A second line of research has shown that economic stress robs us of cognitive bandwidth. Worrying about bills, food or other problems, leaves less capacity to think ahead or to exert self-discipline. So, poverty imposes a mental tax. —Nicholas Kristof
Financial stress (or for that matter, all kinds of stress) diminishes your ability to delay gratification. Consequently, poor people find it harder to resist temptations. In the end, they get stuck in a vicious cycle — they can’t escape poverty because it imposes constant mental stress on them, which then leads them to making bad decisions — not only the financial ones, but also those relating to their health, relationships, and general future.
Does it mean that if you’re struggling financially, you’re destined to have a bad life? Not necessarily. Taking personal responsibility and becoming conscious of the source of the problem can help you push ahead and overcome your circumstances.
Launching one of my businesses put me in debt. It exerted immense daily stress on me. No matter what I was doing, there was always the thought in the back of my head that I had a debt to repay. In some months, I was so close to not meeting my obligations on time that I would have been forced to close up shop if it weren’t for some money I managed to make at the last minute.
This experience has made me realize that no matter what they say about money not bringing happiness, at least several months’ worth of income kept as savings in the bank means the difference between a relatively stress-free life and the soul-crushing fear when you can’t cover an urgent, important expense.
If you’re struggling with finances, make it one of your priorities to get out of debt as quickly as you can and build an emergency fund covering at least three to six months of basic living expenses. In addition to improving your financial health, it will dramatically reduce stress and strengthen your ability to delay gratification and make more optimal choices favoring your future.