Financial wellness can bring with it peace of mind and security for the future

Achieving a sense of financial security has been shown to enhance overall wellbeing and reduce stress levels. The opposite is true too, with a number of studies demonstrating the correlation between financial stress and issues such as anxiety, depression, and even substance abuse.

Focusing on financial health with consistency can of course be challenging. Costly health conditions, job insecurity, and economic turmoil can all slow us down.

So, how can we practice financial wellness?

Understanding financial wellness

Our financial wellness can be seen as a relative measure of how well we manage our finances. This might include being debt-free, having savings, meeting day-to-day expenses, having a comfortable retirement, and having the freedom to make life choices.

Improving financial wellness is about practicing better money habits, setting goals, and taking steps to achieve them – all with the aim of improving your overall quality of life.

The impacts of poor financial wellness

Overwhelming financial stress isn’t healthy. A study published in 2022 found it to be associated with depression in populations of all income levels. If your income barely covers your basic needs, you are naturally likely to feel very stressed when it’s time to pay the bills.

Research has shown that financial insecurity is a serious source of mental stress, while others suggest that poor physical health can directly impact financial stability. On the other hand, income growth correlates to life expectancy increases, while decreasing the risk of chronic illness.

Promoting financial wellness

There are 3 basic pillars of financial wellness:

1. Being clear on your financial goals and priorities
2. Knowing your numbers (income, expenses, net worth, retirement goals, debt, etc.)
3. Adjusting your behaviors and managing your emotions to match both your priorities and your financial reality

Practicing financial wellness might include:

• Managing short-term finances: Making a budget, sticking to it and working to gradually increase your income
• Managing long-terms finances: Ensuring that you make room to save and invest for long-term goals, like buying a home and building a nest egg for retirement.
• Improving present financial freedom: Reviewing the impacts of your habits on your budget and adjusting your lifestyle or your goals so that they match.
• Achieving future financial freedom: Retirement planning is a key part of achieving future financial freedom, such as making multi-year commitments.

Financial wellness and personal health

Our physical, mental, and financial health are closely connected. As we consider the dynamic relationship between our health and our financial resources, it’s important to take just as much time to improve our financial health as we do our physical and mental health.

A healthy attitude to money can bring with it confidence and stability. This in turn can give us the time and resources to learn about more complex concepts, such as investing. Financial wellness can be self-perpetuating. The more money we have, the safer we feel, allowing us to make even smarter decisions, and potentially making even more money.

Sources:

Harvard University, “The role of financial conditions for physical and mental health: Evidence from a longitudinal survey and insurance claims data,”

How can financial wellness affect your health? (webmd.com)

 

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