Do you find yourself worrying a lot about money and finances? You are not alone. With a downturn in the economy, financial stress, many millions of people around the word are in the same boat. The ever-increasing cost of living and stagnation of wages can cause heightened financial pressure for us. Financial stress can seem insurmountable and at times we can feel really stuck, not knowing how to resolve the issue or move forward. The anxiety that comes with managing budgets, debts, and long-term financial goals can be overwhelming. Many clients can find themselves caught in constant worry over their finances, worrying about not earning enough to meet their financial commitments and basic living costs, difficulty in improving current financial situation, inability to save for the future, and many other aspects of their financial security.

Financial stress can have profound psychological impacts on individuals. This constant worry can disrupt our daily functioning and reduce overall mental health and well-being, making it difficult to cope with other life challenges. It can bring on the following effects:

1. Anxiety and Depression: Individuals may feel overwhelmed, helpless or hopeless about their financial situation, leading heightened anxiety and even clinical depression.  
2. Sleep Disturbances: Financial stress often disrupts sleep patterns, leading to insomnia or poor-quality sleep as our minds ruminate over the current situation and how to fix it. This can exacerbate mental health issues, creating a vicious cycle.
3. Decreased Cognitive Function: Chronic financial stress can impair our ability to concentrate, process information, make decisions, or solve problems. This can affect work performance and daily functioning.
4. Relationship Strain: Money problems are a common source of conflict in relationships. Stress about finances can lead to arguments, reduced intimacy, and even the breakdown of relationships.
5. Social Isolation: Individuals under financial stress may withdraw from social activities, fearing judgment or simply being unable to afford outings. This can lead to feelings of loneliness and isolation.
6. Negative Coping Mechanisms: Some may turn to unhealthy coping strategies, such as substance abuse, overeating, or other forms of escapism, to deal with their stress.
7. Sense of Hopelessness: Persistent financial difficulties can foster feelings of helplessness and hopelessness, leading individuals to believe that their situation will never improve.
8. Physical Health Issues: The psychological stress from financial problems can manifest physically, leading to issues like headaches, gastrointestinal problems, and weakened immune response.

Addressing financial stress often requires both practical solutions and emotional support to help individuals navigate their challenges and improve their overall well-being.

There are many practical ways to approach financial stress. Traditional approaches to financial management often focus on budgeting (i.e., planning your income and expenses, prioritising needs/commitments, managing existing debt, and planning savings and financial goals), financial advice, and/or investment advice. 

However, sometimes those approaches do not stop the endless rumination (i.e., the repetitive and passive focus on distressing thoughts or problems that are hard to interrupt) that can come with financial stress or help us with the psychological impacts of money worry. When you have tried everything else, Acceptance and Commitment Therapy (ACT) offers a different perspective, focusing on psychological flexibility and emotional resilience to the problem. Here’s how ACT can be used to manage financial stress effectively.

Understanding Acceptance and Commitment Therapy

Firstly, you may be wondering what ACT is. It is a form of psychotherapy that combines mindfulness and behavioural change techniques. The primary goal of ACT is to increase psychological flexibility, which is the ability to be open to and accepting of one’s thoughts and feelings while taking committed action towards valued goals. ACT is built around six core processes:

1. Cognitive Defusion: Learning to observe thoughts without getting entangled in them.
2. Willingness: Embracing thoughts and feelings rather than avoiding or struggling with them.
3. Mindfulness: Being present and engaged in the current moment.
4. Self-as-Context: Recognising that one’s sense of self is more than just the sum of one’s thoughts and feelings. 
5. Values Clarification: Identifying what truly matters to you in life.
6. Committed Action: Taking steps towards living in alignment with your values in meeting the current challenge.

