Welcome to Let’s Talk Money, where you’ll hear from financially savvy people on the small changes they made that helped them build sustainable money habits, reduce their stress, and set themselves up for financial and personal well-being. We never seem to hear about the critical connection between our financial well-being and our whole human well-being. But money is a top cause of significant stress for Americans, according to the American Psychological Association, and unchecked stress levels have been linked to issues from heart disease to diabetes to depression. The good news is that there’s a powerful, impactful approach to managing our finances and our health, based on the latest behavioral science showing that starting small — with too-small-to-fail Microsteps — is the most effective way to make habits stick. It’s time to make this a key part of our conversation about our relationship with money. Read on for compelling stories and advice on how to take control of your financial and overall health, one small step at a time.
When you think about your personal relationships, your relationship with money may not be the first that comes to mind. But it’s an important one that impacts your life in more ways than you might assume, affecting both your physical and emotional well-being. According to the American Psychological Association, money is a somewhat or very significant source of stress for the majority of Americans (64%). Constant worry and stress over finances can be a literal pain — causing tense muscles, headaches, even stomach problems. What’s more, as Dr. Robert Lustig, emeritus professor in pediatric endocrinology at the University of California, San Francisco, noted in The New York Times, “every chronic disease we know of is exacerbated by stress.”
Clearly, nurturing your relationship with money can lead to improved health, less stress, and the peace of mind you need to show up optimally for all the other relationships in your life. “Not to have to spend mental bandwidth every single day stressing about money is huge,” says Erin Lowry, a personal finance expert and the founder of BrokeMillennial.com. “Our brain only has the capacity to handle so much in a given day, and if there are a lot of different factors that are stressing us out, including money, that’s going to keep us from living up to our full potential.”
To help you reap the well-being benefits of reducing financial stress, Thrive chatted with Lowry, as well as Rianka Dorsainvil, a Certified Financial Planner and founder of Your Greatest Contribution, a financial planning firm serving small businesses and multigenerational individuals from a variety of cultures and backgrounds. Their lessons — which come from personal experiences — can transform your relationship with money in 2020 and beyond.
Put on your financial oxygen mask first
Rianka Dorsainvil saw firsthand how personal finances can have a ripple effect on not just our emotional health, but also our physical health. Watching her aging grandmother become ill and need dialysis, Dorsainvil assumed retirement would be an option. “I said, ‘Nana, you’ve been contributing to your retirement fund throughout your entire life, so now you should be able to take money out and live off of it. But I had assumed wrong.’” Her grandmother, who was the first to give of herself — and her bank account — her entire life, couldn’t retire because she wasn’t prepared financially for it. Witnessing that was difficult for Dorsainvil, but led her to develop a mantra she regularly uses with her clients: “Put on your own financial oxygen mask before assisting others.” When it comes to saving and planning for retirement, stop thinking of it as something you’ll do if there’s any money left over, says Dorsainvi. Make it your default to “pay yourself first” — before you dole out funds elsewhere.
And ditching the “it’s too late” mentality is key to moving forward. “It’s true that the best time to start investing in a 401(k) was yesterday, but if you haven’t started, anything that you can start contributing today is going to help you tremendously in the future,” notes Dorsainvil. You can start by allocating as little as 2% of your paycheck to your employer-sponsored retirement plan. If your employer provides a match, even better! And if you do already contribute, look for opportunities to amp up the amount.
Know when your budget needs adjusting
Several years ago, when Dorsainvil contemplated quitting a job to embark on launching her own business, she knew that it would be too stressful to jump ship without first determining if she could make ends meet. Knowing that new businesses can take a while to become profitable, Dorsainvil said it was important to go through a “test run” of tightening her belt. “Before I quit my job, I started moving my income into a cash money market account (that way, I could earn a little bit of interest on it), with a goal of getting a feel for what it would be like if my husband and I just lived off of his salary. The good news: It felt OK!,” recalls Dorsainvil.
Lowry found herself in a similar phase of belt-tightening while on her book tour, when bringing in income took a back seat to publicizing her book. “I was not bringing in money and spending a lot of money, and my salary covers a lot of our expenses (I’m married), so that was incredibly stressful.” Lowry and her husband got through it by consciously adjusting their spending. “We had to pare way back for a period of time.”
Rethink your emergency fund M.O.
An emergency fund is important — but not solely for the financial security it provides. Living with the fear that you won’t be able to cope with an unforeseen money hurdle causes stress that can affect your physical and emotional well-being. One reason your health could take a hit when you’re stressed about money? When cortisol, a.k.a. the stress hormone, is chronically elevated, you’re at an increased risk of problems including depression, obesity, metabolic syndrome, Type 2 diabetes, and high blood pressure.
