What is financial health?

Financial wellness is defined as “actionable steps people can take to improve their financial health.”

According to the Financial Health Network’s definition, financial health is “the dynamic relationship of a person’s financial and economic resources as they apply to or influence a state of physical, mental, and social well-being.”

Financial health falls into three categories:

  • vulnerable
  • response
  • healthy

In August 2020, the Financial Health Network released its annual trends report. Reports show that nearly two-thirds of Americans are struggling financially or are financially vulnerable. These people are trying to spend, save, borrow or plan in ways that allow them to remain resilient over time and seize opportunities.

Many of us don’t need research to prove that struggling financially can harm your financial health and cause financial stress. We also don’t need research to prove that financial distress and stress have a direct impact on your physical, mental and social well-being.

However, research surrounding financial stress and its effects may help you feel more effective when dealing with challenging financial situations.

What are the effects of financial stress?

The Financial Health Institute defines financial stress as “a feeling of anxiety, worry, or scarcity that results from financial and/or economic events and is accompanied by a physiological stress response.”

Emerging research links financial stress to mental health. A 2014 study from Yale University explored the idea that some "mental health problems" are actually money problems.

The study found that most participants were deeply in debt and felt very stressed about it. Debt has a strong negative impact on mental health, and if one's financial problems are solved, other problems may be solved as well.

On a day-to-day basis, financial stress can negatively impact your financial decisions. It can lead to extreme situations of overspending or underspending. Similar to eating emotionally or severely restricting food due to stress, the same effect can occur with money.

A person may find comfort in "retail therapy" - spending mindlessly on non-essentials - or find relief in limiting spending to the bare necessities, limiting their food intake to save money. However, both extremes can be harmful in the long run.

As mentioned before, top-down changes are absolutely needed to alleviate the stress of expensive health care, predatory student loans, stagnant wages or salaries, and the rising cost of living.

But what can you do to change your situation when people in the ivory tower stand in the way of changing your ways? How can you take back your power to reduce your financial stress, improve your financial health, and feel good about your finances?

Incorporate financial wellness into your life.

Read on for physical and mental health tips to take agency for your overall health, there are steps you can take to create agency for your financial health.

What financial wellness measures can you take?

If you work for an organization, the first place to start is asking your HR team about financial wellness benefits.

These benefits can include the following:

  • Gain access to payroll. This is the ability to access your salary or paycheck before payday so you can cover unexpected expenses.
  • Financial coaching. Some employers reimburse financial coaching fees.
  • Hardship short-term loan or grant. Some employers offer loans or grants to cover unexpected expenses beyond your payroll. These come either as grants that you don't have to repay, or as loans with very low interest rates - less than 5%.

In addition to these benefits, if you're self-employed, there are some financial wellness steps you can take on your own to change your situation.

These steps can include:

Negotiate Credit Card Debt

This can be done through consolidation or simply asking for a reduction in your rates.

Practice money mindfulness

Money mindfulness is a practice that brings awareness to financial decisions. Overspending and many forms of financial anxiety are the result of unconscious money choices.

To practice money mindfulness, I recommend taking three deep breaths before making any financial decisions. Making you aware of your money choices will reduce spending you later regret and help restore a sense of calm when faced with scary financial decisions you have no control over.


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