Personal Finance

7 causes of financial stress

In the medical industry, a pandemic is described as a widespread outbreak of an infectious disease over a wide geographical area. In the financial world, I think we have a serious pandemic that is causing people to have serious financial problems and stress. A lot of people are stressed and one of the biggest causes of that stress comes from money. So what’s causing all this financial stress? Here are some major contributors to financial stress

1. High debt levels

Debt levels are rising faster than both incomes and assets. Never has it been easier to access debt in all forms – lines of credit, mortgages, credit cards. You can now buy pretty much anything without having cash. Debt has created a lot of the economic problems we face today and was the biggest factor in the world financial crisis in 2007. The debt problem has been fueled by consumerism and consumption. In 2005, a national Symposium in Financial Capability suggested that Canadians spend 25% more than their income. We no longer practice delayed gratification. Instead we practice delayed consequence. We have become our worst enemies because we’ve been programmed to spend even if it means spending money we don’t have.

Related article: Great reasons to pay off your debt

2. Low savings rates

Savings rates have been steadily declining since a peak in the early 80’s when it was almost 18%. Today savings is pretty much non-existent hovering around 2% to 5%. This is far from what we need to save to be financially secure in the future. This is a real serious problem because our financial future both on a macro level and a micro level is largely dependent on how much we save today. Unfortunately the real consequence of a low savings rate has yet to be seen.

Related article: Principles of saving money

3. Volatile stock markets

For most of the 1990’s wealth was created by the stock market as we experienced one of the strongest and longest financial booms in history. Unfortunately, stock markets do not move in a straight line and they experience cycles just like anything else. For most investors, the decade from 2000 to 2010 was not very prosperous. In fact, for many, the stock market has destroyed wealth as opposed to create it due to some major bear markets.

Related article: The realities of the stock market

4. Real estate won’t be our financial saviour

Not only has the stock markets contributed to the ups and downs of financial stability but so has real estate. Anyone who owned real estate in the financial boom loved their investment. It was a period of time I call ‘stupid money’. Stupid money exists when money can be made without any effort. You can sit and do nothing and make money. Real Estate booms create stupid money. The problem with every real estate boom is some people become over leveraged and over extended. When the boom stops, slows down or experiences a correction, that’s when problems hit. Because real estate is largely leveraged (which means you don’t pay cash but you borrow lots of money to buy real estate), period after booms can create massive problems like the financial crisis in the late 2000’s.

Related article: Predictions for real estate prices

5. Demographics means more fear

The baby boomers have been a huge demographic force that have shaped social and economic patterns since the day they were born. These baby boomers are now getting serious about retirement as it is happening in the next 5 to 15 years. This is serious stuff because the closer you get to retirement, money and finances become really relevant and as a result really stressful. Retirement is supposed to be the best years of our lives but instead, it is stressing people out because of lack of planning, fewer pension plans, low savings rates, high debt levels and fear about the foundation of government benefits.

6. Financial market place is increasingly complex

There is more information, products, choice and confusion in the financial industry. Go to the bookstore and you will find hundreds of books on money. Go to and search on money and you will find over 70,000 titles. Google the phrase ‘personal finance’ and you will find 78,400,000 results in 0.1 seconds. Go to YouTube and type in retirement and you will find 7,500 videos including my own. There is a ridiculous amount of information on the topic. Here’s the problem more information is not always a good thing. The challenge we all face with too much information is that there is so much conflicting information out there. Part of that confusion stems from the fact there is more opinions and less fact. Anyone can now wallpost, twitter or blog about anything. To compound the problem, we also have more financial products than ever and more choice has paralyzed us from making important decisions about money. Too many people have placed too much control and trust in the hands of financial advisors and stockbrokers and product sellers. Money fraud is big business and too many people are losing too much of their hard earned dollars to ponzi schemes, pyramid programs and shysters. Not only is it hard to know what information to trust but it has also become difficult to know whom to trust.

Related article: How to work with financial advisors better

7. No formal education on money

Who’s teaching you about money? Herein lies the root of the problem. There is little formal financial education in the school system. There is very little offered in the workplace. So many people have to learn from friends or family but that creates it’s own set of problems because many of them don’t have the knowledge, ability or resources to teach others about money. Research has found that 42% of adult Canadians lack the basic literacy and life skills to cope with the demands of our knowledge society and economy. There is a cure for financial stress Financial stress is all too common in our society and we need to do something about it. The starting point is a little knowledge but true success comes from action. It comes from taking control of your financial affairs and developing good financial habits.

Related article: Financial Education in the workplace


  1. Kim

    Hi! I am currently conducting my research entitled “Financial Stressors among credit card holders in Lucena City; Basis for sound credit card usage”.I just want to ask for your help to answer my question. What do you think are the financial stressors of credit card holders?

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