Whether we have it or need it, whether we manage it, accumulate it, or are spending it, money creates anxiety.

Anxiety can be debilitating. Research known as the Yerkes-Dodson Law, first documented in 1908, shows that some anxiety, such as nerves before going on stage, can be helpful to sharpen the senses. Too much anxiety, however, and we start to shut down, and our faculties are reduced.

That same study showed that money is one of the sources of anxiety more likely to push you over that tipping point. Stress about money creates anxiety, which leaves us less able to cope, which increases the anxiety even more.

Money and anxiety

What is it about money that gets us so anxious?

One answer is pretty obvious: if we don’t have enough money to meet our basic needs. Without enough money for food, shelter, and security, we struggle to put our attention to other matters, such as problem-solving or creativity.

Those in financial difficulties will often speak of how they struggle to engage with their problems. And experiments on ideas such as Universal Basic Income have shown that if you give someone sufficient income for their basic needs, then they are more likely to seek a job, not less.

The anxiety from money doesn’t always go away for those who have it. Indeed, as George Michael is quoted to have said, becoming wealthy doesn’t solve your problems; it just creates different ones.

When faced with money decisions, especially long-term planning and thinking about the future, we tend to resort to fight or flight mode. Short-term decisions, or even not engaging at all.

Here, then, are all three tips for how to reduce our natural tendency to worry about money.

Tip 1: Engage

I’m sure we’ve all done it: a red bill, a final notice, arrives in the post at a difficult time, and it gets put to one side and ignored. Comedian and actor Spike Milligan was said to have had two post boxes in his front door; one was marked ‘Bills’, and behind this one was a bin.

In practice, however, not engaging with the problem only tends to make the problem worse. Little steps are the secret here. Anxiety is caused by being overwhelmed, and just doing something small can lead to another small action, which will eventually build into reducing the issue.

Tip 2: Have a plan

There is a Chinese proverb which states that every long journey starts with a small step.

But in which direction?

I know from experience as a financial planner that many people put very little thought into what they would like their future to look like. We are busy at work, busy raising children, and we rely on the simple assumption that we need to build wealth.

However, simply saving without a purpose other than a vague notion of needing money one day can be a hollow exercise. It also means that we don’t tend to save enough.

The first part of this plan, therefore, is: how much do you need?

In order to answer this, we also need to ask ourselves what a happy future would look like. What will bring you wellbeing and contentment in the future, and how much will it cost?

The full question, therefore, is: how much do you need for a contented life?

Tip 3: Get help

It is very difficult to challenge our own assumptions. That is why they are called assumptions!

It is also difficult to recognise your assumptions, or to challenge your ideas for your future, by yourself. Discussing it with someone else verbalises the issues and makes them real. I, for one, know that I think best when I’m talking.

It might therefore be a good idea to talk through this vision for a wellbeing future with your partner, your family, and your financial planner. This can help you to identify and prioritise your objectives, and ensure they are built around wellbeing, not just wealth.

Your financial planner can then help build that plan, and monitor progress over the years, amending as appropriate.

Engaging with our daily finances and creating a clear path to identifiable objectives will have a significant impact on anxiety when it comes to money.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.