When it comes to our wellbeing, most people have a pretty good idea of the things we need to do to keep our mind and body in shape. We work out, we prioritise self-care and we take mental health days. But, something we rarely do is pay attention to how our decisions about money are affecting our financial wellbeing and in turn, our personal wellbeing and overall health.
The pandemic has deepened the wealth gap and we are likely to see a wildly uneven recovery: the famous K shape. Some – those with steady incomes and minimal debt – will come out of this period better off than when they went in, while everyone else – those with pre-existing household debt and financial instability – will be worse off. Markedly so.
Never have the disparities in financial wellbeing been so stark. And when you’re suffering from money worries, there can be a number of direct and indirect effects on your wider health and wellbeing too. That’s why we’re on a mission to bring financial wellbeing to the forefront and move it higher up the agenda.
A good way to start focusing on financial wellbeing is to think about the following 5 questions and answers; consider them with your own experience in mind, use them in your conversations with students, and share them with friends, family and colleagues.
1. What is ‘financial wellbeing’?
Financial wellbeing is when your financial situation is such that you can:
- Withstand financial shocks (like a Covid recession)
- Take advantage of financial opportunities without compromising your larger financial picture (such as a depressed property market when you are looking to own your own place)
Being ‘financially well’ means you can set your finances in such a way that your money works for you, regardless of the circumstances. In essence, you are able to control your finances (rather than being controlled by them).
2. Am I in a state of financial wellbeing?
Comparing yourself to others when it comes to wellbeing is an exercise in futility. Each person’s assessment of their financial security is unique.
Ask yourself truthfully if you:
- Run out of money before you reach the end of the month
- Would be able to handle a financial shock without changing your lifestyle
- Are on track to meet your financial goals – in the short, medium and long term
- Have the ability to make the financial choices you would like to make to get the most out of your life however you see fit
- Spend a significant amount of time thinking or worrying about money
3. Does financial wellbeing impact mental health?
Mental health can be both a cause and a consequence of financial challenges – humans are a closed loop and everything is connected.
Worrying about money can often cause anxiety and impact on sleep, stress levels and mood. This can all lead to poor concentration, which can result in lower performance. This in turn can impact job prospects, creating negative conditions for mental health – and so on.
- 86% with experience of mental health problems said that their financial situation had made their mental health problems worse (of nearly 5,500 respondents to a Money and Mental Health survey).
- People experiencing mental health problems are 3.5x more likely to be in debt than people without mental health problems (5%).
- 30% of men are confident they could cope with a surprise cost compared to 21% of women.
4. What does financial wellbeing mean for physical health?
High financial stress levels, and debt stress in particular, is associated with an increased risk of ulcers, migraines and coronary problems. But these are just the tip of the iceberg according to the American Psychological Association (APA).
To cope with the stress brought on by money worries, people can adopt harmful coping mechanisms including abusing alcohol or drugs, making dangerous lifestyle choices like gambling, self-harming and worse. These heavily influence our physical health, as well as our mental and emotional wellbeing. And on and on it goes.
5. How can I improve my financial wellbeing?
Suggestions for addressing your financial wellbeing:
- Improve your knowledge – it can be tempting to ignore something you find overwhelming or don’t understand, but tackling the subject will make you feel empowered. Perhaps there’s a financial jargon term you’re unsure of? There’s no time like the present to find out what it means!
- Define your goals – it’s easier to achieve a goal if you have one defined. If it feels too big and intimidating, try breaking it down into smaller, more manageable milestones.
- Budget – assess your spending and your income and make adjustments where you can (e.g. get the best deals on expenses, beware tech-enabled spending and cull any unneeded subscriptions).
- Tackle your debt – move what you can to a 0% card and then aggressively pay it down. Debt is undeniably a financial albatross – the sooner you get rid of it the better you’ll sleep.
- Save (if you can) – build an emergency fund first (a safety net in case unexpected things happen) and then work towards your goals and providing a nest egg for the opportunities that will come your way.
- Protect yourself (and those you care about) – have life insurance if you have financial dependents, have a will if you have assets. What’s the point of growing wealth if you don’t protect it?
Of course, there are many things that can impact mental and physical health and getting your finances in order isn’t necessarily a silver bullet that will fix everything.
That said, mastering key financial skills can help combat these challenges, build your confidence and self-esteem, and ease the impact of money worries on your physical and mental health.
Feel free to get in touch if you have any questions or comments about financial wellbeing.
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