Money Psychology

Does Money Reduce Stress?

Does Money Reduce Stress?

I don’t like money, actually, but it quiets my nerves.

~ Joe Louis

Money, or the lack of it, can cause a lot of stress. It can lead to tremendous personal or family strife and even wreck marriages. This issue has really come to the forefront during the financial crisis of the past couple of years. A lot of folks have really struggled with financial, psychological, and physical health problems as a result of excessive debt levels, employment issues, and insufficient emergency funds. A lack of money is undoubtedly stressful.

But how do you explain the fact that wealthy people can experience a great deal of stress as well? A lot of high net worth people have found the financial crisis stressful too. They are more likely to be invested in the stock market and have therefore suffered more investment losses than those who are not exposed to the market.

According to Thomas Stanley and William Danko, authors of The Millionaire Next Door, the wealthy also worry about actions the government might take that could affect their net worth. The financial crisis has led to a lot of talk about increased financial regulation and taxation of the rich. High net worth individuals are likely to experience elevated stress levels as a result. (I know. Cry me a river.)

It’s Not About the Money

I’ve written before that money is potatoes. It’s a relatively innocuous, tasteless entity by itself. We give it flavour and meaning. One of the things that money represents to many of us is a sense of security or control.

If we have enough money, we can relax. We don’t have to worry about food or shelter for ourselves and our families. A stable income gives us the potential to really control our future. We can budget our spending and save for emergencies and retirement. But can and do are often two very different things. Transforming potential into action can be easier said than done.

Gail Vaz-Oxlade recently wrote about control. When we don’t feel like we have control over our lives, we can experience elevated stress levels and even become ill as a result. But with control comes responsibility. We need to take action in order to control our finances. How often do we lament that if we only made a little more money we could get our heads above water?

But is more money really the stress tonic we think it is? There’s no doubt that a few extra dollars of income each week have the potential to take some pressure off. But only if we let them. Unless we use that extra money responsibly, we will not enjoy the benefits of it.

Control Your Money & Reduce Your Stress Level

A January 2009 Psychology Today article on The Pursuit of Happiness aptly captured our tendency toward short term stress-relief in favour of long term health:

“we . . . tend to grab superficial quick fixes such as extravagant purchases and fatty foods to subdue any negative feelings that overcome us. Such measures seem to hinge on a belief that constant happiness is somehow our birthright. Indeed, a body of research shows instant indulgences do calm us down – for a few moments. But they leave us poorer, physically unhealthy, and generally more miserable in the long run.” (The emphasis here is mine.)

Would more money reduce our stress levels? In many cases, the answer is likely no. When we get a raise, we often allow our lifestyle to inflate rather than keeping expenses constant and using the extra income to pay down debt and/or increase our savings. It’s not about how much money we make as much as what we do with it. Taking control of your money can reduce your stress level.

4 Simple Ways to Control Your Money

  • Set Up a Budget: Take an hour or two to list your income and expenses. If your income is more than your expenses, you need to cut spending or increase your income. There are a lot of different ways to set up a budget. It doesn’t matter how you do it, just that you take control of when and how your income is spent.
  • Establish an Emergency Fund: When the weather is fair, that’s the time to build your storm shelter. Contributing regularly toward an emergency fund is a must if you hope to weather financial difficulties. Just knowing that money is there for you when you need it can reduce your stress level during good times, and allow you to keep a cooler head when things get rough.
  • Set up a Retirement Savings Plan: Whether you’re 22 or 52, you need to have some idea of how much money you’ll need to support yourself in the absence of employment income. More importantly, you need a plan for how you’re going to save enough to achieve your goals. Learn about RRSPs, TFSAs, and other savings vehicles. Make sure you understand how much CPP and OAS you are likely to receive and factor that into your calculations.
  • Make It a Habit: Once you set up your saving and spending plans, it’s imperative that you are consistent in your efforts to stick to them. Good habits, like bad ones, can be hard to break. The longer you have been budgeting, saving and planning, the stranger it will feel not to do it.

Admittedly, all of these financial control mechanisms take some work. But getting started really is the hardest part. Once you’ve made these efforts part of your routine, you’ll find that implementing them is less stressful and that they will actually reduce your overall stress level significantly. Remember that control over your money is the key to reducing financial stress.

The other benefit to increasing your control over your financial life is that it will likely enhance other areas of your life. A key thesis of this blog is that improvements to one part of your life balance sheet can lead to improvements in other areas. For example, if you choose to cut spending by eating at home more often, your food consumption may decrease in quantity and increase in quality. That’s great for your physical health, as you will likely lose weight and feel better. That in turn can have psychological benefits as you feel proud of your healthier appearance and lifestyle.

