Money, Anxiety & COVID-19
Infectious Disease,  Mental Health Awareness,  MH Tips,  Research

Money, Anxiety & COVID-19

Since the beginning of March, we have all been worried about different aspects of our life. With schools, offices, and almost all institutions shut and new laws being introduced every now and then about jobs and education – we are always kept on our toes, stressing out about either the virus itself or the side-effects of the virus. If we think about it, the virus has led to tremendous changes in our lives. Many people have been laid off with one email, there have been massive pay cuts and no bonuses this year. The economy has been steadily falling this whole time, which only makes our anxieties rise further…

In different countries, from China to New Zealand, this virus has led to anxieties about finances. The question is, what does one with financial anxiety feel like and what might lead to it? Financial anxiety might manifest as feelings of fear while handling finances, not feeling smart enough, unease about money, guilt and shame. There are various psychological, physical and bodily signs that might indicate that the person is anxious. 

“When we look at how any kind of anxiety and stress impacts the body, it can lead to things like heart disease, inability to sleep, and lowered immunity, which during a pandemic is incredibly harmful.”

The difference between general anxiety and financial anxiety is the trigger. That means, if a person is thinking or discussing finances and feels anxious – they might be experiencing what is called financial anxiety. Remember that financial anxiety could also be a part of general anxiety – while the only thing distinguishing the two is the trigger. 

Anxiety about finances has affected the whole world. Even in a so-called super power country the USA, 51% of Americans feel at least somewhat anxious about their financial situation following the coronavirus outbreak. Nearly three in 10 Americans’ financial situation (29%) has been negatively impacted since the pandemic began.

Brad Klontz, a financial psychologist, believes that like the recessions that took place in America in 2009,  the current economic downfall will also lead to Post Traumatic Stress Disorder- like symptoms in people. He also says that people who have to experience financial anxiety again in 2020 might have it much worse! Klontz states that people are traumatised due to losing money from banks and investments. This might mean that they never invest money again. Since they lose trust in financial institutions and the government, it leads to one major behaviour: hoarding!

Hoarding is a behaviour mainly done by a population that follows a scarcity mindset – where “there is never enough”. Their actions stem from a place of ‘lack’. People with this mindset will save everything for the future – regardless of their financial stability. Hoarding behaviour is a sign of anxiety, and when you hoard money in the house  in order to avoid using banks and lockers out of mistrust, or sparingly spend money even on living essentials in order to save, it could be a sign of financial anxiety.

In a poll across Australia, China, Hong Kong and Singapore with 2500 respondents, 27% of respondents felt ‘anxious’ and ‘overwhelmed’ about their finances due to COVID-19 while around 40% said they were ‘stretched but coping’. At least 75% of respondents in China said they have recently researched new policies. From that number, more than half (around 55%) noticed new or additional benefits they were not aware of before. However, in Australia, only 14% researched or engaged their insurer. This difference might be because of the intensity and duration of the virus in both the places, while China had to go through months of lockdown, with many deaths and a huge economic crisis, Australia imposed strict lockdown and dealt with the virus better.

In terms of insurance, this poll was crucial to understand people’s preferences. Australians compared to the Chinese said that they are willing to sacrifice their life insurance over home or car insurance. While this might help for the time being, impulsive decisions could be life-threatening in the long run! A quarter of respondents in Singapore and one in five in Hong Kong said they would let go of their home/car insurance if pressed financially. This aspect of the pandemic raises awareness of people’s needs for protection and to what extent they would go for financial protection. It gives us a lot of clues about the needs and consumer preferences during a worldwide economic crisis. 

Similarly, Swiss Re, an insurance company also conducted a survey on 1000 Indians from Mumbai and Bangalore in May 2020. One in every five respondents in the survey were ‘feeling anxious and barely coping when it came to finances as a result of COVID-19.’ When questioned, 28% of them said they were happy to sacrifice home / motor insurance  while 25% were ready to cut life insurance premiums to ease the anxiety. However, being active in insurance and investments – many respondents (63%) discovered new additional benefits related to different policies. Nearly 64% of the respondents were concerned about their mental health problems, caused due to isolation and loneliness.

“Financial anxiety is creating a Doomsday like scenario in the minds of many. The range may vary from minor financial crunch to total ruin; but no-one can escape the impact of the global economic slowdown.”

