By Michele Lerner
Individuals rely on friends and family to relieve emotional stress and doctors to alleviate physical stress.
But financial stress is perhaps the single most common source of both emotional and physical stress. People who turn to you as a financial professional will benefit from all the proactive strategies for addressing that stress and increasing financial stability that a professional can offer.
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More than half of the employees who responded to PwC’s 2018 Employee Financial Wellness Survey said they are stressed about their finances. In fact, when asked about what causes the most stress in their lives, 40 percent of respondents identified financial challenges as their most serious stressor.
Only 21 percent said their jobs are the most stressful element, while 15 percent flagged either health concerns or relationships. Since financial worries can pervade many aspects of daily living, helping your clients cope with this primary source of stress will go a long way toward improving their quality of life.
The Wealth And Health Connection
Financial freedom means different things to different people, but for 21 percent of PwC’s respondents, it means not being stressed about their finances. Another 21 percent said being debt-free defines financial wellness, while yet 21 percent pointed to having enough savings to not worry about unexpected expenses.
Chronic stress, whether it comes from financial pressure or another cause, can have long-term physical and mental consequences. Some of the symptoms of ongoing stress, according to WebMD, include low energy, headaches, gastrointestinal issues, aches and pains, chest pain, insomnia and a propensity for colds and infections.
Getting control over financial matters can reduce stress and some of those symptoms. More than half of respondents to the PwC survey said they want to make their own financial choices, but they also want to have someone — such as a supportive financial professional — help them validate those decisions.
Assistance from a personal financial professional is among the factors that could help increase financial wellness, according to survey respondents. Those surveyed also thought lower healthcare costs, better job security, a rising stock market, lower inflation, an improved housing market and lower education costs could help reduce financial stress.
Financial Stress By The Generation
Among sources of financial stress, the top concern for Millennials and Gen Xers (48 percent and 51 percent of PwC respondents, respectively) is not having enough emergency savings for an unexpected expense.
For Baby Boomers, a lack of emergency savings was the No. 2 concern, mentioned by 41 percent of respondents. The biggest concern for 46 percent of Baby Boomers is not being able to retire when they want to, which is also a worry for 39 percent of Gen Xers and 25 percent of Millennials.
One reason Baby Boomers say they will delay retirement is the need for healthcare, which — for the first time in the survey’s history — surpassed the response of delaying retirement because the respondent doesn’t want to retire. People who have faced years of financial stress may have ongoing health issues, such as mental issues, cardiovascular problems, obesity and other illnesses that require treatment.
The third most common financial worry is not being able to meet monthly expenses, a concern for 30 percent of Millennials, 23 percent of Gen Xers and 17 percent of Baby Boomers.
One issue contributing to these financial strains is the fact that 42 percent of respondents with adult children are still providing financial support to those children. More than half said they are willing to sacrifice their own financial well-being to do so.
Another issue involves employees taking money out of their retirement funds. More employees than in the past say they think it’s likely they’ll need to use the money in their retirement plans for non-retirement expenses in the future. Retirement plan funds have become a safety valve for many who don’t have money set aside for an emergency or unexpected expense, according to PwC.
Financial worries have multiple effects on people. A quarter of those surveyed said the biggest impact of financial stress is on their health. When we are faced with short-term stress, the “fight-or-flight” instinct kicks in and causes our blood pressure to rise, our heart to pound and our breath to quicken. Chronic stress can have significant long-term consequences when the source of the stress goes unaddressed.
In addition to health concerns, 18 percent said financial worries reduce their productivity at work, while 11 percent said this stress affects their work attendance. Another 18 percent said financial concerns take a toll on their relationships.
Fear And Investment Choices
Stress doesn’t just affect daily life and health — it can also have a negative effect on investment choices.
According to Karthik Easwar, an assistant teaching professor at Georgetown University in Washington, D.C., even individuals with relatively stable finances can be influenced by their emotions and make poor choices based on fear. Easwar has observed the prevalence and effects of that fear during his research for an ongoing project on emotions and financial behavior being conducted jointly by Brigham Young University, Ohio State University, the University of Arizona and Georgetown University.
“Individuals tend to opt for more conservative investment options because of the emotional toll of ups-and-downs of riskier investments,” Easwar said. “They think they’d rather see daily small returns and don’t realize that over the long term a slightly riskier investment can lead to higher returns.”
People overestimate how they will feel if an investment declines, Easwar says, but it may not be as emotionally grueling as they think. This fear partly explains why people have too much of their money in savings, CDs or other overly conservative investments.
“Financial professionals need to convey to investors that the emotional response to potential declines can be overestimated,” he explained. “Perhaps they can look for a silver lining, such as a tax deduction on a loss, and point to other long-term gains realized from other investments.”
One of the biggest fears for many people is that they will run out of money during retirement, Easwar notes. Financial professionals are often in the perfect position to address this very real concern.
“Financial planners should use that fear to explain to their clients that starting early and taking on some measure of risk will maximize their long-term wealth,” Easwar suggested.
Financial Professionals Play A Proactive Role
Addressing clients’ main concerns can be the starting point for a holistic approach to money management that includes exploring a variety of financial vehicles in the context of life plans and health considerations.
After an emergency savings account is adequately funded, a financial professional can develop an investment strategy and retirement plan consistent with the goals and age of the client. Formulating strategies to cover healthcare costs in retirement and to assist family members, including adult children or aging parents, can also help clients handle both their worries and their finances.
Whether working with a young professional just starting a career, a pre-retiree or anyone in between, financial professionals can provide guidance that will allow people to achieve financial clarity and gain control over their money, thereby diminishing their overall stress. Financial planning has more than a monetary benefit. When stress is alleviated around money matters, mental and physical health improvements are likely to follow.
Michele Lerner, a Washington, D.C.-based freelance writer, has been covering personal finance and real estate for more than 25 years. Her work has appeared in numerous publications including The Washington Post, Bankrate.com, The Motley Fool, REIT magazine, Fox Business News, National Real Estate Investor magazine, DailyFinance.com and NewHomeSource.com.
Transamerica is not affiliated with Forbes. The opinions and content presented by the author are hers and not those of Transamerica or its affiliates.
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