We're all painfully aware that there's a psychological and emotional element to our financial habits. No matter how emotionally intelligent you are, you might be vulnerable to emotional spending (or impulse spending), and you likely feel a boost of happiness or satisfaction when your paycheck lands in your bank account.

What you may not realize is that the way you choose to spend (or save) your money has a direct impact on your levels of stress and mental well-being; and if you get your spending under control, you may be able to significantly decrease the stress and anxiety in your life.

Worrying About Your Savings

First, you should know that the amount of savings you have and the amount of debt you owe can seriously affect your stress levels. According to one study, 37 percent of Americans felt moderate to high anxiety when thinking about their retirement savings, and money is the number one source of stress, beating both personal relationships and work. With the average United States household carrying $137,000 in debt and most Americans behind on retirement savings, it's no wonder why we're so stressed about money.

Taking the time to pay those credit cards down (instead of trying to buy a bigger house or afford that lavish vacation) and build up your emergency savings can take a serious load off your mind. You'll feel more stable, more secure, and most importantly, more in control.

Impulse Buying and Remorse

How often do you make impulse purchases? Are you tempted to pick up a few extra items when you're in line at the grocery store, or do you add a few small products to your cart when you're shopping online because they were advertised to you? Research shows that engaging in impulse shopping elicits self-conscious emotions, like guilt and shame, which can negatively affect your wellbeing.

If you're naturally vulnerable to the temptations of impulse buying, your options may be limited. You can reduce episodes of impulse shopping by preparing a strict budget and adhering to it, and by creating a firm list of things to shop for--preventing yourself from deviating from that list. Then, if you do make an impulse purchase, think carefully about it, and follow through only if you feel strongly that you won't experience feelings of remorse afterward.

Buying Experiences vs. Things

Empirical studies suggest people are happier when they buy experiences than when they buy things (in general). For example, you'll probably get more happiness out of taking a vacation than you will from buying a set of brand-new furniture. There are a few possible reasons motivating this preference, including the fact that experiences are tied to memory, and stronger, more positive memories lead to greater overall happiness and health. The allure of objects and items also wears off quickly, even if you keep them for a long time.

Saving Time

Studies show that when you spend money in an effort to save yourself time, you can reduce your overall stress; in one survey, people who made purchases specifically to save time reported higher life satisfaction than those who didn't. For example, you might spend money on an oil change rather than doing the work yourself, or pay extra for a cab, rather than waiting around for a bus. Having more time to comfortably handle your responsibilities, or spend more time with your friends and family is worth far more than the money you spend to save that time.

Unnecessary Frugality

We've established that it pays to be frugal; reducing your expenses and saving money for an emergency fund (and/or to pay off your debt) can reduce your stress. But there's also evidence to suggest that being overly frugal can stress you out, too. Forcing yourself to eat food you don't like or make yourself uncomfortable for the sake of saving a few dollars, will probably do more harm than good, and constantly worrying about every dollar you spend will fill you with anxiety.

The Other Direction

Of course, we should also consider the mutual relationship between stress and spending habits. Spending money the wrong ways could significantly increase the stress in your life, but that stress may fuel your irresponsible spending habits--resulting in a vicious, endless cycle. If you want to break out, you'll need to create structure for yourself, and break out of the spending cycle that keeps you locked in at this level of financial health.

Extremes in any dimension of your spending habits can result in additional stress, so try to find a balance. Resist impulse purchases whenever you can, but don't be too strict with your spending habits. Save money so you have a cushion for a financial emergency, but don't be afraid to splurge on an occasional vacation. The "right" balance is different for everyone, so it might take some experimentation to figure out what works best for you--but when you do, you'll be glad you took the effort.