Needless to say, the last couple of years of being stuck in a global pandemic saw many people’s financial well-being suffer. The American Psychological Association says that 64% of Americans admit to money being a significant source of stress in their lives, and another 52% relayed that the pandemic had led to them facing a negative financial impact.
But financial wellness is more than just a number in your bank account. It also relates to your attitude and feelings towards money and how that can lead to a positive or negative impact on your health. Stress is now understood to be a major contributor to one’s mental and physical health, therefore understanding how it can impact your financial wellbeing is the key to taking control of the situation.
“When I’m stressed about money or worried that I’ll have unemployment or a lot of debt, that’s going to add additional stress, and if I have mental health challenges, they will be triggered more often,” Nathan Astle, therapist and board member of the Financial Therapy Association, told Healthline.
Astle says that people who are stressed or facing mental health issues are likely to pay less attention to their finances. They may ignore their budget or take to “retail therapy” to help them feel better.
“The stress we are under during the pandemic is certainly affecting how we handle our finances. Every person feels anxious about some things, and our anxiety response gets overly activated when we see danger in a lot of places. It can be overwhelming, and it makes making good decisions harder. Working through the symptoms of anxiety and cause of anxiety is helpful,” said Astle.
What is Financial Wellness?
To take control of your financial wellbeing, you must first know what it is. According to Astle, there are 3 main areas of financial wellness: financial literacy (the knowledge of different terms and ideas around money), financial behavior (decisions you make involving money), and financial emotion (the way you feel about money).
Christina Klenotic, senior vice president and head of brand and strategic partnerships at Laurel Road, says that financial wellness is not about wealth. This claim is backed by several studies, such as the one by Princeton University where it was found that while people who made less than $75,000 were unhappier than those who made more, a higher yearly income did not impact emotional wellbeing. After a certain point of earning, your happiness level just stagnates.
“[Ultimately] it comes down to your handle on your personal finances and how they support your overall goals in life. Having a deep understanding of your finances and how to manage them toward your goals in a way that minimizes the stress that comes from money management is the best path to financial wellness,” Klenotic told Healthline.
Financial wellness is certainly within your reach. It may take a few rounds of trial and error to understand what it means to you, but it’s not impossible to achieve at all – even during financially challenging times like a pandemic! Here are 8 ways to help you get started on your journey towards financial wellness.
Clean the Slate
A study conducted by Laurel Road found that 52% of millennials and Gen Zers regret the way they handled their finances in the past couple of years.
“Give yourself a clean slate and reset your financial plan. The spending habits of last year belong in the past; now you need to look forward,” Klenotic said.
Understand Your Financial Beliefs
If you’re trying to understand why you do the things you do in regards to money, you can take the Klontz Money Script Inventory quiz. Recommended by Astle, the quiz has about 50 questions that help uncover your beliefs and behaviors around money, including those that may have been planted in you all the way back in your childhood.
The quiz will put you in one of four groups: money avoidance, money status, money worship, and money vigilance. Determining which one you fall into will help you understand your actions and make changes if need be.
For instance, describing money avoiders, Astle says, “One group is the belief that money is bad. If I have that belief, I might subconsciously do things to sabotage my financial success because I don’t want to be greedy.”
Practice Mindfulness
Astle says it’s important to keep a cool head while making decisions regarding finance. Practicing mindfulness is a good way to keep your emotions in check.
“Anxiety and depression lead to a disconnect with our bodies. Our heads are in the clouds, and we’re not paying attention to the sensation in our bodies,” he said.
Mindfulness is the act of focusing on your surroundings so you can be in the moment and grounded. You can look around your surroundings, take note of minute things like the color of flowers on the coffee table, as well as focus on the textures around you like the scratchy fabric of the couch, etc.
“Then you’ll notice your emotions easier and be able to approach those emotions with the rational good decision-making part of your brain, which will help you connect with [your partner],” said Astle. This is a good exercise to do every time you are about to take a look at your finances or discuss them with someone else.
Create a Budget
Budgeting is one of the most important things to do anytime you want to take control of your finances. And don’t stress yourself out about it! “This doesn’t need to be complicated, and you’re also not expected to nail budgeting the first time you give it a go,” said Klenotic.
She suggests using the 50/30/20 rule for budgeting. In the method, 50% is dedicated to needs (rent, utilities, bills, groceries), 30% to wants (shopping, entertainment), and 20% is put towards savings or other financial goals such as building an emergency fund or saving for retirement. Klenotic says that using an app to help you keep control of your budget and spending is a great idea too.
Be Realistic About Saving Goals
The 50/30/20 budgeting method gives you a good guideline of how much you should put towards saving. However, if you are not able to set aside 20% of your income (or if you don’t have an income at the moment) you can obviously set your own savings. But Klenotic says that your savings goals should be realistic so that you do not pressure yourself unnecessarily or beat yourself up if you fail.
“If you are concerned about depleting savings, consider scenario planning for how to rebuild your savings once you are employed (i.e., forecasting what you’ll need to save over the coming year to build your nest egg back) or even tapping into your 401(k).”
Refinance Student Loans
Student loans come with a higher interest rate than certain other loans, so if you can get a different payment plan, you can reduce your overall monthly expenses and save some dough on student debt!
“Look for a digital lending platform that is simple and personalized, like Laurel Road’s, that makes the process easy and gives you peace of mind. While most lenders require employment for refinancing, this is absolutely an option to keep in mind for you when you do start work again to help build your savings back up,” said Klenotic.
Don’t Stress About Debt
While paying off debt should always be one of your biggest financial goals, you should not forget that it is a long-term goal. Aiming to pay it off ASAP is unrealistic, says Klenotic. Not just that, but she says that you don’t have to pay off certain debt quickly, especially “good debt” like student loans which have long-term value.
It’s easy to find “inspiring” stories online of people completely eliminating their debt and paying off major loans, but think about how realistic that would be for you. “It’s always good to remember that financial wellness is a personal journey and everyone’s will be different,” says Klenotic.
At the same time, you should be taking steps to build a budget so you can save money and address debt. Also, make sure to consider options that will help you with specific kinds of debt.
“There are also options available to manage more specific kinds of debt, like negotiating a lower credit card interest rate for credit card debt or refinancing your student loans for student debt. Check out your options, you may be surprised what’s available to you,” said Klenotic.
Have Financial Confidants
Talking about finances may be uncomfortable and often seen as taboo, but Astle says it’s one way to get financial wellness. As social creatures, human beings are wired to share and converse about topics that make them feel stressed or anxious.
“If you are having struggles with your financial wellness whether it’s needing to know more about your money or needing to make good financial behavior decisions, or you are experiencing internal psychological emotional stress, not having ways to connect with others, will make you feel really alone and make that mountain a lot harder to climb,” says Astle.
Asking for help is a good way to achieve success. Not only do you feel like you can unload a burden off your shoulders, but you can also learn from the advice and experience of others. Astle says along with having your friends and family in your corner, you shouldn’t hesitate to get professional help either, whether it be going to a therapist, or consulting a financial counselor or planner. Nonprofits such as GreenPath and Credit Counseling Service even provide one-on-one financial counseling, so take advantage of whatever help you can receive!
“Trying to do it on your own is difficult. There are resources to help build that circle of people who can help you get to a better place,” said Astle.
