One of the leading causes of stress among people throughout the world is a poor financial situation. Being caught in a rut with little hope for financial advancement can lead to lower rates of happiness among adults. Financial troubles can also be a problem for relationships. Friction over money is one of the leading causes of relationship stress in America today.

More Money, More Happiness?

While money is a stress for many people, does it mean that more is always better? Some research would tend to argue that it’s not necessarily the case. A salary of $75,000 appears to be the perfect level for day-to-day happiness. While people have better levels of personal satisfaction above this level, it does not have as big of an effect as getting up to $75,000 does. Earn less than $75,000, and you’re likely to be less happy than people at that level. Earn more than $75,000 annually, and you’re not likely to see as big of a bump in your level of happiness.

The Effect of Debt on Happiness

Most people will have some level of debt in their lives. People generally have to pay to live somewhere. For the most part, they will either have to pay rent or a mortgage. Other forms of debt are not quite so necessary. This debt includes credit card debt and even “good” debt like student loans. The higher the level of outstanding debt, the less likely people are to be happy in general. High levels of debt are associated with emotional and psychological problems like depression, anxiety, shame and anger. These are not exactly traits that are frequently tied to concepts like happiness or stability.

Pay Off Debt

One of the best ways to cut down on financial stress is to pay off debt as soon as possible. Not only is the bank or credit card company no longer looking to get their money back, you’ll also be able to improve your monthly cash flow. For example, a family that owes $300 a month on a car and $300 a month on student loans would see its cash flow improve by $600 a month if those two bills were no longer outstanding. Most people could not live on $600 a month, but an increase that large on a monthly basis could be a great relief to people who have been living paycheck to paycheck. Looking to cut expenses through opting out of a daily lunch out or looking for cheap insurance quotes can also help improve this cash flow.

One of the best ways to pay off debt is through the debt snowball. This requires paying the minimum on all outstanding debts and then using all additional cash toward the smallest debt. Repeat this each month until the smallest debt is paid off, then roll the money that went to the smallest debt into the next smallest debt. Rinse and repeat until all debt is paid off. A lack of debt will lead to less stress because cash flow will improve and personal financial freedom will be closer.


After paying off debt, it’s a good idea to start saving, both for upcoming expenses and retirement. These expenses might be expected or unexpected, but with cash on hand to take care of them, it’s likely that they will lead to a little short-term aggravation rather than long-term stress because of debt.

Also, when looking to retire comfortably, about $500,000 is a good number to aim for when combined with Social Security and any pensions that are expected. The higher the number in the nest egg, the bigger the cushion that can cut down on stress and provide the stability that leads to happiness and comfort.

If financial instability leads to stress and depression, financial stability is a leading contributor to personal happiness and satisfaction. Looking to pay off and minimize debt and then save a nice portion of income can lead to more freedom. This increased freedom can cut down on stress and improve one’s overall outlook on life.