The Psychological Toll of Financial Instability on Freelancers 

The number of freelancers and other independent contractors all over the world has been soaring during the past few years: almost half of the population of workers are independent or freelance around the world (Forbes, 2023), and the workforce of freelancers has not stopped growing. However, the dark side of independence appears to be income instability: scattered working hours, delayed payments and no or minimal job safety. This economic insecurity is very psychologically demanding. The results of research are natural anxiety, depression, stress, and burnout in the freelancing community with an uncertain income.

Case in point, one study revealed that self-employed employees experience much more psychological distress (financial insecurity, fear of running out of money) compared to wage workers (Patel & Rietveld, 2020). These issues are only compounded by the current COVID-19 pandemic and economic shocks: UK surveys indicate that the mental health of many freelancers suffered with the disappearance of customers and the drought of projects (Spelsberg, 2024; Knight, 2024). In brief, financially freelancers suffer due to persistent stress related to financial uncertainty that has serious implications for mental health. 

The Rise of Freelancing and Precarious Work 

Freelancing represents freedom and flexibility in employment that millions of workers across the globe prefer. Freelancers account for some estimates to 1.57 billion or about 47 per cent of the available world workforce (Forbes, 2023). This involves all the gig economy drivers and creative contractors. But as opposed to a conventional job, freelancing usually provides no regular income, nor health coverage, nor legal security. According to the information provided by the World Bank and the ILO, a substantial number of self-employed and informal employees lack regulatory protection, have long hours, long days, and are not secure in employment (World Bank, 2022).

Job insecurity

In one illustration, the WHO singles out the issue of job insecurity and poor remuneration as major psychosocial risks to mental wellness (World Health Organisation, 2022). Practically, the freelancer can face a period of no work of several weeks between active projects or may experience the situation of ghosting when the customer does not send the payment. According to a UK study published recently, 72 per cent of freelancers have experienced late or non-payment of funds, and 72 per cent have had cancellation of projects in the middle of the process (Knight, 2024). Freelance is a chronically stressed population that is preceded by facts regarding the harsh economic realities. 

• Income volatility 
• Lack of a safety net 
• Isolation and irregular hours 

These factors combine to create persistent financial anxiety. Freelancers are acutely aware that a missed month of income can threaten their livelihood, which fuels worry and tension. As Chicago Booth’s Sendhil Mullainathan research on poverty notes, “Working through a difficult financial problem produces a cognitive strain that’s equivalent to a full night’s sleep lost.” (Walton, 2018). This means that money is a distractor in its own right, and as such, it can completely mess up concentration and good decision-making just like a severe lack of sleep. 

Anxiety, Depression, and Chronic Stress 

As it might not be a surprise, mental issues are often directly proportional to the uncertainty of income. Money concerns are rife. The surveys conclude that most of the freelancers indicate being stressed and anxious about finances. A US study conducted on the course of the pandemic indicated that self-employed individuals were much less likely than salaried employees to state that they were concerned with their finances, and that was associated with higher levels of psychological ill-being (Patel & Rietveld, 2020). Practically, freelancers are often faced with the constant fear of paying the bills, getting new work, and paying dependents, which may gradually develop into panic and sleep deprivation. 

Prolonged stress and isolation can also lead to depression. In a UK survey, over half of freelancers said their work caused them to feel depressed, far above the rate in traditional workers (Leapers, 2023). Another poll found that 64% of freelancers feel lonely daily, and many rank loneliness as one of the hardest parts of freelancing (Leapers, 2023). Chronic loneliness and financial strain feed negative thinking: “Many freelancers suffer from mental health problems linked to the solitary nature of [their] work,” notes a marketer commenting on these findings (Leapers, 2023). Indeed, studies of “non-standard” workers in Europe tie high job insecurity and financial difficulty to symptoms such as sleep disturbances, depression, and even higher rates of antidepressant use (Benach et al.,  2014).

Country wise data

Notably, the patterns are cut across countries. Such is the case of a 2005 German survey of freelancers, where 37 per cent reported an unsatisfactory overall state of health due to a reduction in the capacity to relax as well as strain continuously due to unsteady workloads (Krause et al., 2005). Likewise, recent surveys of cultural-sector freelancers in The United Kingdom found that income shocks created by the pandemic were negatively affecting their mental health (Spelsberg, 2024). Therefore, in brief, anxiety and depressive symptoms are the array of problems that occur among freelancers when income is uncertain.  

• Anxiety 
• Depression 
• Stress and tension 
• Burnout 

Isolation, Burnout and Fatigue 

Freelancers also tend to work on their own, which at the same time can increase stress because of the absence of a social support system. Researchers have highlighted that in freelance mental health, isolation is a massive aspect. According to one of the surveys, only 10 per cent of freelancers consider themselves not to feel lonely and disengaged most of the time (Knight, 2024). Financial stress bears even greater on the shoulders without any colleagues to rant against or to share the burden. One freelancer described it like this: it was very hard when you are the only one there, and it may be really hard to get feedback or a pat on the back (Krause et al., 2005).  

Long hours compound these issues. Unlike in typical jobs, many freelancers struggle to “switch off.” In the UK survey, 85% of freelancers admitted they never fully disconnect from work on holiday (Leapers, 2023). This constant on-call mode fosters chronic fatigue. Burnout becomes likely when high workloads and time pressures accumulate. Indeed, research on self-employed entrepreneurs finds a strong link between job demands and mental exhaustion (Hessels et al., 2018; Stephan, 2018). One German study reported that nearly 40% of freelancers had high subjective health strain, exhibiting a “pattern of health problems… due to long working hours in conjunction with an unpredictable workload” (Krause et al., 2005).

