likely to have poor parenting practices, which can lead to negative effects on their children’s mental health. Moreover, financial stress can push individuals to take risky decisions such as gambling or substance abuse to cope with stress and anxiety.
Affordable rent to reduce financial stress and improve mental wellbeing
There’s no doubt that financial stress and mental health are interrelated–and that the former can severely impact the latter. And while it’s essential to address financial stress to maintain good mental health, the question for many is “how?”
One impactful solution is reducing your monthly rent payment. Rent consumes the bulk of our paychecks in the United States so any reductions in that living expense will create an opportunity to save and move forward. PadSplit is a great example of modern co-living that gives people a chance to catch their breath financially. Use our Rent Savings Calculator to figure out how much you could save each month in rent.
Financial education can provide insight for spending and planning
Financial counseling and financial planning can empower individuals to take control of their finances and subsequently improve their mental health–though paying for these services isn’t a viable option when you’re swimming in bills.
Fortunately, there are pro bono financial planning organizations like the Financial Planning Association (FPA) that help underserved communities across the country. The FPA provided free financial advice to nearly 12,000 people in 2020, including low-income individuals and families.
Use their tool to find a chapter near you to learn how you can receive free financial counseling.
You can also take a free online personal finance course to learn about finance and planning. Two options include:
- MoneySmart is a free resource created by the Federal Deposit Insurance Corporation (FDIC) that teaches users about everyday financial topics like building credit and how to create a spending and saving plan.The course is also available in Spanish.
- Learning Lab by GreenPath is a free platform that provides worksheets, guides, and debt calculators to help consumers manage their finances. It’s online portal also offers free courses and games that teach about financial topics such as auto loans and rethinking your financial habits.
Taking care of our mental health is just as vital and important as taking care of a physical injury. The options for alleviating financial stress we’ve shared can have significant impacts. And remember, your mental health matters every month–not just this month.