Stress, the Brain, and Finances

Written by: Tonya (she/her)

2 min read | Published: October 29, 2024

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It’s no secret that stress can play a part in our daily lives. Economic changes, the job market, even the season can create changes in a person’s finances, which can impact emotions and mindset. Ultimately, this can lead to significant changes in how a person handles money — and that can influence overall financial goals.

Many people are aware that external factors such as income, expenses and debt can contribute to determining financial wellness, but internal factors like emotions and mindset also play a part. It’s important to understand that the brain has specific regions that control various functions. For example, the area of the brain called the prefrontal cortex controls executive function or reasoning and logic. According to an article by the National Library of Public Medicine, the prefrontal cortex is the brain region that is most susceptible to stress, and that stress can diminish the ability to utilize reason and logic. This means that with reduced capabilities to reason, a person may not make the best financial decisions during a time of stress.

What does it look like to make decisions while stressed? Stress and anxiety can trigger impulsive decisions that someone could later regret.

That might mean purchasing a more expensive replacement product, selecting a more expensive, unnecessary repair, going on a shopping spree to boost your mood, or sharing personal financial information which could lead to fraud.

Fear and worry also can lead people to opt out of handling their finances entirely — also known as avoidance. This may present as declining phone calls or ignoring bills from financial institutions. Emotions have a significant impact on the human brain and our ability to use logic to work toward improving our financial wellbeing.

What You Can to Reduce Stress

It may sound cliché, but the most important thing a person can do is learn how to manage their stress. Stress management has been talked about for decades, but with a better understanding of how stress can alter the human brain and a person’s capacity to reason, the conversation is more important than ever. When managing stress, it’s important to spend time doing things you enjoy and avoid things that will place added pressure on you.

Three of the best tips I can share about reducing stress are promoted across the internet and have been helpful to me personally:

1. Make time for your hobbies. Engaging in your hobbies doesn’t have to take a lot of time. Spending as little as 15-20 minutes a day on hobbies can help lower your stress levels.

2. Maintain an exercise regimen. Once again, exercise does not need to be lengthy or overly strenuous. Choose something that you enjoy and aim for 2.5 hours per week, or 22 minutes a day.

3. Find time to get outside. Being outside, surrounded by nature, has a positive impact on our health and stress levels. It doesn’t have to be a hike deep in the woods, it can be sitting in a grassy park while reading a book or taking a walk on a crisp winter day.

No matter how someone chooses to handle stress, the important thing is to make sure to take time to handle it. Stress has a negative impact on health, which can negatively impact finances. If a stressful situation arises, it’s important to focus on ways to lower that stress and find a space of calm before making important financial decisions.