Financial distress: definition, effects and advice

Today, many changes are characterising the global socio-economic landscape: a new financial crisis is generating a rise in global inflation rates.

There are two main triggers: the post-Covid economic recovery and the resulting increase in energy demand, and the Russia-Ukraine crisis and the resulting rise in energy costs.

Based on surveys of our corporate clients, we have found that in the past year, a strong sense of stress and concern about one's current and future financial condition has increased in individuals.

In fact, more and more people report being anxious or fearful about their own and the country's economic situation.

Recently, this specific type of stress has been called 'financial stress', also known as 'financial distress'. Let us see, therefore, what it is and how we can intervene to contain it.

Financial distress: what we are talking about

Financial stress is a negative emotional experience related to the feeling of lack of control over one's financial situation and the fear of not being able to meet one's upcoming and future financial obligations.

According to Salary Finance's Report 2022, financial problems are the primary source of stress (42%), higher than work problems (31%), worries about one's health (29%) and relationship problems (27%).

It is important to talk about this increasingly common type of stress because it has significant effects on both a person's personal and work-related well-being.

  • Effects on personal well-being: financial stress can be regarded as the opposite of financial wellbeing, i.e. well-being due to a sense of control and security over one's financial condition. Generally, financial stress can generate, in some cases, physical consequences such as insomnia, loss of appetite, stomach ache and headaches; in other cases, psychological repercussions such as anxiety and panic attacks, depression, mental rumination (repetitive thoughts about past or future situations).


  • Effects at work: People suffering from financial stress spend an average of five hours per week dealing with their financial problems at work. In particular, effects at work include difficulty in carrying out regular activities and consequent accumulation of work; general dissatisfaction and low involvement in one's work.
Stressed man

Some tips to deal with financial stress

Here are some strategies to manage the effects of financial distress on a personal level.

1. Listen to your emotions.

The first step in dealing with any situation that generates stress is to learn to listen to our emotions. Being aware of our moods as they arise is a good way to combat constant brooding and to be able to get rid of the negative state of mind more easily. One way to listen to and manage our emotions can be to write them down: this also helps us brainstorm possible solutions to the problem we face.

2. Focus on what you can control.

As we have seen, one of the factors underlying financial stress is precisely the lack of control over the events happening around us that have an impact on our financial situation. Given the impossibility of changing this situation at the macroeconomic level, we can intervene in the way we approach problems and events. When we are faced with a financial decision or problem, let us try not to focus on what we ideally want to have, but concentrate on what is within our control and thus on what we can realistically do to deal with the situation: for example, let us take our accounts in hand and do an analysis of income and expenditure on a monthly basis, so that we have the different items of spending under control and thus know which of them can be contained.

3. Create good habits in times of low stress and carry them forward even in difficult times.

Stress often causes us to behave in habitual ways instead of acting rationally and intentionally. For this reason, a good tip is to create positive habits in times when we are less stressed and when we have fewer financial worries; these can protect us and guide us when more difficult periods arrive in which the lack of energy and the fatigue of the moment lead us to set on autopilot. A very good strategy, for example, is to always combine pleasurable activities with activities perceived as burdensome, so as to establish a reward system when completing our daily duties.

4. Think in terms of objectives and compare yourself with people who might share them.

A great way to combat financial stress is to set clear and sustainable goals. We are not always used to making our goals explicit and planning to achieve them; however, making this effort will help us increase both the likelihood of their achievement and our sense of control over the situation, thus reducing perceived worry and anxiety. Furthermore, sharing our financial goals with people who have similar goals to us can be enriching, because we may discover new solutions and new perspectives on them.

5. Temporarily suspend difficult decisions and find activities that reduce stress.

One mistake we are often in danger of making is to make impulsive and hasty decisions in order to reduce our discomfort and tension. This would not be a good strategy to follow, especially in the area of financial choices. To avoid incurring this risk, we can try to put the decision to be made that generates us stress on hold in order to devote ourselves to an activity that helps us reduce the worries of the moment. Examples are meditation, sporting activity, going for a walk, going out with friends or whatever helps us take our mind off our worries. Once the stress peak has passed, we can rethink the problem or decision to be made with a clearer mind and a more serene approach.

In conclusion

More and more people today report worries due to global changes and financial uncertainty.

It is important, therefore, to name this distress and recognise the effects that financial stress can have on each of us.

The way to deal with financial stress follows the rules of stress management in general; in this specific case, however, it is important to bind it to a healthy awareness of our income and spending, so as to avoid stressful situations due to a lack of management of our finances.

At the same time, following simple financial education tips allows us to make predictions about the immediate future and plan for longer-term life changes.