Q.ai - Make Genius Money Moves
Sept. 30, 2021
Millennials face quite the dangerous dynamic: For many, financial strain sits at the root of their mental health issues, but their mental health issues can also exacerbate their financial stress. Read: poor spending and saving habits or difficulty focusing on the future while just trying to survive the present. But while many of us often feel stuck in a vicious cycle, there are some steps you can take to better manage your money and, in turn, your mental health.
It may not come as a surprise that depression and anxiety are on the rise. Globally, an estimated five percent of adults and an estimated 3.8 percent of the total population cope with depression, according to the World Health Organization. Meanwhile, over 40 million adults in the US (or 19.1%) live with an anxiety disorder, according to the National Alliance on Mental Illness.
Even before the COVID-19 crisis, from 2017 to 2018, 19% of adults in the United States experienced a mental illness, which is an increase of 1.5 million people since the year prior. In fact, according to the 2018 report “ Major Depression: The Impact on Overall Health” by the Blue Cross Blue Shield Association (BCBSA), depression diagnoses have steadily increased by 33% from 2013 to 2016. Amongst millennials, depression jumped by 47% from 3.0% to 4.4%—a rate that’s faster than most other age groups.
And, of course, the pandemic has only worsened mental health issues. Researchers recently polled millennials and found that more than half felt overwhelming anxiety in the last year. In fact, 17% of them were diagnosed with or have been treated for anxiety, which is 66% more than the number of young adults who were diagnosed with or treated for anxiety in 2008. In fact, millennials are the most likely generation to grapple with anxiety and depression.
Moreover, another study," Prevalence of Depression Symptoms in US Adults Before and During the COVID-19 Pandemic,” published in JAMA, finds people who tend to struggle more financially are adversely affected. For example, having less than $5,000 in savings is associated with a greater risk of depression. And the likelihood of having a mental health disorder is three times higher amongst those who also have unsecured debt, according to one systematic review.
According to a Student Loan Hero survey of over 1,000 adults, almost half of respondents felt depressed about finances or had anxiety over their financial situations. In fact, 37% of respondents (and 49% of millennials) reported that their financial situations negatively impact their mental health.
After all, millennials entered the workforce on the shoulders of the 2008 recession, and they’re still playing financial catchup. According to the National Bureau of Economic Research, it takes about a decade to recover from a setback like that of the recession. So millennials were only just starting to get back on their feet when COVID-19 took another stab at the economy.
In short: The Great American Affordability Crisis—compounded by the costs of COVID-19—is taking a devastating toll on millennial mental health. Millennials have less money and more mental health issues than the generations before them.
BCBSA Chief Medical Officer Trent Haywood, MD, JD, told Forbes, “Various studies and measures all suggest that there is an underlying trend that depression has been and continues to be a growing problem.”
3 Tips for Managing Money Stress
Because mental health issues aren’t going to go away anytime soon, here’s how you can take more control of your finances to alleviate at least one of your stressors.
1. Seek professional help for your money stress.
Unfortunately, research published in JAMA Internal Medicine purports that the large majority of people who suffer from depression seldom seek help. Yet anxiety and depression continue to wreak havoc on people’s finances. Worse, financial strain is claiming millennial lives, according to Wellbeing Trust . More millennials are dying “deaths of despair” related to drugs, alcohol and suicide, Time reported in June, sometimes due to financial stressors.
On the upside, however, in an essay for the Wall Street Journal in 2019, Peggy Drexler called millennials “the therapy generation,” suggesting that they’re destigmatizing mental health issues. Arguably, millennials seem to talk about both taboo topics shamelessly: depression and money. A survey by Insider and Morning Consult finds that they’re more likely to unpack their finances with friends and family than their parents ever were.
Talk to a professional about your financial woes. Cognitive behavioral therapy with debt counseling, for example, is one surefire way to unpack the triggers that drive your spending and saving habits (or lack thereof).
2. Create a better budget.
Creating a realistic budget can help you better manage your money, which can ease some of the mental load. Not sure where to start? The 50/30/20 rule is a popular budget that divides your after-tax income into three categories:
- 50 percent for your needs (payments like your rent or mortgage, car insurance, groceries, health care insurance, student loans, utilities, etc.)
- 30 percent for your wants (costs like your morning cup of coffee, your travel plans, your premium Spotify account, etc.)
- 20 percent for your savings and investments (like bank savings accounts, IRA contributions, stock market investments, etc.)
All you need to do to get started is determine your take-home income, or what’s left of your paycheck after you deduct for taxes and Medicare and Social Security costs. Then, once you know exactly how much money you’re earning after taxes each pay period, you can break down the 50/30/20 percentages of that number.
3. Invest your money so it makes more money.
Contrary to popular belief, you don’t need a lot of money to get started investing, and you really should get started investing sooner rather than later. Investing early has long-term benefits because money grows over time, thanks to compounded interest, and outpaces inflation.
In fact, investing generally sees annual returns of about eight to 10 percent—which is much more than your money could earn if you left it sitting in a savings account.
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