When we consider our mental health, we tend to focus on how we are feeling emotionally. However, to truly assess well-being, it’s important to think of mental health in a more holistic way that includes additional elements, such as your finances.
If you are feeling financial stress, you’re not alone: Nearly three-quarters of Americans report feeling stressed about money. That can take a toll on both your physical and mental health, potentially leading to a number of conditions that include depression, obesity, heart problems, and more.
Fortunately, better financial mental health and accompanying benefits are within reach. According to a study from the FINRA Investor Education Foundation and the Global Financial Literacy Excellence Center (GFLEC), there are several factors affecting financial mental health, each of which can be addressed with more effective financial behaviors.
Read on to learn more about how you can combat three key potential stressors to achieve better financial mental health.
Improve financial mental health with sufficient income
Inadequate funds can leave you feeling overwhelmed as you juggle payments and try to determine which bills to prioritize. Many people have been feeling this stress acutely if they have found their earning capacity affected by health issues or caregiving responsibilities, while prices on everything from groceries to gas simultaneously rise.
Faced by budget constraints, most consumers first identify places they can cut back, which is a smart strategy to help through tough times. But it might be even more effective to try to earn more money so you’re in a better position to cover bills for the long run.
The current hiring climate is more appealing than it has been in years, with an unprecedented number of workers quitting their current jobs. As they leave openings and companies compete to hire new workers, this might be the time to look for a similar job at a new employer. Another option is to explore opportunities in a potentially more lucrative field. Even if you don’t have corresponding experience, identify and showcase “transferable” skills, like team building or project management that can give you a foot in the door. You also might benefit from taking an online course to brush up or add a new in-demand skill.
Improve financial mental health by managing debt
Receiving multiple bills every month can feel daunting, especially as the interest continues to rise if you’re only making minimum payments. Many consumers find success in tackling payments using either the “snowball’ or the “avalanche” strategy. Here’s how they work.
When you use the “snowball” method, you pay off your debts by starting with the bill on which you owe the smallest amount and applying the bulk of your dollars there, while still making the minimum balance on all your other bills. After you’ve wiped out the first small debt, you move on to the next smallest payment, and so on. The goal is to experience the momentum and motivation that comes with each debt you remove from your plate.
By contrast, with the “avalanche” method, you’ll apply the majority of your resources to the account with the largest interest rate, while still making the minimum payments on all your other debts. As you tackle this more expensive debt first, you’ll see big savings in interest charges.
Improve financial mental health with better money management
A surprising number of consumers operate without a budget, even though it’s almost impossible to avoid debt if you’re unclear how much money you have to spend each month. Many people avoiding a budget could find it more palatable by changing their perspective: Rather than viewing a budget as something negative that scolds you for spending, consider instead how it gives you permission to spend.
One handy budgetary formula to get you started is to add up all your sources of income and divide the total into three categories:
- 50% goes to “needs,” which are your essentials, such as housing, utilities, groceries, childcare and car payments
- 30% can be spent on “wants,” like entertainment, recreation, hobbies and clothing
- 20% is allocated toward savings, everything from long-term savings like retirement accounts to more short-term programs, such as your emergency fund [can link to new story] or money you’re setting aside for a vacation, a down payment on a home or a gift fund.
There are many digital budgeting tools that can help you stay the course, or you can simply track different categories in a notebook.
Want to learn more about how you can achieve better financial literacy and money management skills? The Valley Bank Learning Center is packed with resources to help you start 2022 with the positive financial mental health that comes from having a handle on your finances.