How High Inflation Rates Negatively Impact Our Lives, Including Mental Health

Key Points

• In the past month, inflation has reached a four-decade high of 9.1%.
• The devaluation of people's money reduces their purchasing power and increases their stress levels.
• Financial advice can help reduce anxiety and provide guidance during these challenging times.

Inflation: A Deeper Understanding

Recent purchases have been stark reminders of the impact of inflation, with previously affordable items now out of reach or surprisingly expensive. For those unfamiliar with the term, inflation is the rate of increase in prices over a specific period. This increase can apply to various goods and services or a specific category.

In June, the United States experienced a four-decade high inflation rate of 9.1%, as reported by the Bureau of Labor Statistics. The most noticeable inflation occurred in food, gasoline, and shelter. Dr. Jaime Peters, an assistant dean and assistant professor of finance at Maryville University, explains that several factors have contributed to the rapid inflation we are experiencing:

• The COVID-19 pandemic disrupted supply chains, allowing companies to increase the prices of their goods.
• A labor shortage has given workers the opportunity to demand higher wages, leading to increased costs for companies.
• The ongoing invasion of Ukraine by Russia has resulted in intensified competition among countries for oil from the Middle East, as they seek alternatives to Russian oil.

Inflation's Impact on Mental Health

High inflation rates can trigger feelings of anxiety and uncertainty. According to Kara Nassour, a licensed professional counselor, inflation primarily affects mental health in two ways: financial stress and uncertainty.

"Inflation reduces the purchasing power of money, which can increase stress related to finances. This financial stress can lead to chronic anxiety, exhaustion, strained relationships with partners, and difficulties in accessing housing, education, or healthcare," Nassour explains. "Poverty itself can be a traumatic experience." These issues are particularly challenging for single-parent families and those who have experienced a significant decline in their standard of living.

Nassour adds that this financial stress is compounded by the uncertainty surrounding inflation. "Most people don't understand why inflation occurs, how to stop it, or how quickly it will escalate," she explains. "This makes it difficult to plan for the future or save for future expenses like college or buying a home. In extreme cases of 'hyperinflation,' the value of money declines so rapidly that people withdraw cash from banks and buy goods to sell later, fearing that their savings will lose value. This can lead to increased instability, anxiety, cynicism, and loss of trust in the government."

Furthermore, Hazel Navarro, a licensed independent clinical social worker, notes that this uncertainty and sense of hopelessness come at a time when the global economy is still recovering from the pandemic and the resultant mental and financial challenges. Adding to the strain, many individuals are reminded of the Great Recession of 2008, fearing that the current economic situation might deteriorate to similar levels.

Another concern is the effect of inflation on access to therapy. With increasing rates, the cost of therapy is becoming prohibitive for many. A recent study conducted by Verywell Mind revealed that 48% of individuals would not be able to afford therapy if rates continued to rise, and 38% had already required assistance to cover therapy costs. Approximately one-third of individuals have had to reduce the frequency of their therapy sessions or discontinue them altogether due to financial constraints.

Mental health is equally important to physical health, yet society often dismisses it as a luxury, leaving individuals to cope independently during times of heightened anxiety. In the United States, where healthcare costs are exceptionally high, individuals may struggle to prioritize their physical and mental well-being.

Navarro recommends exploring whether an insurance policy covers mental health providers, both in-network and out-of-network, even if it involves reimbursing a portion of the out-of-pocket expenses.

Financial Strategies for Navigating Inflation

Inflation, especially at a rapid pace, can indeed affect our living standards and pose challenges to financial stability. However, certain strategies can help minimize inflation's negative impact on individuals:

Budgeting

Creating a budget is a fundamental and essential step. Due to high inflation, Peters recommends adjusting the budget every quarter. Beyond its direct objective of saving money, budgeting can also have a positive impact on mental health.

"In the absence of a budget, your mind is more likely to make pessimistic assumptions about your financial situation," says Dr. Marie-Helene Pelletier, PhD, MBA, an award-winning work psychologist and expert in resilience and workplace mental health.

Marie-Helene Pelletier, PhD, MBA, a psychologist In the absence of a budget, your mind is likely to make more negative assumptions—but sort of knows they are not real. One way or the other, the budget will help you have clarity on the situation and provide a direction on next steps. — Marie-Helene Pelletier, PhD, MBA, a psychologist

Pelletier adds, "It is also possible that your mind is making unrealistically positive assumptions—but sort of knows they are not real. One way or the other, the budget will help you have clarity on the situation and provide a direction on next steps."

Utilizing Public Transportation

Given the soaring gas prices, Peters suggests walking, biking, or taking the bus whenever possible.

For those living in areas where driving is essential, it is advisable to plan trips in advance to avoid repetitive outings. Additionally, carpooling with neighbors is a viable option.

Seeking a Cost-of-Living Adjustment

Peters explains, "If you have not received a substantial raise recently, your real income has decreased compared to last year. You should approach your employer and respectfully request a raise, backed by concrete data."