Financial Wellness and Your Overall Well-Being: What's the Connection?
Money — we all need it to survive, but it's a necessity that can, at times, cause arguments, fear, and feelings of inadequacy. Women, in particular, are susceptible to the anxiety and stress caused by financial instability. In fact, in a recent study, 56% of women said money has a negative effect on their mental health, compared to 47 percent of men. So what do money worries and feeling overwhelmed have to do with your well-being?
What the Research Says
The connection between money and happiness is complicated. For example, some research has shown that people with higher incomes are happier than those with lower incomes. Other studies suggest that while money can buy happiness, it's not as simple as earning more money to make yourself happier. In fact, research suggests that the link between money and happiness is not as straightforward as we might assume. In a study carried out by researchers from The University of Texas at Austin, they discovered that although money can bring happiness, it has a greater impact when spent on experiences rather than material possessions. This is because experiences tend to create lasting memories, while the perceived value of material goods diminishes over time.
What is Financial Wellness?
Financial wellness is a combination of three factors:
- Financial security is the ability to maintain your standard of living in the event of an emergency or other major life event. It also includes the ability to meet ongoing expenses, such as housing, food, and transportation.
- Financial health is how you feel about money. Do you worry about paying the bills? Do you define success by how much money you make? Do you feel stressed when it comes to balancing your budget? Financial health can include feelings of guilt or shame about money as well as feelings of joy when you spend it.
- Financial literacy is how well you understand money management concepts like budgeting, debt repayment, investing, and retirement planning. It also includes knowing where to go for help with managing your finances if necessary — whether that's talking with friends or family members, or seeking out professional advice from a financial advisor or accountant.
Improving Financial Wellness Brings Positive Effects
Here are some ways that improving your financial wellness can positively impact other aspects of your life:
- Relationships: A person with healthy finances is more likely to have healthy relationships.
- Health: When you are stressed about money, it can lead to poor eating habits, sleep issues, depression, and anxiety.
- Self-confidence: Improving your finances can boost your self-esteem because it shows that you've taken control of this area of your life. Once you start seeing results from working on getting out of debt or building up savings, it can be empowering and give you confidence in other areas of life as well.
Financial Wellness and the Impact at Work
Financial stress among American workers has continued to increase in recent years, with about half of employees reporting that they are suffering from this problem. And it’s an issue for people regardless of their income level. Nearly 60 percent of those making less than $55,000 a year say they feel financial stress, but nearly 40 percent of those making more than $200,000 also say they are stressed about money.
Five Steps You Can Take Today
- Set goals. Write down specific goals for yourself — such as paying off debt or buying a home — and then create an action plan to reach those goals.
- Create a budget. Track your spending so that you can see where your money goes each month. Identify areas where you can cut back and reduce unnecessary expenses.
- Minimize debt. Debt - especially high-interest debt - can make it hard to reach other financial goals like saving for retirement or buying a home.
- Save for emergencies. It's a good idea to have an emergency fund of three to six months' worth of living expenses. One way to do this is to set up automatic withdrawals so that a portion of your income regularly goes into a separate savings account.
- Start investing for the future. Tackle your long-term goals by investing for the future. You can begin with small amounts and gradually increase your contributions over time.
Working on your financial wellness is a key part of the overall process of improving your life. Improving your financial wellness is important: it helps you sleep easier at night, gives you peace of mind, and improves your life, both now and in the future. The saying, "No amount of regret can change the past; No amount of anxiety can change the future" is true. Managing our finances wisely today – instead of dwelling on regrets about the past or worrying excessively about the future – is the path to positive change.
-- Susan Michel is the founder and CEO of Glen Eagle Advisors, LLC, an award-winning financial services firm based in Kingston, NJ. Offering retirement planning to business owners and wealth management, the Glen Eagle team takes an educational, holistic approach to meeting their clients’ long-term goals. Susan is a member of the Enterprising Women Advisory Board and a past recipient of the Enterprising Women of the Year Award. She was recently named an Enterprising Women “Top 20 in 2020” Award Winner.