All About Financial Wellness: How It Affects Your Health, and Tactics to Achieve It
SOURCE: Everyday Health
Cultivating a sense of financial wellness takes time, effort, gainful employment (for most people), and communication skills.
When it comes to money, having enough is certainly important. But true financial wellness is about more than just your profit-and-loss statement. It’s also about how you relate to money, how you handle financial stress, and how well you communicate these things when necessary.
To help you improve your financial wellness, we reached out to several financial therapists who help folks manage not just their bank balance, but also their relationship to money. These professionals — many of whom have backgrounds in financial planning, mental health counseling, or both — help people cultivate financial security along with a healthy rapport with money.
Read on for more about what financial wellness is, what contributes to it, and how to boost your own.
What Is Financial Wellness?
“Financial wellness comprises both the math and the emotions of money,” says Saundra Davis, the executive director and founder of Sage Financial Solutions and an adjunct professor of financial planning at Golden Gate University in San Francisco.
As a financial behavior specialist, Davis stresses three basic pillars of financial wellness:
Clarity about your financial goals and priorities
Knowledge of your numbers (income, expenses, net worth, retirement goals, debt, and more)
Ability to adjust your behaviors and manage your emotions in a way that honors both your priorities and your financial reality
While financial security certainly plays a role in financial wellness, it’s not just about how much money you have. It’s also about being able to manage financial decisions and stressors in a healthy way. “Financial security and stress are two components of financial well-being,” Davis says. ”It is possible to have security and still feel stressed.”
In other words, there are very wealthy people who are constantly stressed about money, and there are people who have far less but feel happy and comfortable in their financial situation.
How Is Financial Stress Different From Other Types of Stress?
As Davis mentions above, financial stress is a key component of financial wellness. More specifically, learning to manage financial stress is crucial. “No matter how positive you may feel about your financial well-being, no one is immune to financial stressors,” says Ashley Agnew, a financial therapist and the director of relationship development at Centerpoint Advisors in Needham, Massachusetts.
As with other types of stressors, a certain degree of financial stress may be helpful. Agnew says that a minor amount of financial stress is what keeps us from constantly overspending. Feeling a lot of stress about a particular thing, whether it’s a single purchase or an ongoing financial commitment, could be the gut-check you need to reconsider that decision or similar ones going forward.
But constant, overwhelming financial stress isn’t healthy. A study published in 2022 found it to be positively associated with depression in populations of all income levels, although the relationship is stronger among low-income populations.
And unfortunately, addressing financial stress is uniquely challenging for several reasons. First, we’re constantly making decisions about money — some as small as whether or not to buy the sale item at the grocery store, and some as large as whether to lend money to a family member. “It is only normal to feel some level of stress along this continuum throughout the day,” Agnew says. Always having to think about the consequences of these decisions can feel burdensome.
Second, for many people, financial decisions and their consequences are shared. If you share finances with your partner or your family members, then their financial priorities and numbers get intermingled with yours. But no two people are on exactly the same page about money. “Each person has had fundamentally different experiences with money,” says Ed Coambs, a certified financial planner, licensed mental health therapist, and financial therapist who owns Carolina Couples Counseling in Matthews, North Carolina. It’s not just our current financial situation that shapes our relationship to money; it’s also our past experiences, including how our parents related to money.
Finally, some financial stressors can be chronic and absolutely crippling. If your income is not enough, or barely enough, to cover your basic needs, then you likely feel very stressed every time it’s time to pay rent and other bills (such as utilities and medical expenses). You might be tempted to numb out the stress instead of facing it, which just perpetuates the cycle. Davis says that it’s important to know where your money is coming from and going — even if you don’t have enough, getting a realistic picture of your situation is the first step toward creating a plan and reaching your goals.
How Does Your Financial Well-Being Affect Your Physical and Mental Health?
There’s a reason we’re talking about financial well-being: It has a significant impact on both your physical and mental health.
It’s well documented that financial security, which is one aspect of financial well-being, has a huge impact on health. If you don’t have enough money to access nutritious food, quality healthcare, and rent or mortgage in a safe neighborhood, your physical health is at risk, Agnew says. One study found that low income status was associated with accelerated aging — age-associated chronic illnesses and earlier death — and decreased physical health overall.
A lack of financial security also leads to increased financial stress, which negatively impacts your mental health. Indeed, a research article found that lower income was associated with worse mental health.
