The Link Between Financial Wellness, Happiness and Health

While it is often treated as a separate part of life (in spreadsheets, in bank accounts, in monthly budgets), financial health has the potential to affect every aspect of a person’s life.

Money worries can seep into every part of your life and, in contrast, having control of your finances can bring a sense of security and stability to many areas of your life.

We use the term financial wellness to describe people who have sufficient control over their financial affairs to meet their current commitments, to save for future needs and to cope with unexpected expenditures. This does not necessarily mean that they are wealthy.

Having control over finances can contribute to feelings of happiness and better health.

Financial Stress Can Affect More Than Your Bank Account

Financial problems are rarely contained within financial matters.

The person worried about paying for rent, credit card debt, medical bills or loan installments often cannot shake the worries even after closing the banking app. The financial stress is part of life and many are facing it without any relief.

Stress, which can arise from all sorts of situations, affects both body and mind. So even though someone may feel stressed by problems to do with money, this can have an impact on their physical and mental health.

As a result of the stress of dealing with their financial situation, people may lose sleep, be easily distracted, be short-tempered and unable to focus on daily matters. When under financial stress, people’s health can suffer as a result of decreased exercise, consumption of unhealthy quick convenience foods and postponement of routine medical appointments as they cannot afford these expenses.

Although financial stress might not directly cause health problems, the stress that it generates affects every aspect of health and can affect numerous choices and behaviors that affect health in the long run.

Feeling Financially Secure Creates Mental Space

One of the most ignored positive effects of financial well-being is the mental space it generates for its owner.

Someone with sufficient financial resources to cover their current expenses and anticipate their future needs will have fewer financial concerns competing for their attention and thus will have more mental space for other things.

Of course, there are always going to be unexpected expenses, prices of things will fluctuate, we don’t know what is going to happen with our jobs, and our cars will always break down from time to time and cost money to repair.

The difference is preparation.

Some savings and a realistic budget in place means that an unexpected $500 expense is only an inconvenience, whereas to someone living without any financial cushion at all, the same $500 expense can feel like a crisis.

That difference can have a meaningful effect on day-to-day well-being.

In addition to having money for a trip, having financial security can make it easier to focus on your goals, whether or not they involve spending money. For example, trying to spend more time with loved ones, trying out a new hobby, getting in shape, learning something new, etc.

Money becomes less dominant when there is a system for managing it.

Financial Wellness Is About Control, Not Perfection

There is no universal number that determines whether someone is financially well.

A couple with the same income could have completely different financial situations. For example, a couple with expensive housing and many dependents to care for would likely have different financial circumstances than a couple with lower expenses and a lot of debt.

In summary, financial wellness can be thought of in terms of control and preparation as opposed to in terms of income.

Useful signs of improving financial wellness can include:

• Paying regular bills on time
• Knowing approximately where monthly income is going
• Maintaining some emergency savings
• Understanding existing debts and repayment terms
• Planning for larger future expenses
• Avoiding unnecessary high-cost borrowing
• Saving consistently when circumstances allow

None of these require perfect financial behavior.

It is not the end of the world if, from time to time, a person makes a financial error or is forced to spend in a way that they did not plan in the event of an unexpected bill. What is important is whether that person has the means to recover and then continue on their way.

Better Financial Decisions Can Reduce Uncertainty

Uncertainty tends to make financial stress worse.

Of course, even knowing these numbers doesn’t automatically make paying them easy. But it can make paying them easier to understand.

Simple financial tools can help.

The financial decision-making process is eased when simple financial tools such as loan calculators are used. These tools allow individuals to estimate their monthly payments before borrowing and compare different terms for the same loan amount. For example, an individual can use a loan calculator to determine the impact of paying off a loan earlier than the original repayment term.

These financial tools can also be used to plan for future expenses, to track current spending, and to plan for future savings.

Financial Stability Can Support Healthier Choices

Health decisions often have a financial component.

Healthy choices typically cost money. Whether it is nutrition, a gym membership, fitness equipment, or even a doctor’s visit (with a deductible and/or copays, plus travel to and from the health care provider), healthy choices can be very costly. Even free activities (such as walking) can become too expensive when a person is busy with other financial responsibilities.

Even free activities such as going for a walk or to a park are affected by financial instability.

Someone who is working long hours of overtime to pay for unexpected expenses may not have time to go to the gym. Or has unexpected medical bills may delay going to the dentist. And struggling to pay off several debts may decide to go for the cheapest option, even if it is not the best in the long run.

Greater financial stability creates more flexibility.

When someone has more financial resources, they can choose the activity, food, product or service that is in their best interest and satisfies their needs.

In summary, having lots of money does not guarantee good health. However, having enough money to cover your costs can help you to make healthy choices and stick to them.

Financial Wellness Is One Part of Overall Well-Being

Financial wellness is not the same as happiness or good health. Life is complex and no guarantee can be given.

However, money can have a huge impact on daily life decisions, e.g. where to live, how to spend time, etc. and the issue of being prepared for unexpected events.

Building healthier financial habits will help reduce uncertainty, improve decision-making, and give you more control over your life and finances.

Improving your financial situation seems to be solely related to money, but it can affect other areas of your life and create positive effects in the long run.

Taking control of your finances may not bring you the same amount of happiness as your savings are bringing you. Instead, it will give you something even more valuable: more time to think about and take care of other aspects of your life.