Our financial health is a crucial part of our overall well-being, whether we realise it or not. Several studies have shown a clear connection between our welfare and our financial well-being.
For example, a study conducted in Australia in 2015 found that experiencing financial difficulties increases the risk of developing mental health issues over time. Similarly, a study from 2017 discovered that being unable to pay for housing expenses, like rent or mortgage, was a significant cause of psychological distress.
Despite understanding this relationship, discussing financial well-being can be complicated and difficult to understand fully.
Experts generally agree that financial well-being or satisfaction encompasses both objective and subjective financial factors. For example, having enough money to comfortably pay off your mortgage or loan is an objective factor, while having enough financial resources to live the lifestyle you enjoy is a subjective factor.
Financial well-being is influenced by both your current financial experiences, like your current situation, as well as your hopes and expectations for the future.
Our financial well-being is closely connected to our physical health. According to a global study conducted in 2020, more than 80 percent of participants stated that when their finances were in order, other aspects of their lives became much more manageable⁵. In the same study, 70 percent of respondents also recognized that having positive financial well-being, including practising good financial habits, had a positive impact on their overall physical health.
Considering this, it would be fair to consider our financial well-being as a foundation in our lives. If our financial situation starts to decline, it can affect other areas of our lives. Therefore, it is in our best interest to establish healthy financial habits to benefit our overall well-being.
The way we use our money has a big impact on how we feel about our financial situation and how satisfied we are with it. It's not just about how we spend our money, but also about the debts we have and the amount of wealth we accumulate.
By improving our spending habits, we can reduce stress and anxiety while enhancing our overall financial well-being. One effective way to achieve financial security and improve well-being is by having a good savings plan. Research has shown that this to be true for people at all income levels.
Set a personal goal: Identify something you've wanted to do but couldn't due to financial constraints, such as joining a gym, taking an art class, or going on a holiday. Research the cost and treat it as a savings goal.
Review your budget: Take an hour to examine your spending over the past month. Assess your income and categorise your expenses, such as energy bills, insurance premiums, entertainment, groceries, and remaining funds.
Prioritise high-interest debt: Focus on reducing debts with the highest interest rates, such as personal loans, credit cards, and investment loans. Find ways to minimise these debts and save on interest.
Cut back on non-essential spending: Look for areas where you can trim discretionary expenses. Consider cancelling subscriptions, preparing lunch or coffee at home, or avoiding impulsive online shopping.
Save regularly towards your goal:Set aside small weekly amounts specifically dedicated to your personal financial goal. This consistent saving will help you make progress over time.
October 25, 2022
October 25, 2022
October 25, 2022
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