Money is a constant part of daily life and the rising cost of living, economic uncertainty, inflation, and pressure to plan for the future can take a toll. Over time, financial stressors can impact not only your bank account, but also your mental health, relationships, and overall wellbeing. Let’s look at some ways money can affect our mental health, plus the three steps you can take to create financial clarity, reduce stress, and support a more balanced life.
Money and stress
Financial concerns are among the most common and persistent sources of stress Canadians face today. According to FP Canada, 43% of Canadians say that money is their top source of stress – ahead of health, relationships, and work.
Factors like job loss, career transitions, rising interest rates, market uncertainty, and the increasing cost of essentials can increase financial pressure. This stress doesn’t just stay in your bank account. Research from the Government of Canada states that people experiencing financial stress are:
- Twice as likely to report poor overall health;
- Four times as likely to experience sleep problems, headaches, and other stress-related symptoms; and
- More likely to experience strain in personal relationships.
Financial stress can compound with deadlines, family responsibilities, and work expectations. It’s important to recognize and address these concerns early to prevent them from becoming larger emotional or financial challenges.
Why taking care of your money improves your wellbeing
There is a strong connection between financial health and mental health. When you’re stressed about money, this activates the same part of our brain as physical danger, creating a persistent sense of worry. Over time, this can lead to increased anxiety, fatigue, and even avoidance behaviours like ignoring credit card bills or delaying important decisions.
Financial clarity acts as a release valve. When you have a plan and feel in control of your finances, several areas of life tend to improve:
- Stress levels and anxiety decrease;
- Financial confidence increases;
- Decision-making becomes clearer; and
- Overall wellbeing improves.
Managing your money well isn’t just about wealth; it’s about peace of mind.
3 best practices to take care of your money (and mental health)
1. Get clarity
Financial stress often comes from uncertainty, not just from a lack of income. Clarity helps you understand what’s really going on and gives you a sense of control. Start with the basics:
Track your monthly cash flow: Look at the money coming in (income, benefits, etc.) vs. money going out (rent, subscriptions, groceries, transportation, debt repayment, etc.). A tool such as a cash flow calculator can help you with this, while some banking apps have features that categorize your spending automatically or forecast future cash flow.
Identify fixed vs. discretionary spending: Fixed spending is for essentials, like housing, clothing, food, or medication. Discretionary spending includes things like eating out or taking a vacation. These are sometimes referred to as needs vs. wants and being mindful of the difference can help you adjust your spending. Budgeting apps, including free options, can also help you manage your money.
List and track your short-term obligations: Short-term obligations are debts or payments due within a year, such as credit card balances, insurance premiums, or upcoming annual fees. A simple spreadsheet or notes app can help you track due dates, minimum payments, and interest rates. Bringing visibility to your numbers can reduce anxiety and help you make decisions with confidence.
Automate certain payments: Automate fixed essentials, savings, and minimum debt payments to stay consistent and avoid missed bills. Be cautious when automating variable expenses like credit cards and utilities; monitor these to avoid cash flow surprises. Keep payments for discretionary spending and subscriptions manual, so you stay aware and in control of where your money goes.
2. Build a financial buffer
One of the most effective ways to reduce financial anxiety is to increase financial resilience. You can do this by building a financial buffer, also known as an emergency fund, which helps protect you from unexpected expenses or disrupted income.
Here is a simple way to get started:
- Open a savings account that has no fees or low fees.
- Each week, save and deposit a realistic amount – even $5 or $20 helps.
- Aim to build an amount equal to 3 to 6 months of your regular expenses.
Not everyone can save large amounts quickly, and that’s ok. Even a small buffer can reduce the fear of unexpected expenses, prevent reliance on high-interest debt, and provide a sense of stability.
3. Talk about money – don’t internalize it
Financial stress can grow in silence. Talking about money can help bring light to a taboo topic.
Start by talking to someone in your trusted network, whether it’s with:
- A partner or family member
- A trusted colleague
- A financial advisor
- A counsellor
Talking about money can bring new perspectives and turn problems into actionable plans. Avoidance, on the other hand, can worsen both financial and emotional outcomes over time.
True financial wellbeing goes beyond the balance sheets. When you feel in control of your finances, you’re likely to experience less stress and improved mental health. Financial literacy isn’t just a professional skill; it’s a personal tool for building wealth and a healthier, more balanced life.
CPAs can access mental wellness support through Telus Health.
This article is not intended as financial advice, and you should not make financial decisions based solely on the information presented.
Nelson Soh, CPA, CA is a TEDx Speaker, best-selling author of Life Literacy and the 100 Day Money Mindset Journal and financial literacy expert. Nelson is also the co-founder of FSQ Consulting, a business consulting firm, and one of CPA Financial Literacy Program volunteers. You can follow Nelson on LinkedIn, Instagram, or TikTok, to learn more about financial and life literacy.
