An insatiable appetite for money is more about greed than ambition. A German philosopher, Arthur Schopenhauer, summed it up rather well. He likened wealth to seawater in that the more a person drinks, the thirstier they become. Financial wellness is not a simple case of acquiring all the money one needs—plus some. So, this article explores how to turn financial sickness into financial well-being.
Financial concerns can be real or fancied, but the outcomes are the same either way. Money worries are responsible for a range of physical, mental, and emotional health problems. A US study showed that financial insecurity is more of a stressor than work and personal relationships , .
Money issues dominate the thoughts of 72% of US adults. That’s according to a Stress Report by the American Psychological Association. But a lot of financial worries are about what might happen rather than what is happening. Phycologists say that unnecessary fret is an enormous waste of mental energy. Not worrying, though, is easier to say than do, but achievable with practice , .
The late American self-help author, Dr. Wayne W. Dyer, was an expert at dealing with life issues. He once said;
“If you change the way you look at things, the things you look at change.”
Wayne Walter DyerRenowned Self-Help Author
People can use this simple philosophy to help alter perceptions about money and wealth. We’ll look at those later .
Poorer Americans tend to have more financial common sense than those who are better off. Many students and middle-class adults are the cause of their economic woes. People today buy stuff they don’t need with money they don’t have. Money psychology affects the way we spend, save, and invest. It’s possible to change the way one thinks and behaves around personal finance , .
The list below shows some common signs of financial stress:
- You regularly spend more than you earn
- It’s a constant struggle to pay bills
- Vacations and nights out are few or non-existent
- You don’t have $1000+ to fall back on in case of an emergency
- Relationships suffer, including employer/employee
- Frequent arguments over money-related matters
- Difficulty sleeping
- Mood swings, depression, irritable and restless
- Fall behind on education
Financial anxiety has no bounds, and it can affect any one of us at any time. Signs can be subtle or blatant, sudden, or gradual. But it’s not the problems that hurt so much; it’s how we manage them—or not. The way to tackle these issues is first to identify what triggers financial angst .
Identify Your Money Triggers
A money trigger is something that occurs prior to making a poor financial decision. So, the way to identify a harmful trigger is to look at what happened before it. Here are three examples:
- Fear of missing out on some item or event
- Sudden urge for retail therapy
- A strong desire to impress others
Most triggers are dominant thoughts and emotions that say spending will fix us. It usually does, but it’s a band-aid solution with short-lived benefits. And how many times do you buy or invest in something only to regret it shortly afterward? It’s not only shopaholics who make bad financial decisions either.
Adults with ADHD have a particularly hard time managing finances for obvious reasons. But even they can achieve financial wellness with an effective plan .
The rest of this page looks at ways to find peace in life through better financial well-being.
Financial Wellness Defined
You don’t need to be a high-earner to be financially well. Wealth helps, but it’s not the answer. Indeed, net worth and large incomes are not accurate ways to measure financial wellness .
A financially well person meets the following present/future criteria:
- Present: Can settle all financial obligations, current and ongoing
- Present: Financial freedom to make choices that enhance life
- Present/future: Feeling of financial security
- Future: Can absorb any sudden financial shock
- Future: On course to meet medium and long-term financial goals
It’s about control over finances and living within one’s means. There are those who get by on small budgets and still enjoy life. These are people who respect money and cover all their needs along with a few wants. They recognize what they can and cannot do with what they have. Money comes, and money goes—it’s part of life for ordinary Americans.
Know Your Wants from Your Needs
There’s a vast difference between life’s wants and needs. A financial “need” is necessary to survive. Examples are food, shelter, power, insurance, and so on. These are recurring living expenses and the ones that take the most out of a paycheck.
A financial “want” is something that’s nice to have but isn’t essential. These are expenses that make life more enjoyable or comfortable. Fashionwear, dining out, travel, and entertainment are all excellent examples of wants. It sounds obvious, but the lines often become blurred between the two .
Government Self-Assessment Test
Millions of Americans worry about money, but they don’t always know why. You don’t have to be insolvent or in the red to be financially unwell. Some people complain about money issues even though they have plenty of it. Where are you at? The Consumer Financial Protection Bureau (CFPB) agency can help with its quick questionnaire. You can find a link to it in the Further Reading section below .
Measure Your Financial Well-being
There are two parts to the financial wellness assessment. Part 1 helps to determine your current situation using six questions. There’s no typing involved or probing into personal finances. The only requirement is to choose the best response based on the stated issue. The format looks like this:
- How does (question) best describe you?
- Select: Completely | Very well | Somewhat | Very little | Not at all
Part 2 consists of four statements. In this section, you select the answer that best describes your situation. The choices are: Always | Often | Sometimes | Rarely | Never.
It’s then just a case of confirming your age group and hitting the “Get My Score” button. It’s much easier to work at improving your situation once you know your financial wellbeing status.
The Path to Financial Wellness
The nine suggested measures below can lead to better financial wellbeing. These are simple yet effective concepts that anyone can adopt to improve their situation.
- Learn to budget
- Reach out and seek advice
- Keep financial records
- Look after your credit score
- Plan for larger purchases
- Have a savings plan
- Automate savings
- Spend within your means
- Save for retirement
Let’s now examine each of these points in more detail.
#1 Learn to budget
There are many ways to budget, but the 50/20/30 rule makes an excellent starting point. It’s a theory introduced by US senator, Elizabeth Warren, in a book she wrote. It’s called, All Your Worth: The Ultimate Lifetime Money Plan. The idea is to divide all remaining after-tax income in a specific way. Use 50% on essentials (needs), 30% on desires (wants), and save the remaining 20% .
It’s easier to create a budget plan than it is to stick with it. That’s why it’s better to keep written records that you can refer to and tweak if necessary. That can be a simple notebook, spreadsheet, software program, or a mobile app. There are also online management tools that can help .
