by Laura Hale, Co-Founder & Head of Product @ Ladder
When 2020 rang in, a whopping 51% of Americans took the resolution to eat healthier and 50% vowed to be more active. Alongside these traditional health goals, another resolution topped the charts: half of the country expressed wanting to better manage their finances.
The definition of financial wellness differs from person to person. For many of us (59%, according to a Charles Schwab survey), it might mean escaping the cycle of living paycheck-to-paycheck. For others, it’s about having months of living expenses in their savings account and an investment strategy. Ultimately, the goal is achieving a healthy relationship with money. What’s not always apparent, however, is how interconnected financial, physical, and mental wellness are.
According to the American Psychological Association, money is one of the most significant sources of chronic stress in our lives. And to understand just how negatively financial stress impacts our physical and mental illness, we need only to turn to the following statistics about the 2008 financial crisis: people experiencing high levels of debt stress were almost 3 times as likely to report migraines, insomnia, and ulcers. 23% had severe depression compared to only 4% for people with low levels of debt stress.
To make matters more frustrating, financial stress gets directly in the way of our New Year’s resolutions too. Studies show that stress leads to overeating and opting for junk food instead of healthy food. But there’s no reason to get discouraged! January may be over, but there’s still plenty of time to prioritize your financial wellness goals for an all around healthy 2020. Here are 4 to consider:
Make a budget and stick to it.
It may sound obvious, but “in many cases, people don’t have a budget at all, or it’s been a while since they paid attention to their expenses,” says Lauren Anastasio, CFP® with our partner SoFi. The first step of any financial plan is understanding where you stand. Take the time to sit down and look through bank statements (or software like Mint) to understand your spending habits. “The reason a budget is so important” says Lauren, “is it’s the way to really be honest with yourself.”
Start building an emergency fund
Start building one– even if debt reduction is your first priority. “If you don’t have savings, the first unexpected expense can put you back into debt.” says Tania Brown, a CFP® with Financial Finesse. Experts recommend between 3 and 6 months of expenses. Apart from setting aside a portion of your paycheck every month, one way to get extra cash is to sell stuff you don’t need.
Find a finance buddy.
Just like a workout buddy will keep you motivated at the gym, finding a trustworthy friend who can plan alongside you and check-in on monthly financial goals can make a huge difference in helping you stick with your resolution.
And of course… Get life insurance!
If over half of the country’s population overestimate the cost of a simple term life insurance policy, they underestimate the incredible mental wellbeing that can come from knowing your family is financially prepared for the unexpected. But per usual, our Ladder customers say it best…