Home Mental Health & Well-Being The Virtuous Cycle of Financial Wellness

The Virtuous Cycle of Financial Wellness

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Money can’t buy happiness. We’ve all heard the saying. But a lack of money can certainly lead to unhappiness. Financial struggles are a huge source of stress and anxiety for many people. Constantly worrying about making ends meet, juggling bills, and not being able to afford basic necessities takes a major toll on your physical and mental health.

On the flip side, having control of your finances provides a sense of security and freedom. When you manage your money wisely, you’re able to cover expenses comfortably, save for the future, and even afford some luxuries. This greatly reduces stress and allows you to focus your energy on the people and passions that are most meaningful to you.

So how exactly does being financially savvy lead to greater well-being? It’s not just having more money. It’s developing positive habits, mindsets, and behaviours that create an upward spiral of improved financial health and improved mental health.

Budgeting and tracking expenses

The first step to financial control is knowing where your money is going. By creating a budget that lays out income and expenses, you gain visibility into spending patterns. This allows you to align expenditures with your values and goals.

Apps and websites like Mint make it easy to link accounts for automated expense tracking. But budgeting isn’t just about spreadsheets. It’s about mindset – becoming deeply aware of your money habits and making conscious spending choices. Studies show budgeters report lower stress, higher life satisfaction, and greater optimism about the future.

Paying off debt

Carrying excessive debt drains your monthly income as interest piles up. This creates constant financial pressure and anxiety. Paying off loans and credit cards frees up cash flow to use in more positive ways.

Develop a debt payoff strategy, be relentless in following it, and celebrate each milestone. As balances fall, you’ll gain motivation to accelerate progress. A 2019 study found paying off debt was associated with greater psychological well-being.

Building emergency savings

Since life is unpredictable, a solid emergency fund prevents being blindsided by large unexpected expenses. Try to save at least 3–6 months on basic living expenses. This cushion means you won’t have to resort to desperate measures like high-interest loans or credit card debt when surprises come up.

Knowing you have a backup plan reduces money-related anxiety. Plus, watching your safety net grow gives you a sense of financial security and pride. Use that stability to make proactive life decisions instead of reactive ones.

Investing for the long-term

Consistency is key when it comes to investing. Make regular contributions to retirement accounts and let compound growth work its magic over decades. Visualise your future self enjoying financial freedom thanks to smart choices today.

Investing also provides teachable moments with kids. Show them how saving a portion of monetary gifts can become much larger over time. Instill financial literacy early on.

Avoiding status spending

It’s easy to get caught up comparing ourselves to others through social media, designer brands, luxury cars, and big houses. But research shows that materialistic pursuits usually undermine happiness. The joy quickly fades and leaves you chasing the next status symbol.

Focus instead on appreciating what you have rather than coveting what you don’t. Spend money in ways aligned with your values. Use discretionary income to help others or create meaningful experiences.

Pursuing your passions

Too often, people defer hopes and dreams for some future financial windfall. But waiting prevents you from living your most meaningful, authentic life now. Follow your interests, take that holiday, and start that side business. Financial savvy gives you the flexibility to take smart risks in service of what’s important.

Making a positive impact also boosts well-being. One study gave participants money to spend on themselves or others. Those who spent on others were happier. Look for ways to invest in your community.

Cultivating gratitude

It’s easy to focus on what you don’t have – a bigger home, a fancier car, or more income. But gratitude for what you do have is linked to greater happiness, optimism, and resilience during tough times.

Make thankfulness a daily habit. Write a gratitude list each morning. Tell loved ones why you’re grateful for them. Savour simple pleasures – a warm cup of coffee, laughing with friends, a colourful sunset. This mindset keeps your spirit full, regardless of your wallet.

The upward spiral created by these attitudes and actions is clear. As you become more financially fit, you experience less stress and anxiety. Freed from constant money worries, your physical and mental health improve. This gives you energy to make more positive financial choices, continuing the beneficial cycle.

Of course, circumstances outside your control can sometimes derail your progress. A job loss, medical crisis, or other setback may require hitting the reset button on some goals. Cut yourself some slack. Once the dust settles, recapture that motivation and get back on the path.

Remember, perfection is not required; just keep learning and moving in the right direction. Over time, the compounding effects of smart financial behaviours create a self-reinforcing cycle of well-being. Money can’t buy happiness, but being financially savvy sure can.

Miles Whitaker is a financial coach who helps people break the debt cycle and build wealth.

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