Another report on ‘consumer anxiety’ also stated that the people of China were very worried about their finances. The answers in 2020 to questions like “What things do you see in your profession that indicate an economic slowdown?” on Quora have ranged from “I’m in sales — commission is impossible” to “I’m in construction. Last year we got four jobs and this year none. Layoffs have started.” Young adults have especially resorted to using apps and sites like Quora or Weibo and WeChat which allowed for unfiltered news about the economy that is not shown on national television. They were adamant on knowing the truth about the economy instead of staying in denial.

While the whole world was and still is coping with the ever rising cases of the virus, New Zealand was the only country to have zero cases since June. Even though the cases were nil,  Jacqui Maguire, a clinical psychologist in Wellington said that the anxiety has only worsened due to the pandemic. Why? Because of the uncertainty of the people and the economy and problems faced by them meant that the economy would still be low for a while. So while general anxiety reduced, anxiety particularly related to the economy and finances increased – the uncertainty of it all, made the people more apprehensive..

Anxiety due to finances
“The brain doesn’t like ambiguity, it sees it as a threat and it interprets it in the same way it would a target coming after you...Ambiguity turns on your fight or flight system from a survival perspective.”

This tells us that anxiety is on the rise, throughout the world. From health to financial, the stress and uncertainty has led many to feel fearful, hopeless and troubled. In terms of finances, Klontz mentioned two biases that could be affecting your investments: overconfidence bias and anchoring bias.

Overconfidence bias is thinking that we are much better than we actually might be. While it is important to be hopeful and positive about the future, it is also important to remember that the inflation among different commodities (like masks and toilet paper) in the last so many months was unique. People who invested money in those companies before were not doing as well financially, as they are doing really well now – and while we might praise our skills and ourselves for being smart enough, we need to remember that the money we make (or don’t make) does not completely depend on us, but also the market and present situations. The confidence needs to extend from ourselves to the society, its behaviour and the economy as a whole.

“I want you to be much less confident in what you think you know to be true about investments and about markets...They've actually done studies on gender differences here and it turns out that women are less confident in what is a good stock, and where it's going to go. It turns out that they actually are better at investing as a result, so they actually have better returns by having less confidence in knowing exactly what's going to happen in the future.”

Anchoring bias is when we are cognitively inflexible to shift from the initial piece of information given to us. According to Klontz, this cognitive bias makes us stick to a particular price for a commodity. That means, if we buy an item for 100, we are adamant that we sell it for 100. The problem here is that – in the current economy, selling the item for ₹75  rupees might also be beneficial for us. 

“...flexibility and thinking is really helpful when it comes to your relationship with money because times do change, circumstances change. When we're stuck on a rigid belief about how the world works (like, for example, my grandfather believing that you can't trust banks with your money, and I get why he got that belief, but when it's rigidly held) that's when it gets us into trouble.”

The pandemic might be feeling extremely unmotivated, working too hard at our jobs or procrastinating through these times – remember that all these feelings are okay because these times are nothing less than extraordinary,  it will pass and that’s what’s important. But in this time, these few tips might help us feel better and reduce the feelings of anxiety: 

  • Try focusing your mind on what  you have instead of what you want  or what you do not have. Be grateful for what you do have!
  • Keep your basics in place – that means try not to play around, sell or give up your investments, savings and insurance because of the pandemic. These might be way more helpful in the coming years. (and if you are planning to dissolve or sell them, make sure you are mindful and have made that decision from a rational instead of impulsive point of view)
  • Use fear setting. If the financial anxiety leads to catastrophizing or feeling extremely fearful or worried, ground yourself, and ask yourself “what is the worst that could happen?” Now, sit down with paper and pencil, write this situation and thoroughly and practically plan your way around it. In the future, everytime you feel anxious, remember that your worst case scenario escape plan is already ready – so there is nothing to worry about!
  • Try to look at the financial problems from a third person perspective, ask other people to help you and find a healthier perspective for it. Reimagine your financial goals for 2021 keeping the pandemic in mind. 
  • Be mindful of budgeting using apps or journals  to keep a check on your budget and expenditure. Embrace your financial status and remember that social media only shows us only a part of a person’s life,try not to gauge yourself from that lens. 
  • Try to change your mindset from scarcity, where you think there will never be enough for everyone – to abundance,  where there is plenty out there for everybody. This will avoid hoarding and compulsive saving behaviours and thoughts, so we live a more fulfilling life. 

The most important things to remember is that this pandemic, the virus and the economic situations – just like the Spanish Flu, the plague and various economic recessions – will not last forever.

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