Key Takeaways
- Financial paralysis is when thinking about your finances leaves you feeling afraid, anxious, or avoidant. This can happen to anyone, no matter how much money you have.
- Financial paralysis can make you ignore bills, avoid looking at your bank account, and fail to make smart money moves, like investing for retirement.
- Small steps, such as setting up a repayment plan for bills or using a robo-advisor to open an individual retirement account (IRA), can help you make progress and feel less overwhelmed.
If thinking about your finances makes you feel so overwhelmed or anxious that you can’t move forward, you aren’t alone. Many people feel stuck when it comes to making money decisions. Fortunately, there are ways to overcome this feeling—which is known as financial or money paralysis—and regain financial control.
What Is Financial Paralysis?
“Financial paralysis is a feeling of being stuck or powerless when it comes to finances,” said Rikki L. Rogers, MSW, LCSW, and founder of Merge Financial Therapy. “It can feel like an overwhelming sense of fear, anxiety, or avoidance that essentially blocks us from making thoughtful choices about our money, even if we know what needs to be done.”
The impact of financial paralysis often starts small, like bills left unpaid. Over time, however, it can grow into long-term consequences, such as not being prepared for emergencies, developing significant debt, or even causing damage to personal relationships.
“Financial paralysis in a relationship often presents with tense arguments, general avoidance, and sometimes even secrecy and financial infidelity,” Rogers said.
But it isn’t just romantic relationships that can be impacted. Problematic financial behaviors can spill over into relationships with friends, family, or even work colleagues.
“In more serious cases, financial paralysis can contribute to impulsive overspending, gambling, or even hoarding behaviors,” Rogers said.
Why Financial Paralysis Happens
Financial paralysis can happen to anyone, no matter how much money you have or how much you know about personal finance.
“Financial paralysis is much more about the emotional side of money and less about a lack of skills or financial aptitude,” Rogers said.
These feelings may be rooted in financial trauma, such as growing up with a sense of scarcity or family conflict around money, navigating bankruptcy, or losing a job.
Financial paralysis can also happen when you are overwhelmed by the volume of financial information available or by the number of financial decisions you need to make.
Fortunately, overcoming financial paralysis is often a matter of taking a few small steps, rather than making big, sweeping changes to your financial life.
Strategies for Coping With Financial Paralysis
Knowing that you need to make changes to how you handle your money, but not knowing where to start, can lead to feelings of shame on top of your anxiety and fear. And if you try to change everything at once, you’ll likely become overwhelmed and give up.
“The foundation for overcoming financial paralysis is to begin with a shift in mindset, from self-criticism and avoidance to curiosity and compassion,” Rogers said.
After that, look at the areas of your life where dealing with money leads to the greatest feeling of paralysis.
Tackle your problem areas one at a time, using simple, adaptable strategies:
- Try a new system.
- Remove problem triggers.
- Talk to someone who can help.
- Take the time you need.
- Make use of accessible tools.
- Start small and build.
“Change is absolutely possible, and it starts with small steps toward your own definition of a healthy relationship with money,” Rogers said.
Here’s how to apply these strategies to three common scenarios that can lead to financial paralysis.
Problem: You’re Afraid to Look at Your Budget
You want to stick to a budget, but no matter how much you shuffle things around, you can’t get your income to cover your expenses. Maybe you slip up and overspend. Then you’re afraid to open your budget and see how much damage you've done, which just leads to even more overspending, anxiety, and shame.
However, you're not alone. New research shows that creating a budget doesn’t actually help most people change their spending behavior. It's very common to create an overly optimistic budget, then spend exactly the same way you always have.
Strategies
Try a new system, remove problem triggers, start small and build
Today
Instead of budgeting every dollar, start by taking care of your mandatory expenses (like rent, utilities, and insurance) right after you get paid. Then, knowing that the big things are taken care of, you can spend what’s left without guilt or stress. If you struggle to save, automate deposits into a high-yield savings account. You can even have part of your paycheck directly deposited there so you never see the money in your checking account.
You can also change the conditions that lead to thoughtless spending. If you shop online when you’re tired and bored, for example, you can unsubscribe from sales emails, delete shopping apps from your phone, or pick up a book in the evening instead of scrolling through social media. You won’t be prompted to shop as much, so you’ll spend less even without a strict budget.
Next Month
Look at the big picture of your financial life. Budgeting often focuses on small-dollar spending, but these discretionary amounts aren’t generally what leads to a feeling of financial precarity.