Healthy habits can turn into a virtuous cycle where their benefits become self-reinforcing. You invoke discipline in your financial life. That in turn leads to positive effects in your interpersonal relationships as well as your physical and psychological well-being. That in turn helps you stick with your financial discipline. All of this can lead to lower stress levels and more contentment.

Which is the better stress reliever for you: more money or more control of your money?


  1. Barb Friedberg

    I adore the quote! Having more money definitely has the ability to reduce one very common type of stress: the stress of not being able to meet one’s financial obligations. As for the rest, as the title of this blog states: BALANCE is another way to get your stress level down. Great article.Barb

    • 2 Cents

      Of course I have to agree with you on balance. If you’re ever feeling stressed, I can pretty much guarantee that’s a signal that something in your life is out of balance. The trick is to figure out what it is and correct it just enough to maintain balance. Over-correcting will just lead to more stress.

      Thanks for your input! 🙂

  2. AAA Auto Wholesale

    Money relieves short term stress, but if history repeats itself you’ll be back to no money and stress again. I appreciate the tips that you have given, I think that its very important to have a plan…

    • 2 Cents

      Having a plan and sticking to it are essential if you want to reduce financial stress. I’m going to work on this some more over the next 2 weeks and I’ll report on my progress at the end of the month.

      Thanks for stopping by AAA.

  3. Roshawn @ Watson Inc

    @Barb, You are right. That quote rocks. I missed it on first reading, so thanks for point it out.

    @Balance Junkie
    Overall, I agree with the premise. Money can reduce stress because we give it power to reduce our stress. It certainly isn’t the money itself.To quote you: money is potatoes. It’s a relatively innocuous, tasteless entity by itself. We give it flavor and meaning.

    Since we do can control ourselves with respect to money, we can control our stress level. Budgeting, emergency funds, investing, and overall good money habits help us control financial stress. That’s really a powerful thought when you really think about it.



    • 2 Cents

      Who knew Joe Louis could be so profound? You’re right about good habits Shawn. They can help us control financial stress – and other types as well. It seems so simple, and yet it’s really hard for many of us to do. I’ve fallen out of a few good habits lately and it’s time for me to reinstate them. 😉

      Thanks for your comments!


    More money can complicate lives which can also add stress. Typically, the more money you have, the more stuff that follows.

    Taking control of your money is critically important not just to reducing stress but to being happier and more successful financially. It’s all about developing good healthy financial habits. We delivery workshops in the workplace and one of our workshop is called Take Control of Your Money. My 7 habits to take control of your money are:

    1. Know your net worth
    2. Own appreciating assets
    3. Control your debt
    4. Live within your means
    5. Save regularly
    6. Surround yourself with the right people
    7. Engage and Participate in your financial affairs!

    Thanks for making us think!

    • 2 Cents

      I like your 7 ways better than my 4 ways! I would say that living within your means might be the most important one, but surrounding yourself with the right people is probably the most overlooked habit. It’s hard to cut your spending if most of your friendships centre around a night on the town or other expensive outings.

      Thanks for the information Jim! 🙂


        Finding the right people is key.

        This includes spouses, family, parents (not that you always have a choice with family) but often fiscally responsible people learn from spouses or parents.

        It can also mean friends

        It can also be mentors. Finding a financial mentor is a great strategy

        It can also be professional advisors – financial advisors, accountants, lawyers, bankers, etc.


  5. Doctor Stock

    Well… whether or not one thinks money reduces stress, one thing I am sure of… debt increases stress. Reducing debt or eliminating it all together is a great way to reduce one aspect of stress. Of course, if you stress yourself out working harder or more to the neglect of everything else in your life, you’ll likely find new sprouts of stress cropping up. And so the vicious cycle of life continues…

    • 2 Cents

      I guess Barb was right. We really do need balance, even in our efforts to reduce debt and stress. Thanks for your thoughts Doc.

  6. Squirrelers

    “It’s not about how much money we make as much as what we do with it.” I like that quote, well said. Have to qualify that a bit, to say that a certain level of income is necessary to make sure basic needs are met. But overall, it’s more important to have control over your money than just make more, in my opinion.

    I like the approach you take incorporating money into the broader life picture. I have always advocated that health, wealth, and relationships are interrelated more than people realize.

    • 2 Cents

      Thanks! I’ve learned over the years that improving habits in one area of life can spill into others. Unfortunately, the reverse is also true. Changing one small habit for the better can lead to more positive changes, whether it’s in the same area of your life, or a different one.

      Thanks for stopping by! 🙂

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