In our fast-paced world, it’s easy to compartmentalize different aspects of our lives. We often think of our finances as one thing and our mental well-being as another, distinct entity. However, the reality is that financial health and mental health are intricately connected, influencing each other in profound ways. For many, money worries are not just a minor inconvenience but are cited as the greatest source of stress, even surpassing concerns about work, personal health, and relationships. The 2025 FP Canada Financial Stress Index reported that 42% of Canadians named finances as their top source of stress. Understanding this powerful link is the first step toward building a more resilient and balanced life.
How mental health can affect your finances
Your mental state can significantly impact your ability to manage money effectively. When you’re struggling with your mental health, common challenges arise that can directly affect your financial well-being:
Lack of motivation and avoidance
If you’re feeling low or depressed, you might lack the motivation to manage your finances. This can lead to avoiding important tasks like opening bills, checking bank accounts, or seeking financial help. This avoidance can quickly result in missed payments and accumulating debt.
Impulsive decisions and overspending
Mental health conditions can lead to impulsive spending. For some, spending offers a brief high, prompting them to overspend to feel better or make rash financial decisions during periods of mania or hypomania. To add to this, this behaviour often leads to feelings of guilt, shame, and annoyance later.
Reduced income and poor decision-making
Mental health struggles can make it difficult to maintain steady employment, leading to reduced income and financial instability. Additionally, issues like depression can affect productivity and concentration, impacting one’s ability to make sound financial decisions, budget, or plan for the future, such as retirement.
Impact on other costs
Having a mental health problem might even affect your insurance, potentially leading to higher costs.
How financial stress impacts your mental health
The impact flows in the other direction just as powerfully. Financial struggles can have a devastating effect on your mental health:
Pervasive stress and anxiety
Money worries are a top concern for many. The FP’s 2025 Financial Stress Index showed that 49% of Canadians have lost sleep over finances, and 58% responded that financial stress has had a negative impact on their life. When it gets to that point, even seemingly benign things like getting a reminder about a bill can trigger feelings of anxiety and panic. Those feelings are only compounded when someone is getting calls from collectors because they are struggling to make credit card payments.
Depression and hopelessness
Excessive debt and financial challenges can cause feelings of anger, shame, and fear, often leading to anxiety, social withdrawal, or depression. People who struggle with debt often experience a sense of uninterrupted hopelessness, feeling trapped with no way out, alongside profound shame that can be isolating. This can make people feel unworthy of support in a society that often equates economic success with personal quality. In severe cases, debt and financial stress have been associated with increased risk of suicide attempts.
Sleep problems and physical symptoms
Worrying about money can lead to significant sleep problems. Forty-nine percent of FP’s 2025 Financial Stress Index respondents said they have lost sleep over finances. Financial issues can also manifest in physical symptoms like migraines, a weakened immune system, high blood pressure, digestive issues, and muscle tension. Individuals facing financial stress are four times as likely to suffer from sleep problems, headaches, and other illnesses, and twice as likely to report poor overall health.
Breaking the cycle: Steps towards financial and mental wellness
The deep connection between mental and financial health often forms a damaging negative spiral: financial stress impairs mental health, making it harder to manage money, which then leads to more financial stress. This cycle can reduce overall well-being, economic activity, and even impair decision-making.
The good news is, there are concrete steps you can take to break this vicious cycle and foster wellness in both areas:
Acknowledge the problem and assess your situation
As difficult as it can be, the first crucial step is to admit you’re facing challenges. The next step is to take action. Understanding where your money comes from and where it goes is vital. Gather all your financial information, such as:
- Bank statements
- Credit card statements
- Credit report
- Investment statements (RRSP, TFSA, RESP)
- Mortgage/rent
- Insurance
- All other bills (streaming services, phone, hydro, water)
Use all this information to create a budget that allows you to live within your means. The process of creating this budget should involve setting realistic short and long-term financial goals, and prioritizing what you spend money on. Many find that just having a plan in place reduces financial stress.
Automate your finances
To reduce the overwhelm of tracking bills and savings, automate payments and contributions. This makes managing multiple payments easier and ensures consistent saving. These savings can be the start of an emergency fund. Even a small emergency fund, like one month’s worth of expenses, can be a great first step to improving mental health.
Understand your money and mood patterns
Reflect on how past experiences with money might shape your current feelings. Keeping a diary of your spending and mood can help you identify habits and patterns, enabling you to plan ahead for difficult times. For example, if you have a tendency to partake in retail therapy, make a habit of purposefully not buying the first thing you are tempted to buy when you walk into a store.
Prevent overspending
If overspending is an issue, consider strategies like telling a trusted person about warning signs, giving them your cards, avoiding saving card details online, deleting tempting apps, limiting social media exposure to ads, and practicing delayed purchasing. In some cases, informing your bank about a mental health problem might allow them to flag unusual spending.
Seek support
You are not alone. Reaching out for help is a sign of strength, not weakness. Whether it’s someone you trust, a financial professional, or a mental health professional, they are all great resources to get help. In fact, the European Economic Review reported that consulting a psychotherapist increases a person’s income.
Practice self-care
Complement financial wellness with physical wellness. This includes a nutritious diet, regular exercise, mindfulness techniques like deep breathing, and using kind words and thoughts towards yourself. Additionally, spend your money on things and experiences that genuinely bring you joy and align with your core values, rather than impulsive purchases.
Some are even including financial wellness as part of their self-care routine. Intuit’s latest consumer survey reported that, “58% of 18-35-year-olds are integrating financial management into their overall wellness routines. Significantly, 44% report improvements in their quality of life since embracing financial wellness.”
Wrap-up
The research is clear, financial and mental well-being are deeply intertwined and cannot be approached in isolation. By taking proactive steps to address both, you can begin to break the negative cycle and build a foundation for a healthier, happier, and more financially secure future.
