How Sleep Impacts Financial Decision Making

In this money gif, the main character laments "oh my god, I need help" after staying up all night, suggesting that sleep can have a profound impact on financial decisions.

Money worries keeping you up late at night? You’re not alone. It turns out there’s some science to “early to bed, early to rise keeps a man healthy, wealthy, and wise.” Proving just how intertwined sleep, financial stress and financial decisions are, data from the State of America’s Sleep study found that two-thirds of poor sleepers are concerned about their financial future and more than half live paycheck to paycheck.

Even more troubling is that financial stress and sleep deprivation often create a vicious cycle.

Why you should improve your sleep to make better financial decisions

Lack of sleep can make it difficult to focus and make good financial decisions, leading to even more problems.

Here’s a look at how sleep deprivation can affect us both physically and mentally:

If you’re worried about money, you may find it hard to fall asleep or stay asleep. Why is that?

In this anatomy picture, there's a breakdown of how stress impacts you physically from teeth grinding and headaches to tense muscles. The image links to the article Managing Stress and Money.
Physical Effects of Sleep Deprivation

When we don’t get enough sleep, our bodies can’t function at their best, leading to physical symptoms that make it difficult to fall asleep and stay asleep.

For example, stress can lead to an increase in heart rate and blood pressure. It can also cause muscle tension and headaches. These physical symptoms can make it difficult to fall asleep and stay asleep.

We may feel tired and sluggish, and our ability to concentrate and focus can be impaired. Sleep deprivation can also lead to physical health problems such as high blood pressure, heart disease, diabetes, and obesity.

Mental Effects of Sleep Deprivation

Not getting enough sleep can also take a toll on our mental health. We may feel irritable and anxious, and have difficulty concentrating and making decisions. Sleep deprivation has also been linked to depression and mental illness.

But you may be wondering…

How much sleep is enough sleep to impact financial decisions?

This each night article, medically reviewed by Dr. Colleen Ehrnstrom, Ph.D., ABPP

“The average adult needs 7 to 9 hours of sleep a night to function fully. During sleep, the body heals and the brain stores information and memory from that day. You need sleep to renew yourself after the day’s activities and to prepare for the next day.

How Sleep Deprivation Impacts Stress and Financial Decision-Making

When it comes to stress, we often think of money as the root of all evil. And while it’s true, we’ve already addressed how financial stress can lead to some serious health problems, including insomnia, it turns out that sleep deprivation can also make us more susceptible to financial stress in the first place.

It’s a vicious cycle, really. Money worries lead to sleep deprivation, making us more likely to make poor financial decisions. And the cycle continues until we break it.

So how can we break this cycle? First, it’s important to understand how financial stress and sleep deprivation are linked.

In the following article, we’ll discuss how better sleep leads to better money habits and how to break the cycle of sleep deprivation, bad financial decisions, and financial stress.

How sleep deprivation impacts your ability to weigh risk vs. reward

Inflation, dips in the market, and rising interest rates are all things we have no control over. What we can control is how we spend our money in hard times. Unfortunately, missing precious hours of sleep can lead us to create more financial stress without us realizing it.

According to this each night article, “Cutting out even an hour of sleep each night can affect you, especially your decision-making abilities. It’s not just about choosing right from wrong—it’s also about weighing risks and rewards, retaining memories, and… [making]choices.”

One extra hour of doom scrolling on social media can have a profound impact on your seep deprivation and financial decisions.

Poor sleep and investing decisions

Moreover, this Sleep Foundation article (medically reviewed by Dr. Nilong Vyas, Pediatrician) states:

People who don’t get sufficient sleep are more likely to make risky choices17 and to focus on a potential reward rather than downsides. This can become negatively reinforcing because a lack of sleep limits our ability to learn from these mistakes since the normal method of processing and consolidating emotional memory is compromised.”

Not only are you more likely to make risky moves seeking a hefty reward, but you’re less likely to learn from your mistakes and adjust accordingly. Taking the stock market as an example, it is already tricky not to invest emotionally.

Image of a person sitting on the floor with their hands held together against their head looking stressed. The overlaid text reads Feelings & investing, how we make bad decisions. The read now button links to the article Why We Freak Out with Market Fluctuations (And Why We Probably Shouldn’t).

Sleep deprivation and financial decisions as an entrepreneur

Imagine a situation where you not only move on emotion alone but can only see dollar signs in every move you make. Your brain can’t fully consider that your plans may not work out. This can be just as dangerous for an entrepreneur. The aforementioned eachnight article notes:

For example, if you’re an entrepreneur or own a company, you may make risky decisions hoping for a higher reward. Further, less sleep also means your brain is less aware of loss—you could make a high-risk decision, only focused on the reward and not fully considering the consequences if you lose.