#2 Ask for advice
People who struggle with money may hide it from others. The ‘sweep it under the carpet’ approach is detrimental to financial well-being. A problem shared is a problem halved. There’s nothing wrong or shameful asking for advice and support. That can be close friends, family, or professional guidance. It makes sense to seek counseling from those trained in money management.
Talking is healthy. Experts in personal debt, credit, and budgeting can put a new perspective on situations. They can help to steer young people, students, and adults in the right direction. Ease the burden of financial stress by talking to others and seeking advice , .
#3 Keep financial records
Point one above talks of the importance of budgeting and writing things down. You don’t have to get everything down, but it’s advisable, especially at the start. It sounds tedious, but it can be a real eye opener for a lot of people. This approach helps to tailor and fine-tune a budget that’s 100% unique to your situation. There’s an immense sense of calm after properly organizing one’s financial records.
The US government has a simple website called ‘My Money’ that can be useful. There you can find budgeting worksheets, checklists, and online calculators. Consider a mobile app if you prefer something a little more automated. EveryDollar is a popular app that’s easy to set up and maintain. All you do is add your monthly income, plan expenses, and track spending , .
#4 Use credit wisely
You need to look after your credit score to keep it healthy. The way to do this is to be mindful of financial actions and transactions. Maintain budgets and only borrow what you can realistically afford to pay back. Also, pay bills on time every time where possible. The misuse of credit cards destroys personal credit ratings and thus affects financial well-being.
Heed the eight tips below to keep your credit rating healthy.
- Track all spending, including small purchases
- Pay the credit card on time every time
- Maximize card repayments
- Set a serviceable credit limit
- Avoid using credit to get by
- Use store cards sensibly
- Always check monthly credit card statements
- Get familiar with credit card scams and scammers
That last point is a growing problem worldwide, especially with telephone scams. Around 47% of American cardholders have experienced fraudulent use of their debit or credit card , .
#5 Plan for larger purchases
Try to plan for expensive things or events like a wedding, vacation, a new vehicle, and beds, etc. It’s too easy to put everything on credit, and that’s where so many people slip up. Debt has a habit of creeping up on us because we don’t see the money, and so it doesn’t feel real. Aim to readjust your budget instead. This way you can put aside the money—at least in part—for future costly purchases.
Here are four tips to help plan for big-ticket items or events:
- Make a note of how much money the item or event costs
- Set a realistic savings timeline
- Create a schedule that agrees with your cash flow
- Open a new savings account to put the money
You can choose to automate the savings into the new account if you have a regular paycheck .
#6 Have a solid savings plan
Saving isn’t only about the big purchases. All households should have a savings plan of sorts, but many don’t. Recent generations of Americans replaced saving with spending and credit. People now see the harm this has caused. It’s little wonder financial wellness programs are on the rise. Those with regular savings plans are in a better position to achieve goals and prosper , .
Saving today gives more options tomorrow, and it helps to safeguard against financial shock. Aim for an emergency fund that covers expenses for 3–6 months, or longer. Try to save 20% of your income. Failing that, just put aside whatever you can and work it from there. To do something rather than nothing contributes to financial well-being , .
#7 Automate savings
Saving money is something people know they should do, yet few follow through with it. Either that or they get off track and never put away the amounts they intended. One way to tackle this inconsistency is to have an automated savings plan. You may feel the financial pinch to start with, but it doesn’t take long to adapt. When you pay yourself first, it becomes just another monthly outgoing.
Primarily, you need to decide on a realistic savings goal. How much can you reasonably afford to put away each month? Then, arrange an automatic, regular deposit into your bank savings account from the checking account. People often look for ways to put away even more once they see their money grow. A workable savings plan can become just as rewarding as spending .
#8 Spend within your means
Financial wellness is about freedom from money fears. Chronic debt has the reverse effect and can be harmful to health even in younger people. Sadly, over 60% of Americans struggle with a debt of some form. The key here is to live within one’s means, that is, spend less or equal to what you earn. It’s a maintenance approach that results in a healthier and happier life , , .
Cheap, easy money is everywhere in America. There are credit cards, store cards, low-interest loans, and buy-now-pay-later bargains at every turn. It’s not hard to overspend and fall into a spiral of debt. Debtors can bounce back with better budgeting and by forming new spending habits. Some may find help from a reputable credit and debt counseling service useful at the start .
#9 Save for retirement
Lots of young people think saving for retirement is a boring topic that doesn’t apply to them. And many older adults regret not saving years earlier. The point is this; it’s never too early or too late to put money aside for old age. It’s wise to start a retirement savings plan from the first job. But the over-50’s have options as well. One of those is to make catch-up contributions to 401(k)s and IRAs .
There’s a lot of help for Americans of all ages on how to grow a retirement nest egg. To start an effective plan at 20 or even over 50 adds to one’s financial well-being , .
The next section points to some excellent resources that expand on the topics in this guide.
An Unsung Hero of Financial Wellness: Money Saving Mom
Money Saving Mom is the perfect resource if you’re looking to both improve your mindset about finances and improve your actual financial situation. This popular blog is full of deals, coupons, tips, and advice from real people living real life. These financial wellness tips aren’t just theoretical, they have been tried and tested, often by Crystal Paine, the author and entrepreneur behind Money Saving Mom. Plus there’s a thriving community in the comments of many of the articles and posts, so you can reach out to others who can relate to what you’re going through.
Financial wellness is tricky, but thanks to resources like Money Saving Mom, it is definitely possible.
Martin holds a Master’s degree from the University of Copenhagen in Biophysics, and he enjoys using the research skills he honed while getting his advanced degree to uncover exactly what it takes to feel better.