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Here’s What Causes Financial Stress And How To Overcome It


Financial stress affects all of us at some time or the other. However, the reasons and the levels of stress could be different depending upon how certain situations and the resultant impact is handled. Some of the situations that cause financial stress are not having enough money to invest, delaying the investment process, falling into a debt trap and being unprepared to handle financial emergencies. At times, allowing emotions to drive the decisionmaking during periods of market volatility and having negative thoughts about the possibility of achieving investment goals could also be the reason for financial stress. Whatever be the reasons, it is a proven fact that financial stress impacts physical and mental health in adverse ways as it can contribute to low self-esteem, stress in relationships and a feeling of guilt. These effects can be both short-term and long-term. A combination of financial stress and mental health problems can create a spiraling vicious circle, where one compounds the other.

Hemant Rustagi 
Chief Executive Officer, 

Let’s find out what causes financial stress at different stages of one’s financial life cycle: 

Early working years : 

At this stage, inability to keep a balance between spending and saving can be a major reason for financial stress. The power of financial independence often results in indiscreet use of credit cards, which lands young people into a debt trap. There are also instances where a significant part of post-tax income is used for repaying housing loan EMI, leaving little for other goals/needs. While the use of credit card in itself is not a cause for financial stress, the negative effects of indiscriminate use are quite a few and usually grow as time goes on. 

Mid-career : 

This is an important stage in one’s financial life as the money is required for children’s education and marriage, repaying the home loan and to enhance the contribution towards retirement planning. The impact of delaying investment process begins to show at this stage and that can be quite unnerving. Similarly, not taking inflation into account while investing for children’s education and marriage as well as retirement planning can leave a big gap in what is required and what is accumulated. 

Retirement : 

All of us dream of leading a comfortable retired life. Unfortunately, not many plan for it in the right manner as they either end up investing conservatively or delaying their investment process or both. The anxiety of outliving retirement savings can cause serious financial stress. Besides, the widening gap between income and ever-increasing expenses can be quite stressful financially as one has to compromise at an important stage of one’s life. 

Here are a few things that can help in reducing financial stress: 


Budgeting is the key to bringing discipline in money management process. It helps in curtailing unnecessary expenses and saving some money on a regular basis. It also brings in a discipline in one’s investment process. Simply put, creating a balance between spending and saving goes a long way in avoiding the debt trap and eventually reducing financial stress.

Creating an emergency fund- 

An emergency fund is an integral part of one’s risk management process as it helps in tackling situations that may arise on account of job loss, medical emergency or divorce. In other words, knowing that resources are available to tackle any financial emergency without disturbing one’s disciplined investment process can reduce, if not eliminate, any financial stress. 

Having an investment plan in place- 

Having an investment is important as a directionless investment process creates uncertainty and that can be a major cause of financial stress. The feeling of being in control of investment process can keep an investor happy, both financially as well as emotionally. 

Taking help of an advisor- 

The complexities in investment process and the vagaries of the markets can be incredibly stressful. An advisor can help in keeping emotions away from the decision-making process and in reducing the financial stress by explaining different situations and keeping investments on track though the defined time horizon.

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