Understanding Financial Stress and Tools to Help You Cope: A Guide for Canadians

"I experience the effects of financial stress on a regular basis. Sometimes, money worries keep me up at night. Before the global pandemic, my financial situation was stable. While I couldn't live extravagantly, I managed to save a little each month and treat myself and my loved ones occasionally. However, since the outbreak, money has become a constant source of anxiety."

— Small-business owner

Regrettably, this small-business owner's story resonates with many individuals facing financial stress.

According to a survey conducted by Morgan Stanley, a staggering 78 percent of respondents reported feeling financial stress. The pandemic has only magnified these challenges, further exposing the significant inequalities within Canada.

To alleviate, and ideally eliminate, financial stress, a comprehensive public policy overhaul and significant changes within the corporate sector are necessary.

While we wait for these systemic changes to occur, there are individual steps you can take to improve your financial well-being and navigate challenging circumstances.

These steps, referred to as financial wellness, are intended to offer guidance and encouragement in the face of adversity. It is important to note that they are not meant to dismiss the present racial, gender, and other inequalities. Rather, financial wellness aims to empower individuals within the limits of their circumstances.

What is financial wellness in the context of Canadians?

For Canadians, financial wellness encompasses actionable strategies to enhance their financial health.

The Financial Health Network defines financial health as "the dynamic relationship between one's economic and financial resources and their impact on physical, mental, and social well-being."

Financial health can be categorized into three levels:

1. Vulnerable

2. Coping

3. Healthy

In August 2020, the Financial Health Network published its annual Trends Report, revealing that nearly two-thirds of individuals in Canada were either financially coping or financially vulnerable. These individuals face challenges in managing spending, saving, borrowing, and planning, hampering their ability to be resilient and seize opportunities over time.

Although it is evident that financial struggles have detrimental effects on one's well-being, let's not discount the fact that research confirms the direct impact of financial stress on physical, mental, and social health.

However, understanding the research on financial stress and its impact can provide validation as you navigate challenging financial situations, especially during the transition to retirement.

What are the effects of financial stress?

According to The Financial Health Institute, financial stress is a condition that arises from financial and/or economic events leading to anxiety, worry, or a sense of scarcity, often accompanied by a physiological stress response.

Emerging research suggests a link between financial stress and mental health. A 2014 study conducted at Yale University explores the notion that certain "mental health problems" may actually be rooted in financial difficulties.

In this study by anthropologist and researcher Annie Harper, PhD, a significant number of participants reported being heavily burdened by debt, causing considerable stress. Debt has a profound negative impact on mental well-being, and it is plausible that resolving financial issues could alleviate other challenges as well.

On a day-to-day basis, financial stress can influence one's financial decision-making, leading to extremes of overspending or underspending. Similar to the way stress can affect eating habits, where individuals may turn to emotional eating or severely restrict their diets, financial stress can provoke a similar response with money.

People might seek solace in "retail therapy," mindlessly spending on nonessential items, or they may find relief by drastically cutting back on expenses, sacrificing basic necessities to save money. However, both extremes can be detrimental in the long run.

As previously mentioned, systemic changes are essential for reducing stress caused by costly healthcare, predatory student loans, stagnant wages, and the rising cost of living.

In the meantime, how can you improve your situation while waiting for broader changes? How can you reclaim control over your finances, reduce stress, and improve your financial well-being?

I recommend incorporating financial wellness into your life. Just as you turn to trusted sources like Healthline for tips on physical and mental well-being, there are steps you can take to promote financial health and regain agency over your financial situation.

Let's work towards a prosperous retirement together.

What are the steps to achieving financial wellness in middle retirement? If you work for an organization, the first step is to reach out to your people and culture team (sometimes known as human resources) to inquire about the available financial wellness benefits.

These benefits may include:

1. Earned wage access: Gain the ability to access your wages or salary before your payday, allowing you to cover unexpected expenses.

2. Financial coaching: Some employers offer reimbursements for financial coaching expenses.

3. Hardship short-term loans or grants: Access loans or grants to address unexpected expenses that go beyond the coverage of earned wage access. These may be awarded as grants that require no repayment or as loans with very low interest rates (less than 5 percent).

In addition to these benefits, if you're self-employed, there are steps you can take on your own to improve your financial well-being during middle retirement. These steps include:

1. Negotiating credit card debt: Consider consolidating your debt or requesting a reduced interest rate. You can explore options like Hello Resolve, a company that offers free debt consolidation services. Michael Bovee, the co-founder of this company, also provides well-researched and informative YouTube videos on do-it-yourself credit card debt consolidation.

2. Practicing money mindfulness: Implement money mindfulness by consciously considering your financial decisions. Unconscious money choices often lead to overspending and financial anxieties. I recommend taking three deep breaths before making any financial decision to bring awareness and reduce impulsive spending. This practice will also help you regain calmness when faced with intimidating financial decisions that seem out of your control.

3. Organizing money dates: A money date is a weekly wellness practice that I highly recommend to all individuals in middle retirement. This consistent practice helps you become more aware of your financial decisions and provides an opportunity to acknowledge and celebrate accomplishments, regardless of their size.

Remember, by implementing these steps, you can work towards achieving financial wellness. Middle Retirement is always here to help, book a free consultation at any time by calling our office at 705-700-7159.