Is it time to advocate for a promotion at work or look for a new job? Can you start a side hustle to pad your retirement account or save toward a particular goal? Do you need to get a roommate to save on housing costs? Can your family make do with one car instead of two? Think about big changes you can make, then decide what’s practical and doable for you.
If you share finances with someone else, talk together about how to make these changes.
“If you share finances with a partner, the most powerful tool is a willingness to be vulnerable,” Rogers said. “Expressing a desire to approach finances as a team helps [you] move from conflict to connection.”
Problem: You Ignore Bills Until They’re Overdue
If you’re overwhelmed by how many bills you have to pay each month, it can feel easier to just avoid looking at them. Maybe you tell yourself you’ll get to them later. Over time, though, your anxiety increases because the bill is still sitting there, waiting to be paid. And if there are potential negative consequences, like a utility being shut off or a bill going to collections, you’ll be waiting for the other shoe to drop.
Strategies
Talk to someone who can help, take the time you need, start small and build
Today
Pick the most important bill (such as your electricity) to tackle first. If you can pay it off, great! Do that, and feel an immediate weight off your shoulders. If you can’t pay the whole thing, don’t panic. Most businesses have systems in place for customers who can't make an entire payment.
The bill will have a customer service number on it. Make time to call—you could even put the call on your calendar. Tell the representative you have a bill that you can’t pay. Usually, they'll ask how much you can pay immediately. Be honest. In some cases, businesses may forgive the rest of the debt in exchange for an immediate payment. If not, ask to set up a payment plan. This will add a small amount of what you owe to your monthly bill until the balance is paid off.
Do this for each bill in the stack, one at a time. If you get overwhelmed, it’s okay to take a break and start again the next day. And give yourself credit for taking action, even if it takes a while to get through it all.
“Celebrate each and every win, no matter how small, every time you complete a money-related task,” Rogers said.
Next Month
Start the process at the beginning of the month, rather than at the end. This way, the bills won’t have as much time to pile up. Eventually, you'll want to get to the point where you pay bills right away (or use auto-pay), before you spend your paycheck on other things.
Tip
If you have many bills to pay and a lot of your money is going toward interest payments on top of the bills themselves, consider a debt consolidation loan. This can help simplify your payments and lower the amount of interest you’re paying overall.
Problem: You Put Off Smart Money Moves Like Saving for Retirement
If you never learned how to invest, it can feel like everyone else has knowledge that you don’t have. Even if the money is available, you might be too intimidated by what you don’t know. But everyone has to start somewhere, and there are ways to make the process simpler.
Strategies
Talk to someone who can help, make use of accessible tools, start small and build
Today
If your workplace offers a retirement plan, set up an appointment to talk to someone in the human resources department. (Part of their job is helping you with this.) They’ll be able to walk you through the steps to set up your account and automate contributions, which will be deducted from your paycheck without you having to do anything else.
If you don’t have a retirement plan through work, you can set up an individual retirement account (IRA) on your own. One of the easiest ways to do this is with a robo-advisor, which is a technology that helps you invest. The robo-advisor will walk you through opening an account and selecting an IRA as an investment option. And you don’t need a lot to get started: While some robo-advisors might have a $500 or $1,000 minimum for opening a retirement account, others will let you get started with as little as $10.
If this is your first retirement account, go for a target-date fund based on the year you expect to retire. These funds automatically adjust their investments to create less risk as you move toward retirement. Consider using a set-it-and-forget-it strategy: choose a fund for your contributions, then let your savings grow.
Next Month
Once you feel confident that your retirement savings are on track, you can use your robo-advisor to set up an investment account. Don’t start trying to invest in individual stocks. Instead, consider an index fund, which is less risky than trying to pick stocks or time the market. If you start to feel overwhelmed again, consider setting up an appointment with a fee-only financial advisor. They’ll be able to look at your whole financial situation and talk you through your next steps.
The Bottom Line
Financial paralysis can affect anyone, no matter how much money they have or what kind of job they do. And when it hits, managing your money can feel impossible.
“Choose one small, manageable task like reviewing your most recent pay stub, logging into your bank account, or categorizing your spending for just one day,” Rogers said. “Then congratulate yourself on your work and move on with your day.”
By tackling the areas of your financial life that give you the most anxiety one at a time, using small steps, you can decrease the feeling of being overwhelmed when you think about money. With each small victory, you will feel more in control, leading to greater confidence and less paralysis when it’s time to tackle the next step.