Applying ACT to Financial Stress

1. Cognitive Defusion

Financial stress often involves intrusive thoughts such as “I’ll never be able to get out of debt” or “I’m a failure because I can’t save enough.” When we get caught up in our worries about finances, we often see that what our mind tells us is absolutely what is going to happen. It can be difficult to take perspective and see that there are other ways to see the situation, or that it won’t turn out as our mind says it will.  Cognitive defusion helps you distance yourself from these thoughts, viewing them as mere words rather than absolute truths. It helps you to hold those thoughts more lightly rather than getting further caught up with them which can disconnect you from taking practical steps to managing your financial pressures. 

So, when you notice distressing thoughts about money, you can use phrases like 

“I’m having the thought that…”, 

“I notice that I am having a thought that…” or 

“It is just a thought but may not be truth or fact” 

to create psychological distance. This helps reduce the power of the thought and prevents it from dictating your emotional response and actions.

2. Willingness

Willingness involves allowing yourself to experience the financial stress without judgment or resistance. Instead of battling feelings of anxiety or shame about money, you acknowledge and accept these emotions as a natural part of the human experience. After all, it is most likely that you feel the financial stress in the first place because you care about your financial security and independence Practicing willingness might involve acknowledging that financial worries are a common concern and that it’s okay to feel stressed. This doesn’t mean resigning yourself to financial problems, but rather being kind and patient with yourself as you navigate these challenges.

3. Mindfulness

Mindfulness helps you stay grounded in the present moment rather than being overwhelmed by future financial uncertainties or past mistakes. Techniques such as grounding (i.e., bringing yourself back to the present moment using your five senses), mindful breathing, or body scans can help centre your thoughts and reduce stress. When dealing with financial tasks, such as budgeting or planning, mindfulness helps you step back from the worry and allows you to approach them with greater clarity and less emotional reactivity.

4. Self-as-Context

Self-as-context involves recognising that you are more than just your financial situation or the stress it causes. By seeing yourself as a whole person beyond your financial issues, you can cultivate a more balanced perspective. This can be particularly useful when facing financial setbacks; instead of seeing yourself as a failure, you can view the situation as a challenge that you can overcome, focusing on your broader identity and strengths. It also helps you to step back from limiting thought patterns that get you stuck in the financial stress rather than taking valued action toward a resolution or effective management. 

5. Values Clarification

Clarifying your values helps you understand what truly matters to you beyond financial situation. For example, you might value security, problem solving, freedom, or self-compassion. By identifying these values, you can make financial decisions that align with what’s important to you, rather than just reacting to stress or societal pressures. This alignment can provide motivation and direction, helping you to create financial plans that are fulfilling and purposeful.

6. Committed Action

Committed action involves setting realistic, actionable goals that are consistent with your values. This could mean creating a budget that supports your value of financial security or setting up a savings plan that allows for a valued experience, like travel or education. It could also mean not giving up when the situation seems insurmountable and finding other ways to address the problem, even if it takes you some time to get there. Committed action helps you move forward despite financial stress, focusing on proactive steps rather than being paralysed by anxiety or fear.

Integrating ACT into Your Financial Management

To integrate ACT into your financial management, consider the following steps:

1. Identify Your Values: Take time to reflect on what you truly value in life and how your financial choices can support those values.
2. Practice Willingness: Incorporate mindfulness exercises into your daily routine to manage stress and stay present.
3. Challenge Negative Thoughts: Use cognitive defusion techniques to distance yourself from unhelpful thoughts about money.
4. Accept Emotional Responses: Allow yourself to feel financial stress without self-judgment, acknowledging that it’s a normal part of dealing with money.
5. Set Values-Based Goals: Create financial goals that reflect your core values, ensuring that your financial decisions contribute to a meaningful life.
6. Seek professional financial help from an expert for financial advice and guidance.
7. Seek psychological support to assist with managing the impacts of financial stress if you are unable to effectively manage alone. 

By applying ACT principles to your financial situation, you can build resilience and find a more balanced, values-driven approach to managing financial stress. This psychological flexibility not only helps you cope with immediate challenges but also empowers you to create a more fulfilling and purpose-driven financial life.