This is not a winning mindset. On the contrary, this is how you find yourself in a hole of your own design, wondering how you got there. The most terrifying part, in my opinion, is even if you have someone to tell you about the mistakes you’re making, you’re far less likely to listen to their counsel. A lack of sleep, especially in high-stakes situations, makes our brains less likely to accept feedback, as explained in this WSU article quote from Hans Van Dongen (director of the WSU Sleep and Performance Research Center at WSU Spokane):

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Our findings tell us that putting sleep-deprived people in perilous environments is an inherently risky business and raises a number of medical, legal and financial implications”

Financial implications. No one wants to work for a CEO who makes erratic decisions based on nothing, no one wants to have a stockbroker who pulls investments based on a hunch born from 2 hours of sleep, and no one wants to be in a house where big money moves are being made with the reward in mind with none of the risks. It’s clear that sleep deprivation and financial decisions can have a long-term impact on your professional success.

Sleep, memory, and financial decisions

Equally crucial to balancing risk vs. reward is remembering what the options and consequences were to begin with. The Sleep Foundation explains the various memory issues that can be born of low quality or a lack of sleep:

“Poor sleep impairs memory consolidation by throwing off the normal process that draws on both NREM [non-REM] and REM sleep for building and retaining memories. Studies have even found that people who are sleep deprived are at risk of forming false memories10. Fragmented sleep has also been found to negatively affect memory11 even if a person gets plenty of total hours of sleep.”

So now, you can’t remember what you’ve done, but imagine you can’t remember what you’ve learned. Even if you read new tips and tricks to managing your money, with a lack of sleep, you likely won’t remember them. eachnight notes:

Sleep deprivation affects the brain’s ability to learn and recall information. During REM sleep, the brain is active, processing information and storing memories from the previous day.

Less sleep disrupts this process because the body spends less time in this REM cycle. The following day you may have trouble recalling what was said in a business meeting or what assignments you have. Sleep deprivation also makes it harder for the brain to absorb new information, as the brain is working hard to focus and take in information.”

Sleep deprivation and developing better money habits

Image of the app's mindset check-in intended to get the user to look deeper at the "why" behind what they do. The text at the top reads Daily Check-in Understand the why to feel better about your money. The on-screen text reads Anything to add to the why? Followed by user text expressing issue with holiday hours at their job.
Use the money app to schedule worry time, improve your relationship with money, journal and practice mindfulness daily.

It’s difficult to develop better money habits even in the best conditions. As we mentioned before, when you don’t get enough sleep, your brain doesn’t have the opportunity to consolidate memories or process information properly. This can make it difficult to learn new things or stick to good habits. Sleep deprivation can also lead to increased levels of stress hormones, making it harder to focus and make good decisions. All of these factors can make it difficult to form new habits, or to stick to existing ones.

The problem is it’s harder to form new habits when we can’t remember to do them. Stack this with the poor risk vs. reward calculations and unnecessary miscommunication due to misremembering or outright forgetting financial decisions and it is quite easy to see that prevention is better than reaction. 

Sleep deprivation can impact financial decisions and stress in relationships

Two smart phones display's Mindset feature. On the left, it shows how to document how stressed you are about different aspects of your life. On the right, it shows a review of previous Mindset check-ins. The text at the top reads Check-in, understand the way to feel better about your money.
Track what’s stressing you out with a daily check-in. With the money tracking app you can connect how you feel with what you spend.

According to a recent study, financial stress is a major issue for many couples. Nearly half of all respondents said that money was a source of conflict in their relationship.

How does sleep deprivation make it worse?

We’ve all been in the middle of an argument, absolutely sure that you remember what you said or did perfectly. Unfortunately, if you’re not getting enough sleep, you may create false memories. Combine that with a lack of accepting feedback and you have a perfect equation for arguments and miscommunications about spending. The financial stress caused by these disagreements can make even a perfectly neutral financial situation seem like a disaster. 

Want to improve how you communicate about money in your relationship? Start by getting enough sleep before having the conversation.

How to manage money stress so you can sleep better

When we’re feeling stressed and tired, it can be difficult to make rational decisions about our spending, saving, and investing. In fact, stress can often lead us to make impulsive and irrational choices, especially when it comes to buying things we don’t need or devesting when we should stay the course.

Ways to manage money for better sleep

Schedule worry time daily. During this time, take a moment to write down and reflect on all of the things stressing you out. Once you are done, tell yourself to let go of those thoughts until your next designated worry time.

With the Money app, we build in daily Mindset check-ins so you can reflect on how stressed you are and what is causing that stress.

Plan your purchases and your splurges.

This means knowing how much money you have coming in and what your expenses are. You can check out this downloadable guide for budgeting to get started.

When it comes to budgeting and spending, one of the most important things to remember is that planning ahead can save you a lot of stress down the road. This is especially true for big purchases or splurges – by budgeting and saving up for those items, you can avoid the financial stress that often comes with them.