Building up an emergency fund is one of the ways to prevent stress about money. Still, people are often discouraged when they hear the common advice to set aside three to six months’ worth of living expenses (or even up to a year’s worth) — especially if they’re paying off loans or not earning a lucrative salary. In that case, Dorsainvil recommends starting small (but still contributing something). Even $25 per paycheck adds up, she says, noting that when you automate your savings, you’re more likely to be successful in building an emergency fund. “The idea is, ‘set it and forget it.’”
Recognize when spending money is a well-being investment
While it’s normal to go through times when tightening your finances is in order — or, as Lowry calls it, living off of a “bare-bones budget” — not knowing where to cut back can be stressful. Lowry cautions against getting rid of everything you need to support your well-being. For instance, “if mental health is something that you struggle with and you see a therapist or take medication, those costs should be considered a part of your bare-bones budget so you don’t have to go without them,” says Lowry. “Maybe you talk to your therapist and say, ‘Normally we meet weekly. Can we go down to bi-monthly sessions, or even once a month, just while I’m in this financially stressful period?” Whatever adjustments people make, it’s important that they still have their support system in place, adds Lowry.
Trade “convenience spending” for “joy spending” or “sanity spending”
Oftentimes, people fall into a trap of convenience spending, says Dorsainvil. This is when they make a habit of spending money on things that make life more convenient — even if those things don’t make them any happier. One example: Taking Ubers regularly, when you could (almost) just as easily take public transportation. Or buying lunch everyday because brown-bagging a meal to work seems like more of a drag. Dorsainvil recommends asking yourself if you could trade some convenience spending for spending that actually brings you joy. “Travel is very important to me and my husband, and not only travel, but international travel, especially where we can’t take our computers,” says Dorsainvil. “If we’re not able to achieve that goal, which keeps us sane, then we need to look at our spending and see if there’s any convenience spending that’s stopping us.” That thinking is in line with the research — including studies from Professor Thomas Gilovich at Cornell University — drawing the conclusion that happiness is derived from spending money on experiences, not things. Ultimately, spending money on an experience — whether it’s travel or something else that aligns with your values — may bring you a greater well-being boost than doling out funds for something inconsequential.
Don’t keep financial secrets
With the exception of a completely unexpected layoff, most people have an inkling that a financial change or hardship may be on the horizon, says Lowry. “Often people hide that information because they’re embarrassed.” They even hide it from their own partner if they’re in a relationship. “But having an open, honest dialogue is going to take so much stress off your plate, because the two of you can be a team about it,” says Lowry. Ultimately, “learning how to communicate well about money is one of the best things that you can do for the longevity of your partnership, because money tends to be one of the number one stressors in a relationship.”
And if you’re not coupled up, “find a person you trust who you can talk to about what you’re going through financially, because sitting on money angst alone is so stressful,” adds Lowry. What’s more, opening up to others and hearing their woes will help you realize that other people go through financial tough times too. “It’s not just you.”
Consider your credit score
One source of stress for people who don’t have much of a personal credit history is figuring out how to make themselves appealing to lenders — say, for a car loan or a mortgage. And, unfortunately, only using a debit card does nothing to improve that situation. While building a strong credit score takes time, and all sorts of factors — from your credit history to the types of credit you have — impact the strength of your score, “using a credit card is the only way to build a credit score without actually having debt. If you use a credit card wisely — like by paying it off on time and in full every single month — you’re going to develop a strong credit score,” says Lowry. The problem is, “a lot of people were never properly taught how a credit card works, so they’re freaked out. Or there are those who say having a credit card means you have debt. No, if you pay off the balance every single month, you never pay a penny of interest and you’re never carrying debt.”
Face the numbers
Sometimes the stress people live with comes down to being in a constant state of financial ambiguity, says Lowry. “We don’t really pay attention to what the full scope of the problem is because it’s scary.” But when it comes to money, ignorance is not bliss; it’s important to confront your situation head-on. This isn’t about creating a budget (yet), says Lowry: It’s about taking stock of every balance you’re carrying and loan you owe — credit card balances, car loans, student loans, mortgages, etc. — and writing that information down, along with the minimum amount due each month. “You can’t begin to make a realistic plan or a budget without knowing all of the details of your finances,” says Lowry. While this may feel hard at first, you’ll likely notice a huge emotional burden start to lift once you’re empowered with true clarity on your situation. And that emotional lift can have big payoffs on your overall well-being.
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