Addressing your feelings can help your finances, experts say

By Madeline Holcombe, CNN

(CNN) — Money stress exists at all socioeconomic levels. It causes prolonged and serious fights in relationships, is linked to insomnia and stomach ulcers, and acts as a major stressor for most Americans, according to Dr. Megan McCoy, a financial therapist and associate professor at Kansas State University.

And with the uncertainty surrounding the impacts of tariffs on prices and a job market that seems to be running out of steam, it makes sense that financial panic may be especially high and emotional well-being particularly low.

The best time to make financial decisions is before you are in a bad situation, when you can look at your priorities, needs and realities and build a plan that is realistic and resilient, added Elizabeth Husserl, a financial adviser and wealth manager in the San Francisco Bay Area.

“We’re holding our breath for something bad to happen tomorrow,” McCoy said. “I hope readers recognize that if they are one of us who are holding their breath, first of all, it’s normal and valid because so many other people are feeling that way, and also to take a deep breath and try to figure out how to focus more on their current situation rather than what may happen.”

Money is emotional

Shawna Humbert promised herself that she was never going to live like she did as a kid, fearing the electricity would be cut off when the bill wasn’t paid.

But in 2018, she had left her job at a bank to join the police academy before deciding a law enforcement career wasn’t for her. She went from bringing in thousands of dollars a month to nothing, and growing up without financial literacy in her family, she had nothing saved, she said.

And as she worried over whether she could afford to turn on the air-conditioning or go out with her friends, she felt just like that little girl again, Humbert said.

The heartache, fear and uncertainty that Humbert faced isn’t unusual when it comes to money.

Of course, money is emotional. Your financial status influences your access to needs such as clothing, food, shelter and medicine and can be a resource for emotional needs such as belonging, pleasure and rest, Husserl said.

One problem is the scarcity mindset, or a belief that resources are limited. It’s particularly hard to make sound financial decisions that can help you get your needs met down the road when you are in the fear or panic mode, McCoy said.

“The scarcity mindset makes us more hyperfocused on immediate needs, and it makes it harder to think about the long-term goals,” she said. “We get this tunnel vision of avoiding the scarcity we once experienced, causing a lot of reactive behavior, because we’re just trying to make sure now we’re OK.”

This way of thinking also carries a lot of shame, McCoy said.

“Fear and shame are terrible financial advisers. Emotional clarity leads to financial clarity,” added Husserl, author of “The Power of Enough: Finding Joy in Your Relationship With Money.”

Before making any money decisions, it’s essential to address the emotional side first, she said.

You, and your partner if you have one, can sit down and write out your “money story,” Husserl said. What are the major experiences you had around money growing up? How does that impact the way you approach your financial life now?

And when you start to feel panic creep up, figure out which emotions are underneath that –– and don’t be afraid to sit with those feelings and really recognize what fears you are holding onto, McCoy said.

It may feel like you need to make a change in response to the uncomfortable feelings, but you are often better served waiting until you have worked through the feelings and can make decisions from a more even-keeled state of mind, she added.

A spending plan that doesn’t feel like deprivation

People often hear the word budget and think of dieting –– punishment, restriction and merciless cost cutting.

Instead, Husserl recommends a spending plan that focuses on building your financial resilience in both easy and difficult times.

When building your budget or spending plan, start on the emotional side of things once again, said Dr. Sonya Lutter, professor of practice and director of financial health and wellness at Texas Tech University.

What are the three to five things that are most important to you? Do your top priorities include family, health, novelty or security? Once you know what matters to you, you can look at how you are already spending your money and see whether there are ways you can align the two, she said.

Part of building resilience also means looking at which parts of your spending can be turned up or down depending on your financial situation of the moment and which are valuable enough to remain consistent, Husserl said.

For example, she and her family members know that when things are more comfortable financially, they might spend more on entertainment subscriptions or takeout to add a little ease and enjoyment into their day. But if money is tighter, they find shows together on one streaming service or make meal plans for the week, she said.

On the other hand, Zumba classes keep enjoyable exercise a regular part of her life, so she works harder to retain that as a line item of her spending plan regardless, Husserl added.

Money can be an effective way to get one’s needs met, but it’s helpful to diversify how you find feelings of satisfaction, McCoy said.

Could making food at home give you a sense of satisfaction that’s similar to going out for a nice meal? Would longer hugs with your spouse provide the comforting touch you experience when paying for a massage? Creature comforts are still important, but find many ways to meet those needs so that you don’t feel too tied to your spending habits, she said.

Small steps instead of overhauls

A scarcity mindset also makes it hard to take things step-by-step, which is crucial to making big and sustainable financial changes, McCoy said.

For her, a six-figure student debt felt impossible to look at as monthly payments, she said. Instead, everything she did was under this dark cloud of an impossibly large number.

Usually, she would be left feeling guilty and overwhelmed, McCoy added.

Instead, small and manageable steps that she built over time helped her feel more empowered and motivated.

Seattle-based money expert Tori Dunlap recommends setting a regular “money date,” or a scheduled check-in that you enjoy — maybe light your favorite candle or make yourself a delicious drink before you settle in.

Go over where you are financially, automate your savings or bill payments, and take some small steps by canceling a subscription or just texting a friend to let them know you are having a hard time, she added.

“We’ve been taught to carry shame around our finances, especially as women. But shame is not a financial strategy,” Dunlap said in an email. “The more we normalize these conversations, the easier it becomes to move forward — even when things feel hard.”

It’s easy to think that you are the only one struggling financially or that those in your community have so much more than you do, but starting the conversation with those you trust may show you that most people are facing similar stressors and constraints, Lutter said.

“Financial stress thrives in isolation, and building community around these conversations is half the battle,” said Dunlap, author of “Financial Feminist: Overcome the Patriarchy’s Bullsh*t to Master Your Money and Build a Life You Love.”

Emergency funds

A lot of financial stress comes from knowing that big changes can happen unexpectedly, and an emergency fund is a great place to start in relieving that fear.

“There’s always going to be financial emergencies, and by definition, we don’t know when they’re coming,” Lutter said.

Everything is getting more expensive, job losses happen, your air-conditioning could break –– and compounding interest is great for saving but can also pull people into a hole when it comes to debt, she added.

That’s where the emergency fund comes in.

“Aim for three to six months of living expenses if you can, but don’t get discouraged if you’re not there yet. Anything saved is better than nothing,” Dunlap said.

Building that emergency fund might take some time, but it is the highest priority for your financial well-being to protect against volatility and makes a big difference when it comes to emotional states, Lutter added.

Periods of financial growth and contraction are normal, Husserl said. Instead of panicking, it is important to find ways to build your own stability and resiliency to weather the more difficult times.

Humbert found another career and has redefined her relationship with money and saving now.

“Now to look back and see the growth and see my hard work giving me a future … I didn’t realize how important these things would be,” she said. “I just have a smile on my face knowing that I have savings at this point.”

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