Being financially stable has tremendous benefits for our overall health and well-being, extending far beyond the ability to pay bills on time. Below we will define what is financial stability and talk about how it can affect your life.

Mental Health

Research has shown an undeniable link between poor financial health (specifically, increased amounts of debt) and mental health concerns. Children in poverty are also faced with many barriers while growing up.  Here are a few examples:

  • Half of all adults who report that they are in “problem debt” also have experienced mental health issues.
  • The likelihood of having a mental health problem is three times higher among people who have debt than among those who do not. Anxiety disorders, depression, and psychotic disorders were among the most common mental illnesses that those in debt have experienced.
  • There was an even higher correlation between suicide and debt. Research has found that those who complete suicide are eight times more likely to be in debt than not.
  • Furthermore, individuals who are in debt were far more likely to exhibit signs of a substance use disorder, such as problems with drinking or drug dependence.
  • Short-term debt may place people at the highest risk of depression. One study found that short-term debt places individuals at the highest risk for depressive disorders. Furthermore, unmarried people, those who are nearing retirement age, and individuals who are less educated were particularly vulnerable to the harmful effects of stress associated with credit cards and overdue bills.
  • 86% of the 5,500 people surveyed by the Money and Mental Healthy study who have experienced mental health problems reported that their current financial situation or change in financial stability had made their mental health problems worsen.

Fortunately, debt is a solvable issue, and a major benefit of financial stability is reducing these mental health concerns. However, if you are working through a mental health crisis, you may not be in a place to tackle financial hurdles just yet. Similarly, if there are significant money struggles, paying for mental health treatment may not always seem feasible. However, in order to achieve and maintain financial stability, you must make your mental health a priority and take care of yourself first. Seek out available resources in your community, talk with a friend, and begin to work towards mental wellbeing. Your financial wellness will follow.

Stress and Overall Health

Similarly, one of the most important benefits of being financially stable is that it can help reduce stress. Unfortunately, financial stress is a widespread experience. According to the American Psychological Association (APA), 72 percent of Americans are stressed about money at least occasionally and 22 percent feel extremely stressed about their finances. But it seems that parents, younger generations, and those living in lower-income households (making less than $50,000 per year) are particularly susceptible — they report higher levels of stress than Americans overall, especially when it comes to money, and those who have particularly high stress about money are more likely to say they engage in unhealthy behaviors to manage their stress.

While chronic stress of any kind contributes to a myriad of long-lasting physical health issues, anxiety about money in particular has its own set of disadvantages. According to Elizabeth Scott, MS, an author wellness coach who specializes in stress management and quality of life, references the following as the primary issues resulting from financial stress:

  • As mentioned above, those who are experiencing financial stress are more likely to engage in unhealthy coping behaviors. These can include drinking, smoking, overeating, or other unhealthy mechanisms in response to their anxiety. Unfortunately, this leads to more stress, which is associated with even more health risks.
  • Less money for self-care. Those who are struggling to make ends meet are far less likely to choose to pay for “extra” things like chiropractic care or preventative measures, or even basic healthcare or dentalcare, when meeting basic necessities is a priority. Unfortunately, when small health issues go unchecked, they can turn into larger problems – in turn leading to more stress in the long run.
  • Less sleep. When individuals are under financial stress, they often experience trouble sleeping (or working long hours) which can add up to a sleep deficit over time. Not only does this cause chronic fatigue, but it impairs immune functioning and cognitive abilities, while also causing additional moodiness.
  • Unhealthy emotions: Financial strain, and especially debt, can cause unhealthy emotions that can take a tremendous toll on your health. There is often anxiety, frustration, and a sense of hopelessness that comes along with increasing debt and the inability to even pay the accruing interest. This only causes additional stress and poor mental health and well-being overall.

Being financially stable can help reduce the devastating effects of chronic stress on our bodies and minds, and the cycle of stress that can occur when living paycheck to paycheck.

Stability in the Family

It may be a given that being financially stable allows you to pay household bills on time and readily meet the needs of your family, but did you know that it contributes to the strength of our relationships and family wellbeing as a whole? First and foremost, marriages and romantic relationships fare better without the added pressure of financial stress. In one survey, one third of couples reported finances to be the most stressful facet of their relationship, followed by intimacy at a very distant second (11 percent), children (9 percent) and in-laws (4 percent).

Overall, money was the source of marital tensions for 84% of respondents, and 13% reported fighting about money several times a month (with the disagreement about financial priorities topping the list of problems). Fortunately, financial stability and open communication can help create a healthier and happier relationship, which will overflow into the rest of the home.

For example, most adults report that they overheard their parents arguing about money when they were children. Not only does this create tension in the home, but it inadvertently affects children as well. For families who are living with chronic financial stress, that anxiety about making ends meet often spills over onto children.

Additionally, while not every financially unstable household meets the federal criteria for poverty, many do – and research has shown the tremendous impact of poverty on children. In fact, about 15 million children (approximately 21% of all children) in the United States live in families with incomes below the federal poverty threshold. It is important to keep in mind that children are more vulnerable to negative consequences of poverty than adults.