But remember, financial well-being isn’t just about how much money you have. Research also shows that our relationship with money impacts our health, particularly our mental health. In one meta-analysis, researchers looked at how a person’s level of materialism — how much their values centered on the importance of making money and acquiring possessions that convey status — was associated with overall well-being. They found that, regardless of income status and financial security, higher levels of materialism were associated with lower levels of overall well-being.
That meta-analysis looked at several existing studies on the topic and found that people who had enough money to meet their needs had better overall health and well-being, but those who were too focused on acquiring money and possessions were actually worse off by these measures.
Likewise, a 2023 scoping review of all existing studies on the relationship between depression and financial strain — which isn’t defined by net worth, but by whether or not a person is able to cover their expenses with the money they have — suggests that a person’s ability to live within their means could be more important to their mental health than the amount of money they have.
The takeaway? Your relationship to money matters. “A person’s level of worship, avoidance, diligence, and status associated with money can affect their health,” Agnew says.
How Financial Challenges During and After the Pandemic Have Affected People’s Health and Well-Being
In the nearly four years since its onset, the COVID-19 pandemic has impacted every part of our lives and our society, including our financial well-being. But it’s hard to sum up exactly how the financial challenges that sprang from the pandemic have affected our health, because this varies greatly from person to person.
“Everyone’s situation is different,” says Derek Hagen, a financial therapist and the owner of Meaningful Money in Minneapolis. “Many people lost their incomes and had to find new employment, and having a gap in pay can make paying bills a struggle,” he says. “Others maintained a steady paycheck, but they were not able to work from home like so many others and still had to physically go to work.” So, the need for income and financial stability may have put their health at risk, he says.
It’ll be a while before we fully understand how the pandemic and its aftermath have impacted our financial wellness. Already, there are some interesting studies that point to just how nuanced and far-reaching the financial challenges are when it comes to well-being.
One study of Swedish adults found that higher trust in the government to handle economic challenges of the pandemic was associated with better financial well-being, and that increased trust in the government to handle healthcare challenges (like the spread of the virus and the readiness of hospitals) was associated with better overall well-being.
A study of adults in Thailand found that those who lost their jobs during the pandemic were at higher risk of stress, and those whose household income was reduced by 50 percent or more were at higher risk of anxiety. Overall, self-reported financial problems during COVID-19 were significantly associated with stress, anxiety, and depression.
One possible bright spot in all this is that the pandemic may have helped some people reassess their values and their relationships with money. “The pandemic was a reminder to many that life is short,” Hagen says. “The definition of what it means to be financially well has shifted away from having the most and toward having enough.”
How Can You Improve Your Financial Well-Being?
The bottom line here is that your financial well-being — which involves financial security, how much financial stress you experience, and your relationship with money — has a massive impact on your overall wellness. Thus, nurturing financial well-being is crucial. Here are some tips from financial therapists on how to do just that.
Get a Clear Picture of Your Current Financial Wellness
First, establish a baseline. “You can boost wellness by first recognizing where you are now,” Davis says. “There are some money assessments that can help you recognize how money is impacting your overall wellness.” She points to Money Habitudes, which helps you evaluate your financial stress, your beliefs about money, how savvy you are with it, and more.
Meet With a Financial Adviser to Ensure You’re on Track With Your Goals
“Knowing where your money is going can be supportive of your wellness,” Davis says. Knowing how much you need to meet goals — like buying a house, paying for college, and retirement — is equally important. If you haven’t already, meet with a financial adviser who can help you plan for the present and the future, and counsel you on how to manage your finances.
Get Comfortable Talking About Money
“Part of building financial well-being is being able to see money in a broader context and depersonalize it,” Coambs says. This means talking to your parents about their own relationship with money, which could help shed light on some of your own beliefs and habits around it. A couple of close friends whom you feel comfortable discussing money with may help, too, because it can normalize some of your feelings and reduce the burden of carrying your financial stress alone.
Cultivate Financial Intimacy With Your Partner
If you share finances with someone, it’s absolutely crucial that you’re able to communicate about money. “Financial intimacy is being able to be with your partner and yourself in all the good feelings and the challenging feelings, and being able to talk openly and candidly about all financial topics: cash flow and budget, investment and retirement, taxes, insurance, and estate planning,” Coambs says. A good place to start? Schedule financial discussions ahead of time, be transparent about your past experiences with money, establish mutual goals, and work through hurdles respectfully.
SOURCE: Everyday Health
