Cost-of-Living Stress and Mental Health in Australia

If you’ve felt a knot in your stomach when opening bills or found yourself lying awake calculating expenses, you’re not alone. The cost-of-living crisis is affecting more than bank accounts, it’s having a serious impact on mental health across Australia.

Rising costs for groceries, rent, utilities, and everyday essentials have created a constant hum of pressure. While financial stress isn’t new, today’s combination of inflation, housing challenges, and economic uncertainty has intensified its effects.

How Financial Stress Affects Mental Health

Financial stress affects far more than your wallet. It can influence your emotional wellbeing, physical health, relationships, and daily functioning.

Research shows a strong link between financial strain, anxiety, and depression. When you’re worried about making ends meet, your nervous system stays stuck in a state of high alert, contributing to:

1. Persistent worry or rumination about money
2. Difficulty concentrating or making decisions
3. Sleep problems
4. Physical tension, headaches, or digestive discomfort
5. Irritability or a shorter fuse with loved ones
6. Feeling overwhelmed by everyday tasks
7. Withdrawing from social activities due to cost or shame

This ongoing pressure can make simple tasks harder and reduce your ability to cope with life’s normal challenges.

The Hidden Shame of Financial Stress

One of the most painful parts of financial stress is the shame that often accompanies it. Many people feel they “should” be coping better or assume others have it all together.

This shame can lead to social withdrawal or hiding financial difficulties from friends or family, reducing support at the time it’s needed most.

It’s essential to remember: financial stress affects Australians of every demographic, including people in full-time employment and families who have previously felt stable. The shame is widespread but rarely justified.

How Financial Stress Impacts Relationships

Financial pressure can create tension within couples, families, and friendships. Money is one of the most common sources of conflict in relationships.

When finances are tight:

1. Spending decisions feel more emotional
2. Differences in coping styles can create disconnect
3. Communication patterns become strained
4. Parents may experience added guilt or pressure when trying to protect children from worry

In therapeutic work, financial stress often highlights deeper relational or communication patterns. Addressing these can strengthen relationships long term.

When Financial Stress Becomes a Mental Health Crisis

For some people, financial hardship can trigger or worsen serious mental health concerns. Warning signs include:

1. Persistent hopelessness
2. Thoughts of self-harm or suicide
3. Withdrawal from relationships
4. Difficulty functioning at work or managing daily tasks
5. Using alcohol or drugs to cope
6. Panic attacks or severe anxiety

While we are here to support you through regular therapy sessions, we are not a crisis service and may not be available outside of scheduled appointments. If you or someone you care about is in immediate danger, experiencing a mental health crisis, or needs urgent support, it’s important to seek help straight away through the appropriate emergency or crisis services.

Practical Strategies for Coping with Financial Stress

1. Acknowledge what you’re experiencing

Recognising that you’re under financial strain can reduce self-blame and help you take the next step.

2. Separate your worth from your financial situation

Financial difficulty is often shaped by external economic factors, not personal failings.

3. Take small, manageable steps

Breaking tasks down restores a sense of control:

1. Write down your income, expenses, and debts
2. Choose one task to complete this week
3. Focus on what you can influence

Small, consistent actions help shift you out of paralysis.

4. Seek financial counselling

The National Debt Helpline (1800 007 007) can help with budgeting, negotiating with creditors, and understanding your rights.

5. Protect your basic wellbeing

Sleep, nutrition, and movement are essential when you’re under stress. Maintaining these habits can help you manage stress more effectively.

6. Stay socially connected

Connection helps protect your mental health. There are many activities that you can do at a low or no cost such as meeting a friend for a walk, or inviting your family over to play cards.

7. Challenge catastrophic thoughts

Practice grounding questions such as:

1. “What do I know to be true right now?”
2. “What is one step I can take today?”
3. “Have I coped with challenges before?”

This helps interrupt spirals of worst-case thinking.

8. Set boundaries around financial worry

Scheduling time to work through financial related thoughts and tasks can prevent rumination from taking over your entire day.

When to Seek Professional Support

If financial stress is affecting your mental health, relationships, or ability to function, psychological support can help you:

1. Process the emotional toll
2. Build coping strategies
3. Address anxiety or depression
4. Improve communication in relationships
5. Increase resilience
6. Break unhelpful thinking patterns

Seed Psychology offers Medicare rebates with Mental Health Care Plans and flexible payment options.

Moving Forward

Many Australians are struggling because of factors beyond individual control including inflation, wage stagnation, and the housing crisis. Recognising this can ease feelings of shame or inadequacy.

The cost-of-living crisis is affecting people nationwide, and feeling overwhelmed doesn’t mean you’re failing. Looking after your mental health is an essential part of navigating financial stress.

Whether you reach out to a financial counsellor, talk to a psychologist, or confide in a friend, every step counts.

Seed Psychology offers in-person sessions in Brunswick East and online appointments across Victoria. Call 03 9388 8113 or book online.

Key Questions Answered

How does financial stress affect mental health?

Financial stress keeps your nervous system in a state of high alert, leading to persistent worry, difficulty concentrating, sleep problems, physical symptoms like headaches or tension, irritability, feeling overwhelmed by everyday tasks, and withdrawal from social activities. It’s strongly linked to increased rates of anxiety and depression.

Why do I feel ashamed about struggling financially?

Shame about financial difficulties is very common but often disproportionate to reality. Many people assume others are managing better, but financial stress affects Australians across all demographics, including people in full-time employment and previously stable families. The shame is widespread but rarely justified, as many factors are beyond individual control.

How can financial stress affect my relationship?

Financial pressure can create conflict in relationships as spending decisions become more emotional, coping style differences create disconnect, and communication patterns become strained. For parents, there’s added guilt about protecting children from worry. Money is one of the most common sources of relationship conflict, but addressing underlying patterns can strengthen relationships long term.

What are signs that financial stress is becoming a mental health crisis?

Warning signs include persistent hopelessness, thoughts of self-harm or suicide, complete withdrawal from relationships, inability to function at work or manage daily tasks, using alcohol or drugs to cope, and panic attacks or severe anxiety. These signs warrant immediate professional support through crisis services or mental health professionals.

What’s the best first step when feeling overwhelmed by financial stress?

Start by acknowledging what you’re experiencing without self-blame. Then take one small, manageable step: write down your current financial situation, contact the National Debt Helpline (1800 007 007) for free financial counselling, or reach out to one supportive person. Small, consistent actions help restore a sense of control and shift you out of paralysis.

Should I talk to my partner about financial stress?

Yes. While financial conversations can be difficult, hiding stress often creates more distance and conflict than open discussion. Approach conversations with curiosity about each other’s perspectives, focus on collaborative problem-solving rather than blame, and consider seeking support from a psychologist if financial discussions consistently lead to conflict.

How can I manage financial worry without ignoring the problem?

Set specific, limited times to focus on financial planning and problem-solving rather than constant rumination. When worries arise outside these times, acknowledge them and redirect your attention. This creates boundaries around worry while still addressing practical needs, preventing financial stress from consuming your entire day.

When should I seek therapy for financial stress?

Consider seeking psychological support if financial stress is significantly affecting your mental health, relationships, or daily functioning; if you’re experiencing persistent anxiety or depression; if you’re struggling to cope despite trying various strategies; or if financial stress is triggering deeper issues. Therapy can help you process the emotional toll and build effective coping strategies.