How to Improve Financial Wellness: 8 Helpful Tips
What is financial wellness?
Many people stress about money regardless of their income or how much money is in their bank account. Money has a significant impact on our lifestyle and our well-being, which is why financial wellness is one of the eight dimensions of holistic wellness. Financial wellness is satisfaction with current and future financial situations. It is also:
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- Setting a budget and sticking to it each month so you don’t run out of money.
- Knowing your total amount of debt and interest rates at any given time.
- Paying your bills on time and using credit cards wisely.
- Saving money regularly and saving an amount that is consistent with your life goals (i.e. vacations, homeownership, retirement, etc.)
- Being prepared for sudden financial changes.
- Knowing your credit score and understanding how to build credit.
- Being financially independent.
- Feeling good about your current and future financial situation.
- Checking your bank statements/accounts each month.
Are you looking to improve financial wellness? Here are eight tips:
1
Create a budget.
Budgets bring awareness to our spending and help us prevent overspending. You can create a spreadsheet to track your spending or you can use an online platform like Mint that links to your credit and debit cards and automatically tracks your spending.
2
Spend money on time-saving items or services.
This suggestion is based on Dan Gilbert’s research, which found that people reported an increase in happiness after spending money on a service or item that saved them time. Do you feel stressed about cleaning every week? Hire a maid or purchase a robotic vacuum. Do you despise grocery shopping? Use a grocery delivery service like Instacart.
3
Spend money on experiences.
Gilbert also found that people derived greater happiness from experiential purchases than they did from material purchases. Have you always wanted to try a cooking class? Has a trip to Europe always been on your bucket list? If these experiences are within your budget, they will likely invoke more happiness than buying yourself the designer bag or new couch you’ve always wanted.
4
Spend money on multiple small pleasures rather than a few larger purchases.
This suggestion is based on the concept of hedonic adaptation, which posits that our joy about something positive declines over time. Purchasing the newest iPhone feels good in the short term, but as we get used to having it, we appreciate it less. The joy of treating ourselves to an ice cream cone after a stressful workweek, however, feels good every time.
5
Save a portion of every paycheck, and automate your savings.
Set up an automatic transfer from your checking to your savings account with each paycheck. Add this into your budget as you would any other expense to make sure you can afford it. These savings can be used for your long-term and short-term financial goals or they can be used in case of emergencies or unexpected financial strain. Research shows that money can negatively impact our happiness if we cannot meet our basic needs, so having a cushion to help with unanticipated financial burdens can eliminate unnecessary stress.
6
Track your spending.
You may think the five-dollar latte you treat yourself to on the weekdays isn’t breaking the bank, but looking at the $780 you spend on that latte per year can be alarming and may motivate you to reduce your spending. Calculate how much you spend each year on your budget items and seek to reduce your spending by 2% each year. Most credit card companies allow you to analyze your spending on their online portals, but you can also use a journal to track your spending, or you can use Mint.
7
Spend money on others when you can afford to do so.
Altruism improves our happiness, and this is true with how we spend our money too. Gilbert’s research found that spending money on other people activates the reward and pleasure center of the brain.
8
Shift your mindset on money.
Our attitude about money can date all the way back to our childhood and how our primary caregivers talked about finances. Noticing how our thoughts about money impact our well-being can help us develop a healthier relationship with money. One unhelpful belief that many people hold about money is that money buys happiness. The opposite is true, actually: Matthew Killingsworth found that people who equate money with happiness are generally less happy people. To explore other potentially unhelpful beliefs you hold about money, individual therapy can help. For now, reflect on the following questions:
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- How was money discussed in my family of origin? Did my family experience any financial hardships growing up? If so, how did my family navigate those hardships?
- How is money important in my life currently?
- Where does money create stress in my life?
- What do I enjoy spending money on?
- What lifestyle do I want to have in five or ten years?
*An important note: these suggestions are focused on utilizing finances to improve your mental health and well-being rather than improving your finances themselves. For help improving your finances, we recommend that you consult with a financial advisor.
At Embodied Wellness Center, we take a holistic approach to mental health treatment. Interested in a holistic therapy or want to learn more about it?
*Disclaimer: The content posted on this website is for marketing and educational purposes only. It is not, nor is it intended to be, psychotherapy or a replacement for mental health treatment. Please seek the advice of your licensed medical or mental health professional, and do not avoid seeking treatment based on anything read on this website.
