We explore the relationship between your finances and mental wellbeing, the benefits of getting your financial plan in motion, setting up your goals and practicing regular financial self-care (and what that means).
After the year we’ve had (good riddance, 2020), there’s no doubt that personal finances and mental health are linked.
Thankfully, as a society, we’ve become more comfortable talking about mental health, which was once a taboo topic. But what about financial health? What about the day-to-day stresses of managing debt, of saving for the future, of living the life you want within your means?
While the impacts of anxiety and depression are coming to the forefront, money still remains largely a hush-hush topic for North Americans.
So, let’s talk about it.
The Link Between Mental Health and Financial Wellbeing
In a recent survey for an FP Canada report, 38 per cent of Canadians said that money is the leading cause of stress in their lives, beating personal health (25%), work (21%) and relationships (16%).
One-third of Canadians say that the stress related to money management has increased since the pandemic hit according to a national survey by CPA Canada. On top of that, 23 percent of Canadians reported that the COVID-related financial impact was the biggest contributor to their mental health — more than getting sick (16%), loneliness (6%) and even losing a loved one (20%) — according to a study for Morneau Shepell.
That’s a big deal.
More than ever tending to your financial wellbeing is crucial. And an imbalance in its maintenance can cause debilitating stress, loss of sleep, motivation and can put great tension on your relationships.
But how do you get to financial wellness? Saijal Patel, founder and CEO of Saij Elle, a financial consultancy and education platform, breaks it down. She defines financial wellness as a combination of financial literacy, level of confidence and sticking to your responsibilities and goals.
“’Financial wellness’ is achieved when people can apply financial knowledge confidently to manage their economic lives effectively,” writes Patel. “That includes making good financial decisions, spending within one’s means, planning adequately for emergencies and preparing for the future.”
“If any one of the pieces — knowledge, confidence or implementation are missing – financial wellness is at risk. And with that comes emotional stress, loss of sleep, a decrease in productivity and relationship tension.”
The Importance of Financial Self Awareness and Well Being
It’s one thing to understand basic economic principles (thanks, macroeconomics class) and to know the difference between an RRSP and TFSA, or a Roth IRA vs a 401K. It’s another to understand your own spending habits and know exactly where you stand on the personal liabilities versus assets scale.
Financial self-awareness (FSA) is how well you understand your own financial situation.
In a 2019 study by Rice University’s Jesse H. Jones Graduate School of Business, they measured individual’s score FSA score based on a 19-point questionnaire covering everything from total net worth to the details of their life insurance policy.
They found that a high FSA with associated with high self-efficacy. And trust us, you want high self-efficacy: heightened interest in activities, faster recovery after setbacks and better commitment to your life goals (which, at FRUGL, we are all about).
Those with high FSA scores were also better at committing to a repayment plan and tackle debt more efficiently, and they were more cautious in their spending habits and investments.
How to Practice Financial Wellness (#Financial Self Care)
The secret is to build habits that keep you astutely in the loop when it comes to your finances.
Work in healthy routines the same way you would a skincare routine or yoga practice. Maybe you set aside a half hour per week, or ten minutes every other day. All that matters is that you set aside the time regularly to review your own financial situation.
Regularly check your bank accounts to track your spending and monitor for any suspicious activity. Review your bills and other payments (and make sure you automate as many of your bills as possible and set up alerts for any non-recurring payments.)
Review your financial goals and their progress each week. At least every month, review your budget.
Stacy Yanchuk Olesky, director of education and community awareness at the Credit Counselling Society, breaks down how to stay on top of your financial situation.
First, know where your money is going: a $5 a day coffee habit can add up quickly.
Second, Olesky recommends having several savings accounts. An account for unexpected expenses, a rainy-day fund, and accounts for different savings goals (think vacation or a new car).
And finally, live within your means. Know when and where you can afford to splurge – that is, once you’ve accounted for all the necessities.
The Benefits of Financial Wellbeing
Financial wellness is different for many people — you may want to feel secure in your retirement savings plan, or living comfortably within your means, or living debt-free.
First and foremost, you’ll feel a sense of control and shed those day-to-day anxieties (yes please!).
You can dare to dream big. Once you feel settled, as if you’ve gained control of your finances, you can start planning for some things that are more exciting than your RRSP and tackling debt. Start planning a dream vacation or a major splurge – heck, maybe a boat.
You can afford to take chances, you’re not as tied to a job you hate, for example. You’re also better set up to tackle life’s unexpected setbacks.
Finally, you’ll feel a difference in your self-esteem. Being financially comfortable and confident means that you’ll feel accomplished.
Ride that sense of pride that comes with feeling good about your finances.