Why it matters more than you think

If you’ve ever struggled with debt or felt guilty after making a purchase, you know firsthand how money affects your mental health. You’re not alone either: According to a study by Capital One and The Decision Lab, 77% of Americans feel worried about their financial situation.

Unfortunately, money and mental health problems are closely linked – in some cases, it creates a cycle that can be difficult to break.

With the arrival of May and Mental Health Awareness month, it’s worth taking a closer look at how money and mental health interact – and what steps you can take to improve your relationship with both.

How does money affect your mental health?

Financial problems are a common cause of depression, and the resulting shame and isolation that many people feel makes matters worse. And if you have existing mental health issues, financial challenges can compound. A survey by the Money and Mental Health Policy Institute found that of those with existing mental health challenges, 39% said their financial situation made their mental health challenges worse.

Stress and anxiety due to financial challenges also have adverse effects on all aspects of your life. For example:

• Worrying about meeting your financial obligations can keep you up at night, affecting your sleep.

• Conflicts involving money can cause strain in relationships, and embarrassment about your financial situation may cause you to withdraw from friends and family.

• Financial demands can make it difficult to focus on work, which can lead to burnout or poor performance.

Read more: Moral Finances 101: 7 Ways Your Brain Can Waste Your Money

How mental health challenges affect money habits

While financial problems can lead to mental health challenges, the opposite is also true. If you have a problem with your mental health, your finances are more likely to suffer.

For example, if you’re feeling depressed or anxious, you might indulge in “retail therapy” while racking up high-interest credit card debt. Alternatively, frustration may lead to avoiding debt, making impulsive purchases, or letting important financial transactions slip through the cracks.

The data supports this scenario, too. A similar survey from the Money and Mental Health Policy Institute found that 42% of people who felt unwell had stopped paying bills, and 63% struggled to make financial decisions.

This is where that endless cycle comes in. The more you struggle with your mental health, the more likely you are to experience financial hardship or stress, which increases your mental health challenges.

Read more: Do you suffer from money dysmorphia? Here are the signs.

Good money habits can improve your mental health

Although the connection between money and mental health is clear, it is worth remembering the other side of money: If you can improve your financial situation, your mental health can benefit. For example:

• When you have an emergency fund, you have peace of mind that if something goes wrong, you can handle it.

• If you have good credit, you can easily qualify for a loan – it gives you an extra layer of security if you need access to money.

• When you know where your money is going each month, you feel more in control of how you spend money when needed.

But before you can work to improve your finances and mental health, you must be able to recognize when things are going wrong.

Read more: 5 psychological money hacks to reduce spending and increase savings

Signs that money may be having a negative impact on your mental health

Financial hardship doesn’t just affect your bank account; it can feed into other aspects of your life. But when you’re busy going about your daily routines, you may not immediately notice when your mental health begins to suffer. It may require you to slow down and take a closer look at your behavior, but recognizing these stressors is the first step to healthy finances and mental health.

Here are some signs that money may be harmful to your mental health:

• He worries about money all the time. Maybe you feel compelled to check your bank account balance or wake up thinking about money.

• He avoids money altogether. You may put off debt, ignore your bank balance, and avoid any discussion about your financial situation because it feels so overwhelming.

• You have a growing pile of unexpected purchases. When you feel stressed or anxious, you may be able to cope by spending money without thinking too much. You may have a lot of debt mounting up as a result.

• You struggle with guilt every time you use. No matter what your bank balance is, financial stress can take over your emotions. Even if you can afford it, it can be difficult to enjoy.

Steps you can take to reduce financial stress

Getting out of the cycle of financial and mental health challenges isn’t easy, but it’s not impossible, either. Here are some healthy ways to start dealing with money stress:

• Check your finances: When you feel anxious, avoidance is natural. But you may also find that after crunching your numbers, things aren’t as scary as you thought. Start by looking at your bank accounts, credit card statements, credit balances, and debts to get some clarity on your situation.

• Prioritize your biggest challenges: After looking at your finances, you may feel overwhelmed by the many things that need your attention. But don’t try to do everything at once. Instead, focus on whatever is causing you the most stress and deal with that before moving on to anything else. For example, you might focus on getting the current on your car payment before starting to save for your wedding.

• Make a plan: Once you have prioritized your financial goals, you can start taking action. Got credit card debt? Start targeting whatever you can take out of your budget to pay for it. Are the bills always late? Try setting yourself up for automatic payments so you don’t have to think about it.

• Build a financial cushion: Money may not buy happiness – but an Australian study found that the habit of saving has a positive effect on mental health. If you’re short on savings, focus on building a financial buffer to reduce stress and provide peace of mind.

• Add friction to your spending habits: If you have trouble spending money unexpectedly, try adding tension when you shop. For example, if you can’t resist targeted ads on social media, limit your time online. Other ideas include unsubscribing from marketing emails and removing saved credit cards from online shopping sites.

• Take care of your mental health: Because mental health problems can make financial challenges worse, self-care is key to reducing financial stress. Simple strategies include prioritizing sleep, going for a walk every day, and connecting with loved ones.

• Get support: If you’re struggling to manage your finances, you don’t have to do it alone. There are many financial professionals out there — including coaches, therapists, counselors, and nonprofit advisors — who can help. You may have a loved one who is willing to give you emotional support.

Read more: 4 signs it’s time to see a financial therapist

Remember, you don’t have to solve all your financial and mental health problems at once. Even taking one small step can help you start building your financial confidence and improve your attitude. And if you get a little positive momentum, the connection between finances and mental health will start working for you.