Money is known to be the great enabler that puts the life you desire within reach. But it is also known to be the thief that robs you of your peace of mind, especially when there is a lack of money.
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Finances can often lead to stress and worry for many people. A lack of money and financial challenges can have a noticeable impact on our mental health and well-being. Studies¹ have shown a link between financial difficulties and mental health problems, including depression and anxiety.
Working towards financial stability requires discipline and effort and it is important for achieving a sense of calm. Managing your finances well can help alleviate worries and prevent the stress of debt and lack of money. On the other hand, financial troubles or spending more than you have can worsen mental health conditions.
Correlation of Financial Well-being and Mental Health
Financial well-being is defined as the ability to sustain current living standards and achieve financial freedom, reflecting a state of financial security and satisfaction.
There is a strong correlation between financial well-being and mental health, meaning the two factors are linked and often influence each other. Here’s how:
- According to Vlaev & Elliott (2014), financial well-being is closely linked to overall mental health and is crucial for personal development.
- A research called ‘Financial Influences and Mental Health: An Exploratory Study’ has highlighted the crucial role of financial behaviour in influencing mental health conditions. This study underscores the importance of developing a financial plan for the future, reducing personal debt, increasing savings, and adhering to a strict budget as key strategies for fostering good financial habits. These findings align with previous research by Fernandes, Lynch Jr, and Netemeyer (2014), and Tokar Asaad (2015), further emphasising the impact of financial management on mental well-being.
The burden of financial obligations coupled with lack of money often leads to stress, anxiety, and a sense of limitation, which can negatively impact mental health. The constant worry over finances can escalate, potentially resulting in serious conditions such as depression.
Studies also suggest that individuals who report being financially stable and secure are less likely to experience depression compared to those who are stressed and uncertain about their financial situation.
Financial stress can feel like a constant storm cloud hovering overhead, casting a shadow on our daily lives. It can:
- Fuel crippling anxiety: The fear of the unknown, the pressure to make ends meet, and the constant worry about bills can create a constant state of anxiousness.
- Leave you feeling helpless and hopeless: When financial problems seem insurmountable, it can be easy to feel trapped and powerless to change your situation. This feeling of hopelessness can lead to depression and a loss of motivation.
- Strain relationships: Financial difficulties can heavily strain relationships with family and friends. Arguments about finances, lifestyle, money psychology, the inability to afford things, differences in financial goals, feelings of shame, and the exclusion from activities due to cost can create distance and conflict
However, it’s important to remember that you are not alone. Millions of people face similar challenges, and there’s hope. By taking control of your finances you can start to ease the burden and improve your mental health.
Your financial well-being is directly linked to your emotional well-being. Taking steps towards financial stability, even small ones, can make a significant difference in how you feel and empower you to live a happier, healthier life.
Practical Strategies for Enhancing Financial Well-being and Mental Health
Recognising the connection between your financial situation and mental health is crucial for making positive changes. Here are some straightforward suggestions for managing financial stress and enhancing your mental well-being:
Create a Comprehensive Financial Plan: Start with setting clear, achievable financial goals. Outline your short-term and long-term objectives, such as paying off debt, saving for a home, or planning for retirement. A well-thought-out plan acts as a roadmap, guiding you towards financial stability.
Budget Wisely: Tracking your spending through a budget is key to understanding your financial habits. It allows you to identify where you might reduce expenses, helping you to live within your means and avoid financial pressure.
Build an Emergency Fund: Preparing for unforeseen financial emergencies can greatly reduce stress, offering peace of mind that you can handle life’s unexpected turns.
Seek Professional Financial Advice: Getting professional advice can be incredibly beneficial. A financial advisor can help with managing debt, investing wisely, and adjusting your financial plan as needed to meet your goals.
Practice Mindfulness and Stress-Relief Techniques: While working on your financial health, it’s equally important to take care of your mental health.
Monitor Your Progress: Regularly review your financial situation and the progress you’re making towards your goals. Celebrating small victories along the way can provide a sense of accomplishment and motivate you to continue.
Sources:
- Psychological factors associated with financial hardship and mental health: A systematic review
