Here's Why Your Money Anxiety Is Making You Poorer

Avoiding finances can create a feedback loop where stress from past decisions leads to further avoidance and additional bad decisions. The result is a compounding cost that shows up in higher interest, reduced cash reserves, and missed opportunities. A simple example involves buying a nonessential item without a budget, where the resulting anxiety reduces the ability to research and plan for larger purchases. When the purchase is placed on a credit card with a high APR and only minimum payments are made, the balance can roughly double over a few years. Delaying retirement enrollment can also forfeit employer matching contributions, reducing long-term wealth.

"“If you don't take some kind of action to undo that, then that feedback loop is just not going to stop ever, essentially. And for a lot of people, sadly, they will live their entire lives bouncing back and forth between bad decisions, stressed about the bad decision, so they make another bad decision.”"

"“After college, with no budget, he bought a Nintendo Switch without knowing whether he could afford it. The damage came from the stress that followed, which made him stop doing the research he normally would on bigger purchases. As he put it, the anxiety becomes 'a song that plays in the background of your life without you realizing it.'”"

"“Run that mechanic through a credit card. Say a $300 console goes on a card carrying a 24% APR, and the cardholder makes the minimum payment because they are avoiding the statement. That balance, untouched and accruing, roughly doubles in three years. Now layer the next avoided decision on top: the same person delays opening their 401(k) enrollment packet.”"

"“If their employer offers a 5% match on a $60,000 salary, that is $3,000 a year of free compensation walking out the door for every year the envelope stays closed. Two avoided decisions,”"

Read at 24/7 Wall St.