How Stress Impacts Spending, Saving, and Investing Habits and What to Do About It.

by Kaitlyn Ranze

Many different factors can influence how we spend our money. One of the most powerful, yet often overlooked, is stress.

When we’re feeling stressed, 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.

This can be a significant problem, especially if you’re trying to get your finances in order.

In order to get ahead, it’s important to be aware of how stress impacts money habits. In this article, we’ll break down how stress impacts spending, saving, and investing habits, and explain measures you can take to counteract its effects.

Stress and spending

Because of the impact of stress on our prefrontal cortex (the area in the brain responsible for impulse control), stress makes it harder for us to resist temptation and think clearly about our finances.

One of the most common ways stress affects spending is through overspending and shopping. This isn’t limited to buying things we don’t need. Stress can also lead us to overspend on things we do need.

This may be a result of our brain releasing dopamine, a chemical that is associated with pleasure and reward, as a strategy to soothe the feelings from stress.

What is dopamine? 

It’s a neurotransmitter, or chemical messenger, released when we’re anticipating something. It makes us feel motivated, alert, focused, and happy. Dopamine also helps us plan, learn, and be productive. So if cruising the aisles at Target makes you happy, it’s probably and partially your neurochemistry with dopamine at play. But there’s more.

Stress, Online Shopping, and Dopamine

Unpredictability increases anticipation and dopamine. That means not being SURE that you’ll find something, anticipating packages from online shopping, and window shopping can all boost dopamine. Unfortunately, it’s also why online shopping can become so compulsive and addictive.

 An estimated 5 to 8% of Americans are thought to suffer from shopping addiction, but why? Stress alleviated through shopping is rewarded with dopamine which can be habit-forming. With its accessibility, it can be hard to break out of the loop of stress shopping.

How to Cope with Stress and Spending?

Plan your purchases and your splurges.

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

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 practicing moments of gratitude which has not only been shown to improve spending habits but also reduce stress.

Create a system to track your money

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.

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.”

Reflect on your spending daily

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.

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

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.”

Stress and investing

Stress triggers a couple of tendencies that impact investing in a few ways.

Loss aversion

Loss aversion is a cognitive bias that describes the tendency of people to strongly prefer avoiding losses to acquiring gains. In other words, people are more likely to take risks to avoid a loss than to achieve a gain.

Loss aversion is thought to be one of the primary reasons why people are reluctant to invest their money. After all, the fear of losing money is a powerful motivator. However, loss aversion can also lead people to panic selling and holding on to losing investments for too long, in the hope of recouping their losses.

Fortunately, there are ways to overcome loss aversion and investment losses. One way is to focus on the long-term potential of your investment, rather than the short-term fluctuations. Another way is to diversify your investment portfolio, so that you are not overly reliant on any one investment. Finally, it is important to have realistic expectations about investment returns. If you expect to make large profits every year, you are likely to be disappointed – and this could lead to loss aversion.

Base Rate Neglect

Base rate neglect is the tendency to judge the probability of something happening based on new, easily accessible information while ignoring original assumptions. When you made your investments, you assumed it would appreciate over time. When your Twitter field is flooded with information about Russia invading Ukraine, it may trigger an overreaction to new information resulting in overselling based on bad news. (To be fair, the inverse also occurs. Think the piling on based on good news like a Covid-19 vaccine.)

Panic selling locks in your losses, since pulling out of your investments during a decline can make it tougher to recover when the market eventually rebounds, as they did shortly after the March 2020 downturn.

Stress causes physical reactions

Additionally, stress can also lead to physical reactions impacting your ability to make smart investing choices. For example, stress can cause your heart rate to increase, which may lead to poor decision-making. It’s important to remember to avoid reacting emotionally to stress and instead focus on making smart investing decisions. By remaining calm and collected, you can avoid costly mistakes.

Stress and Saving

One way to combat the stress-spending connection is to make saving money a habit. Automating your finances can help make saving easier, since you won’t have to think about it.

10 ways to cope with stress

1) Talk to someone you trust about what’s going on. This can be a great way to offload some of the stress and get a fresh perspective. Talking to a friend, family member, therapist, or any other support system can help you feel more in control.

2) Exercise. This is a great way to blow off some steam and release endorphins. Plus, it’s good for your health!

3) Take a break. If you’re feeling overwhelmed, take some time for yourself. Step away from the stressor, even if it’s just for a few minutes.

4) Practice deep breathing. This is a great way to calm down and center yourself.

Box breathing is one of our favorite techniques.

5) Organize your time. When you’re feeling overwhelmed, it can be helpful to take a look at your schedule and figure out what you can delegate or eliminate. This will help you feel more in control.

6) Take a break from electronics. This includes phones, laptops, TVs, etc. Instead, try taking a walk outside or reading a book.

7) Connect with nature. Spend some time outside in nature. This can help you feel more grounded and relaxed.

8) Make time for yourself. This is important! Make sure to schedule some time each day to do something that you enjoy.

9) 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.

10) Seek professional help. If you’re feeling like you can’t cope with stress on your own, it’s ok to seek professional help. A therapist can help you learn how to better manage your stress and improve your overall wellbeing.

Stress can impact your spending, saving, and investing habits in a few ways. For one, when you’re stressed out, it can be harder to make rational decisions. This can lead to impulsive spending or taking unnecessary risks with your money. Additionally, stress can have a physical toll on your body, which can lead to increased health costs down the road. Finally, stress can cause tension in personal relationships, which can lead to financial disagreements.

If you’re struggling to manage your stress levels, start with some of these strategies. If you’re still struggling to tackle it on your on your own, please seek professional help. A therapist can assist you in learning how to better cope with stress and improve your overall wellbeing.

Related Reads:

10 Ways to Avoid Overspending

Benefits of Scheduling time to Worry

Learn the financial benefits of scheduling time to worry about finances.


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