Unfortunately, children who directly or indirectly experience risk factors associated with poverty have higher odds of experiencing health problems as adults such as heart disease, hypertension, stroke, obesity, certain cancers, and even a shorter life expectancy.

Poor children are also disproportionately more likely to attend schools in districts with fewer resources, less funding from local tax dollars, less parental involvement due to longer, lower wage working hours, and facilities that are inadequate. Furthermore, families living in poverty may not have access to adequate resources to meet even the most basic needs of their children, let alone their wants. Being financially stable reduces these and other risks associated with poverty and financial stress.

Also, kids who grow up in a household that is financially stable will look for ways to be financially stable themselves! Not only is it important to teach children about money, but parents themselves can serve as role models. Showing children the importance of financial stability, as well as the benefits, will help lay a foundation for their future financial health and success in adulthood.

Becoming Financially Stable

While financial stability brings a host of great benefits, it requires hard work, motivation, and intentionality (and sometimes backtracking!) to get there. No matter where you are in your financial journey, here are some tips to increase your financial health in the new year:

  • Create a budget. You can search online for templates, or create one that suits your preferences and lifestyle. When making a budget, it is important to remember to set realistic goals, seperate your needs from your wants, identify and allocate your income and expenses, and modify for seasonal expenses (such as birthdays, other holidays, back-to-school shopping, oil changes, annual vehicle registration, or prolonged days off from work). Overall, a budget should be used to make a plan and stick to it. When creating your budget, show your kids how to do it themselves. This is a great lesson to teach your children how to be financial independent adults later on in life.
  • Use cash when possible. Using a payment method on your phone such as PayPal or Apple Pay, credit cards, or even debit cards all point to what some financial consultants call “auto-pilot spending.” If you’re running on auto-pilot, you’re much more likely to overspend. Using cash allows you to “feel” the money physically leaving your hands, which decreases compulsive spending. Similarly, don’t go grocery shopping when you’re hungry and avoid online browsing when you’re tired or not concentrating well. These behaviors too often result in impulsive and sometimes costly spending.
  • Make a plan to reduce and eventually eliminate all debt. There are some great online resources that can help, ranging from example payment plans to debt tracking sheets. Start by tackling your smallest debt first, and work up to the larger amounts! See where you can allocate more money during the week and move it towards your savings. Even a small amount will help in the long run. A little extra money each week can work significantly in your favor in regards to the interest you’re paying.
  • In addition to addressing old debt, avoid accruing any new debt. Most forms of consumer debt are easily obtained but have both outright and hidden fees, as well as extremely high interest rates. It may be tempting, but it’s important to stay focused on your financial priorities.
  • Start saving – even if it’s just a little! Having even a small savings can help in times when new debt seems like the only option, and you will be less likely to take out small loans or swipe a credit card. Pay yourself first in the form of putting small amounts of money away. It will also help reduce stress because you will know that you have a small buffer in the case of a true emergency.
  • Have a safety net in place. In addition to a savings account, it is important to have a plan for life changes or crises. For example, do you have available sick leave at work or disability coverage? What about life insurance? If something were to happen and you were unable to work or lost your job, what would be your next steps? Planning for the unforeseeable future can help both you and your loved ones have peace of mind.
  • Talk to your kids about money! Financial stability (and instability) is intergenerational. Instilling values regarding saving, spending, and investing money in your children will help them be successful later in life. It’s never too early or too late to start!
  • Similarly, make sure that you and your partner are on the same page about household finances. Will you share one bank account, or two? Who will pay for what? What does each person value the most? It is important to have conversations about money when everything is calm and collected, not in the heat of an argument. Additionally, it is important to make sure that each person in the relationship has an allocated amount of “free money” in the budget. Whether this is $25 or $200, the amount is irrelevant – the goal is to ensure that no one feels trapped. Furthermore, having a little leeway with “extras” will help remind you that money is truly an asset and not a burden, while also avoid bigger relational arguments and disputes later on.

Remember, financial security takes time and cannot happen overnight (even in the case of winning the lottery). Taking baby steps toward your financial health will not only increase your physical and mental wellness, but reduce stress and increase your family’s stability overall. Taking ahold of your financial stability is also a great lesson you can show you children when teaching them the value of money. We hope that this new year is a time of achieving your financial goals!

For more information on child development, please contact Children’s Bureau today.

Sources:

https://www.moneyandmentalhealth.org/money-and-mental-health-facts/

https://www.ncbi.nlm.nih.gov/pubmed/24121465

https://link.springer.com/journal/10834

https://www.moneyandmentalhealth.org/wp-content/uploads/2016/06/Money-on-your-mind-full-report.pdf

https://www.apa.org/news/press/releases/stress/2014/financial-stress.aspx

https://www.apa.org/news/press/releases/stress/2014/stress-report.pdf

https://www.investblue.com.au