A Toll on health

To put it briefly, too many freelancers finally reach the tipping point: fatigue, lack of motivation, and even physical manifestations of stress (headaches, stomach conditions, sleep disorders). According to the World Health Organisation, the most important workplace risk factors regarding poor mental health include excessive workloads, low job control and job insecurity (World Health Organisation, 2022).

All three are fairly common to a freelancer: freelancers may do too much work (to earn the unimpressive wages), they have little control over when and what their clients require, and they are fully aware that their positions may be taken away at any moment. Such a detrimental mixture is only capable of causing not only burnout, but also work loss due to health reasons. One survey identified that 31 per cent of the freelance workers stopped working for a matter of several days in the year due to mental health problems (Mental  Health Foundation, 2023). 

Impact on Decision-Making and Work Performance 

It is not just that financial stress causes offence and damage, but also a detriment to performance at work. Narrowly focused attention, imagination, and decision-making will corrode high stress levels. Behavioural research indicates that the lack of money takes up brain capacity, leading to inaccurate judgment and myopia (Mani et al., 2013). That is, an inability to get one’s mind focused or to plan well can physically come about because of the concern of rent payment.  

In practice, it implies that a freelancer under stress can lose an opportunity or act in a panic. There is research evidence that occupational stress may decrease job satisfaction as well as affect performance and have a negative impact (Sonnentag & Frese, 2003). Financially stressed freelancers might not take uncomfortable decisions (such as the decision to fire a bad client) or hurry in the course of undertaking tasks, which are potentially income-harming moves. In some cases, Parkin et al. argue, you may even engage in the so-called presenteeism and work when you are sick or experiencing burnout to continue the projects (Krause et al., 2005), but this ultimately fails to deliver quality and health. 

Overall well-being suffers as well: chronic stress erodes life satisfaction and can spill over into personal relationships. The WHO notes that all workers, including freelancers, benefit from “decent work” that provides structure, purpose, and social support (World Health Organisation, 2022). Lacking these, many freelancers end up trapped in a cycle of overwork and anxiety that undermines both their health and their work. As one expert bluntly puts it, “stress can significantly affect job satisfaction, performance and commitment” (Sonnentag & Frese, 2003) – a critical issue when the business owner is the worker.

Insights from Research and Experts (Global Perspective) 

A wide range of studies and surveys illustrate these trends internationally. In the US,  Upwork research shows freelancing is booming (38% of Americans freelanced in 2023)  (Upwork, 2024), but other polls indicate a high burden of stress and burnout among those workers. In Europe, scholars note that economic shocks hit self-employed people especially hard. For instance, Patel and Rietveld (2020) found that during COVID-19, self-employed Americans suffered greater short-term psychological distress than wage workers, largely due to income uncertainty and fear of job loss.

In Germany and Switzerland, researchers link the most common stressors for gig workers directly to high job insecurity and financial problems, which in turn cause sleep disorders, depressive symptoms, and excessive work even when ill (Benach et al., 2014). In the UK, cultural sector freelancers interviewed during the pandemic reported worsening mental health tied to lost contracts and sporadic pay (Spelsberg, 2024). Even as freelancing is hailed as a  “dream job” by some, these studies reveal that the mental health risks are very real and widespread. 

Freelancing is an “invisible” occupation

Experts agree that freelancers’ challenges need attention. Jan Siegrist of the University of  Düsseldorf notes that freelancing is an “invisible” occupation of many workers, along with no organised support when problems arise (Krause et al., 2005). Matthew Knight of the  UK’s Leapers project warns that with millions of freelancers contributing sizable GDP (the  UK’s freelancers deliver over £160 billion a year), “their lack of adequate mental health support… will undoubtedly have an impact on the already stretched NHS” (Knight, 2024).  Knight’s survey work shows 45% of freelancers saw their mental health decline in 2024, as cost-of-living pressures and unsteady work took hold (Knight, 2024). Commentators call for better signposting to resources and policy measures: as one expert puts it, “some organisations should be developed so freelancers can have access to… support in cases of crisis” (Krause et al., 2005). 

Conclusion 

Freelancers have the advantage of being their boss, but in most cases at the cost of stability. Researchers and surveys in different parts of the world provide similar portrayals: irregular income and employment generate financial stress over time, contributing to anxiety, depression, and burnout on behalf of independent workers. This, in turn, compromises their well-being, choice, and productivity. As freelancing has increased, professionals are calling to make mental health support for such workers by establishing community networks and financial planning assistance and policies. In the meantime, millions of freelancers will still be forced to bear the mental pressure of not being able to guarantee their economically affected future, leaving implications for themselves, their clients, and society as a whole. 

FAQs 

1. What are some psychological factors that impact stress?

Psychological factors that significantly impact stress levels include perceptions of control, coping mechanisms, personality traits, and cognitive appraisals of situations. Negative thinking patterns, such as rumination and catastrophizing, can also exacerbate stress.  

2. What is the connection between mental health and financial health?

Financial health and mental health are closely intertwined, forming a cyclical relationship where each can impact the other. Financial difficulties can lead to stress, anxiety, and other mental health issues, while mental health challenges can hinder financial stability and decision-making.  

3. What is the root cause of financial stress? 

Financial stress stems from a combination of factors, including debt, income instability, unexpected expenses, and a lack of financial literacy. These can lead to  a sense of insecurity, anxiety, and overwhelm with one’s financial situation.