When you plan your purchases, you can make sure that you are staying within your budget.

Find yourself going over budget frequently?

Plan for splurges. Feeling too restricted can actually increase your financial stress and increase your sense of deprivation. Making a budget that accounts for things that bring you joy and sticking to it is one way to reduce financial stress.

You can also try moments of gratitude or practice financial gratitude which has not only been shown to improve spending habits but also reduce stress.

Create a system to track your money

Image shows the "sweet spot" between indulgence and deprivation. The above text reads Avoid extremes, aim for the sweet spot.

Whether you use a spreadsheet, paper, or a money tracking app, tracking your expenses has been shown to reduce your financial stress. With the money tracking app, you start with a budget calculated from the history of your connected accounts. Organize it to create a plan that helps you reach your goals.

According to Maia Monell, co-founder of, “Having a good financial routine is just as important and impactful as a daily exercise routine. It can improve overall health and mental clarity and help you fight off any unwanted stressors.”

Providing context to your spending can help you identify what purchases stress you out. Just remember, not every purchase has to trigger negative feelings.

While coffee purchases and eating out get a bad rep from some old-school financial gurus, this guilt could be misplaced.

As Madde points out in this article, “You might feel like your money could have been spent on something more important to you, but ask yourself whether your purchase was valuable to you. Did the meal cheer you up after a long day? If so, then it was worth it. 47% of Americans report feeling guilty about going out to eat, despite food from their favorite restaurants ranking in the top 10 purchases that make them happy. You work hard for your money and you deserve to treat yourself on occasion. Don’t beat yourself up over the occasional purchase that isn’t taking away from your bigger goals.”

If a purchase is a rare occurrence, not a habit, it most likely is not going to have much impact on your budget.

Remember how sleep deprivation and stress can impact your financial decision-making:

Image of a cell phone showing a payment of $91.07 to Dog Gone Holistic Monday, 21 June. The text above the image reads Transaction Swiping. Track what you spend. *Fall in love* with your progress.

1. You might make impulsive decisions.

When you’re feeling stressed or emotional, it can be tough to make rational decisions. You might end up making poor financial decisions or investing in stocks that you know are risky, or selling off your assets at a loss just to try and ease your stress.

2. You might not be able to focus.

Reflect on your spending daily

Anxious thoughts can often lead to distractions and a lack of focus. This can make it difficult to pay attention to your money, manage your portfolio and make the best choices for your money.

3. You might take too much risk.

When you’re feeling stressed or emotional, it’s easy to make snap decisions without thinking things through. This can lead to investing in high-risk stocks, pulling out of the market at the wrong time, or investing more money than you can afford to lose.

Tackle your poor sleep to improve your financial stress

The Cleveland Clinic gives a perfect Dos and Don’ts list for improving your quality of sleep:


  • Have a sleep schedule: Go to sleep and wake up around the same time every day, even on weekends and vacations.
  • Clear your mind before bed: Make a to-do list early in the evening, so you won’t stay awake in bed and worry about the next day.
  • Create a good sleep environment: Make sure your bed and pillows are comfortable. Turn down the lights and avoid loud sounds. Keep the room at a comfortable temperature.
  • Exercise every day: Stay active but try to avoid exercising during the few hours right before bed.
  • Relax: Before bed, take a warm bath, read or do another relaxing activity.
  • See your healthcare provider: If you’ve been having trouble sleeping or feel extra drowsy during the day, talk to your provider. There are many treatments available for sleep disorders.


  • Consume caffeine, nicotine, and alcohol late in the day: These substances can interfere with your ability to fall and stay asleep.
  • Lie in bed awake: It’s better to do a soothing activity, like reading, until you feel tired.
  • Nap during the day: A short nap (less than 30 minutes) is OK if you’re very sleepy. But try to avoid naps after 3 p.m.
  • Think negative thoughts: Try to avoid a negative mindset when going to bed, such as, “If I don’t get enough sleep now, I won’t get through my day tomorrow!”
  • Use electronics right before bed: Electronics, such as your phone or tablet, can interfere with your body’s production of melatonin. This hormone gets released before bed to help you feel tired.

Understanding Sleep and Financial Decision Making

Understanding how sleep, or the lack thereof, can affect your decision-making ability puts you in a position to better control it. For example, instead of trying to clean up messes after the fact, you can work towards preventing them from ever occurring.

So there’s the secret sauce on how to improve your financial decision-making. With these tips, you can get back on track to physical and financial wellness. And I won’t tell your mom she was right about getting enough sleep if you don’t tell mine.

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Related Reads:

Benefits of Practicing Gratitude on Your Money Management

Schedule Time to Worry About Money

How to Practice Financial Gratitude

How Social Media Can Impact Spending Habits

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