Let’s begin with stress. Stress is the body’s response to any demand made on it. It affects almost every system of the body, including heartbeat, breath, muscles and our brains. A little stress can be a good thing, if it motivates us to respond constructively to a threat or opportunity and if it doesn’t last too long.
Unfortunately, stress resulting from financial challenges is often chronic, affecting 26% of Americans most or all of the time. Unexpected expenses, the need to save for retirement and out of pocket health care expenses are major culprits.
Stress Spiral No. 1: Physical Health
Chronic stress is linked to physical health issues. High stress causes a fight-or-flight reaction, releasing adrenaline and cortisol. These hormones can suppress immune, digestive, sleep and reproductive systems, which, if sustained, may cause them to stop working normally.
Employees with high financial stress are twice as likely to report poor health overall and are more than four times as likely to complain of headaches, depression, or other ailments. The chart below shows how much sicker people with “debt stress” were during the depths of the financial crisis.
Stress is also associated with high-risk behavior including alcohol and drug abuse: overeating, sedentary behaviors like web surfing and TV watching. These behaviors can worsen one’s health and finances.
The potential feedback loop then is financial challenges leading to poor health, directly and indirectly via unhealthy behaviors. Poor health can worsen money challenges and financial stress by increasing medical expenses, reducing productivity at work and making it harder to make good financial and medical decisions.
Stress Spiral No. 2: Delayed Healthcare
Financial stress can also harm health when lack of financial resources causes people to delay necessary medical treatment. One in four Americans has trouble paying medical bills, with some delay treatment. Cost-related non-adherence may be most important for people with chronic conditions such as high blood pressure, asthma and diabetes. Fifty-six percent of Americans with common chronic diseases say they’ve have missed medication because of cost.
This leads to the second feedback loop: a medical condition results in unexpectedly high out of pocket costs, increasing stress, which worsens the condition directly and indirectly as the patient delays needed medical care and medication. This spiral may become more widespread as more employers switch to high-deductible health plans, which put a greater financial risk on patients.
Stress Spiral No. 3: Mental Health
Of course, we experience financial stress mentally as well as physically. People with debt are three times more likely to have a mental health issue, especially depression, anxiety and psychotic disorders. Financial stress is the second most common cause of suicide, after depression. Unfortunately humiliation among the financially stressed makes it harder to seek help as it worsens mental health.
Mental health challenges can impair financial (and medical) decision making, self-control and employment possibilities. Those with dealing with scarcity suffer from greater cognitive loads from managing the various challenges of making limited means work, impairing executive functioning including creativity, empathy, planning for the future and problem-solving.
So we have our third vicious cycle. Financial stress is associated with mental health challenges, which impair financial decision making and employment, further worsening the financial situation. This can increase stress, which may then worsen the mental health condition.
Breaking the Chain
Left to themselves, vicious cycles like these can spiral out of control, with grave consequences for individuals, employers and societies. Fortunately, there are things individuals and organizations can do to break these loops.
Individuals can take steps to improve their financial behaviors, by better controlling spending and increasing savings. This begins with empathetically planning for one’s future and creating a budget designed to make you happier. Others may benefit from the advice of a financial advisor or credit counselor. We can also work on developing “pride in good money habits instead of money itself,” exercising, using relaxation techniques such as yoga and meditation, and obtaining support from friends, family and, perhaps, a therapist.
Governments, healthcare providers and businesses have a moral responsibility and a direct interest in breaking these loops which destroy welfare, social capital and shareholder value. They should sponsor financial (as well as general and mental) wellness programs to help people control their spending, attain resiliency with emergency funds, and plan for the future. Financial institutions need to support such programs and provide products and services more appropriate to low and middle-income consumers.
In short, the status quo for millions of Americans is not sustainable. The typical American is stressed because she lives paycheck-to-paycheck, saves nothing for retirement, has little financial literacy and is increasingly being asked to shoulder the costs and uncertainties of healthcare and retirement. The resulting stress can cause physical and mental health to spiral along with financial health. It’s time we do something about it.