May is mental health month, so let's have a conversation about how smart financial practices can benefit a person's mental health in many ways. According to a study by Healthline, practicing mindfulness when making financial decisions can help keep you in check with your emotions. Acknowledging your emotional relationship with money is also important. Financial wellness means you have the ability to reach your goals and take advantage of opportunities that can give you peace of mind. Giving back can have its own set of mental health benefits as well!
How do they connect?
The link between your mental health and financial wellness is bigger than you'd expect. An article from WebMD states, "Experts have found that stress from money problems tends to be chronic, or long-lasting. They also found that financial issues are the top source of stress for most people – even more stressful than politics, family, and work." With that being said, having a plan in place to reduce or eliminate debt can help reduce stress and improve your mental health.
Financial wellness doesn't only affect mental health either. It can have an effect on your physical health as well, because of your mental health. Poor financial wellness leading to poor mental wellness can lead to physical ailments which may include: headaches or migraines, a weakened immune or digestive system, high blood pressure, and sleep problems just to name a few.
How to Improve Financial Wellness?
There are many ways to improve financial wellness. Some ways to promote financial wellness to improve your relationship with money include taking financial literacy classes, setting life goals (big and small, financial and lifestyle) to create a blueprint for achieving those goals, or using a merit-based rewards system when you or your family make smart financial decisions.
Here are some other smart financial practices that you can consider:
- Make a budget to cover all your financial needs and stick to it.
- Pay off credit cards in full, carry as little debt as possible, and keep an eye on your credit score.
- Check your interest rate.
- Create a financial calendar.
- Build an emergency fund.
- Track your net worth.
- Consider an all-cash diet.
- Take a daily money minute.
- Allocate at least 20% of your income toward financial priorities.
- Budget about 30% of your income for lifestyle spending.
How to pay off debts?
There are countless ways to successfully pay off debts, but remember one way doesn't work the same way for one person like it might for another. You have to be able to assess your own financial situation and make a plan of action from there that works specifically for you. Below you can find some common ways to pay off your debt:
- Add up your total debt and determine your debt payoff strategy.
- Create a livable but bare-bones budget.
- Use credit card balance transfers.
- Target one balance at a time by focusing on just one area of your finances.
- Find extra money in your budget to put towards debt.
- Sell your stuff.
- Find a side hustle.
- Get a seasonal or part-time job.
- Use the debt snowball method or the debt avalanche method to pay off your debts.
- Consider personal debt consolidation loans.
What is Debt Avalanche/Snowball Method?
The Debt Snowball method is a debt-reduction strategy that involves paying off your smallest debts first while making minimum payments on the larger ones. This method is meant to provide motivation and momentum for debt repayment. It is often applied to revolving credit, such as credit cards. It is different from the Debt Avalanche method, which is where you pay off your debts in order of annual percentage rate (APR). Start by making the minimum payment on all your lower APR debts, then put all your leftover money toward the card or loan with the highest rate.
Take Control of your Mental and Financial Health!
By understanding the connection between mental health and financial wellness, it's possible for anybody to simultaneously improve both. We all know there will always be moments in our lives in which a hardship arrives that can cause a strain on one or the other. But by improving your financial wellness with your mental health tagging along, you may be more prepared to handle it than you think.