The connection between financial health and personal wellbeing is real.
That rush of anxiety when you get a past-due notice from the utility company? The feeling of despair when a debt collector lights up your phone? All related. In fact, a 2019 survey by BankRate found that 78% of American adults lose sleep worrying about their financial situation. Money troubles are also a leading cause of marital discord.
Now let’s look at the opposite end of the spectrum. Think about the satisfaction you feel when your savings account hits a milestone. That burst of pride when your mortgage balance finally drops to zero. You’ll sleep great—and not on the sofa.
Make the connection and thrive
For most of us, goals are related to physical or financial health. Lose that extra 10 pounds so you have more energy. Get a better-paying job so that you can make more progress on your child’s college fund. Now it’s time to connect the two, and taking action can be easier than you think.
What does financial wellbeing mean?
Start by asking yourself what financial wellbeing really means. One answer that may come to mind is “a million dollars in the bank.” That could indeed signify prosperity- unless you owe two million in mortgages and other debts.
To achieve financial fitness, you need to define it properly. It is less about your net worth and more about having the financial freedom to make important choices, like when to retire. Key measures of financial wellbeing include:
- Being in control of your money
- The ability to meet long-term goals, like paying off the mortgage and sending your kids to a great college
- The resilience needed to survive curveballs like job loss, business setbacks, or illness
How money affects your health
According to Maslow’s Hierarchy of Needs, the second most basic human need is safety, which includes financial security. When you aren’t sure that you’re going to make ends meet this month, you’re more likely to be stressed out, fight with loved ones, and suffer insomnia. On the flip side, when you have a sustainable budget and the financial resources needed to meet short and long-term goals, you not only breathe easier: you truly enjoy life more.
Where do you start?
It’s never too late to take control of your finances and, by extension, your future. The tips and tools below can help you accurately assess your situation, identify ways to improve it, and take advantage of wealth-building resources that increase your confidence and overall wellbeing.
1. Create a budget
For some, it’s a fun exercise. For others, it’s an uncomfortable sign that comparatively strict times lie ahead. Don’t fret if you fall into the latter category; it’s a temporary discomfort that will lead to feelings of success and control in the future. So, let’s get started!
First, draw up a budget by writing down your expenses over the last three months. This includes discretionary (e.g. dining out, a new wardrobe) and non-discretionary (groceries, utilities, rent or the mortgage).
You may be surprised by what you find. Many people have no idea of their spending habits: they simply claim that by the time payday rolls around, they’re running on financial fumes. By understanding and taking ownership of what you spend, you’ll gain insights that can lead to financial success.
2. Start saving
Pay yourself as well as your mortgage lender and credit card issuer. You may not be able to put aside much, at least initially, but as you pay down debt and spend more wisely, you’ll have more money available to put into an emergency fund. If your roof needs repairs or your car breaks down, you’ll have the cash to cover it without having to take out a personal loan.
3. Pay down debt
Credit cards, lines of credit, and personal loans may be easy to get, but the cost can be high when you tack on interest rates and administration fees. When you can’t get on top of the repayments, unhappiness and stress is the result. You feel like you’re pouring your hard-earned dollars into a black hole while being nowhere close to getting out of the red.
Once you’ve established a budget, focus on paying down the smaller debts first. Depending on how much you owe, it may take a while, but you will feel in control and, once one debt is taken care of, you move on to the next one. Instead of being in financial stasis, you’ll be making progress.
4. Establish investments
Long-term investments are an excellent way to get on the path to financial prosperity. Strategic investing can make your money grow faster and yield better returns than limiting your saving practices to regular deposits in a savings account. Besides, regular contributions to your investment portfolio can help level out market risk.
Working with a professional financial planner will help you develop a diverse portfolio so that you don’t group all your eggs in one basket, and your investment choices are properly aligned with your financial goals and risk tolerance.
Think of your wealth consultant as a personal trainer. When you’re striving for physical fitness, a qualified trainer will prepare an exercise and diet plan that works for you, now and in the future. A financial planner will work with you to define a budget, identify the right investment opportunities, and keep you on track.
What’s the bottom line?
Most of us have a reasonable idea of what it takes to improve our physical health. Options include making smarter food choices, committing to a gym membership, working out with friends, and hiring a trainer, if you need that extra motivation.
Financial health is no different. We commit to wiser spending decisions, shed all that excess debt, and seek expert advice to get the best results. When we have enough money saved to meet our living expenses, dodge unexpected curveballs, and anticipate a comfortable retirement, a heightened sense of wellbeing will follow suit. Even if you don’t have a million bucks in the bank (yet, anyway), you’ll feel like it. And, after all, isn’t that more important?