The stigma surrounding mental health discussion is being whittled away as more people come forward to speak about their experiences. Whether we like it or not, money and financial well-being impact our mental health so ensuring that you’re in complete control of your finances is an absolute must. Hearing advice from an expert in the financial field is one step in achieving this.
The Fintech Times sat down to speak with Jairo Riveros, Chief Strategy Officer at Paysend, to discuss this very topic and what customers can do to better their financial health.
A well-known saying goes, ‘money can’t buy happiness’. While a variety of factors in life contribute to our wellbeing as a whole, our financial situation is certainly one of them. In fact, a Personal Capital survey showed that 57 per cent of Americans connected their financial health with their overall happiness.
It’s important for us to keep our fingers on the pulse of our financial health to ensure that buying gifts doesn’t break the bank, especially during the festive season. But it’s equally (and arguably more) important for us to stay mindful of our financial capability because it can adversely affect our mental health.
The Science of Finance
Our bank accounts’ effects on our mental states are well-documented— a 2021 study from Harvard University cites ten studies from the past ten years that have shown links between poor financial wellbeing and mental health. The Harvard study found that among the group it surveyed, financial capability and safety were associated with positive physical and mental health. In contrast, financial distress was associated with negative physical and mental health.
Not only does financial distress cause mental distress— but poor mental health can also cause worse financial decision-making. This causes a vicious cycle of mental and financial problems feeding off of each other that becomes difficult to escape, according to the Money and Mental Health Policy Institute.
It’s easy to see why. Experiencing financial difficulty, like not being able to afford essentials or going through debt collections, can negatively affect mental health by increasing anxiety and stress. Poor mental health, in turn, can affect job performance and productivity, which impacts employment and monetary access, while pushing the cycle forward yet again.
A Penny Saved is a Penny Earned
Addressing financial issues is within grasp and can have a positive impact on mental health. Using these personal finance tools can help improve one’s financial wellbeing and their mental wellbeing alike by ensuring financial organisation and financial peace of mind:
- A monthly budget. Having an ongoing monthly spending plan that accounts for income, expenses, and savings is a valuable tool for helping you live within your means. But by organising your spending, it also gives you peace of mind in living within your means.
- A debt reduction strategy. Like a budget, using a plan to reduce your debts can give you peace of mind as you work to settle them. Whether you focus first on your smallest debts or your obligations with the highest interest rates first, knowing how you’ll pay them off is easier on the mind than disorganised debts.
- An emergency savings fund. Encountering an income shortfall or a major unexpected debit doesn’t have to be a life or death situation. Setting aside money as an emergency savings fund can soften financial blows and mitigate anxiety by ensuring that major costs don’t become major debts as well.
- Retirement savings accounts. Retirement and living without a steady income is a major lifestyle change that can bring lots of uncertainty. Whether you use a 401(k) or an IRA, it’s never too early to save for retirement—after all, you’re investing in your future self’s peace of mind.
Show Me the (Digital) Money
Online financial planning tools have made it easier for people to achieve financial peace of mind. Between budget planning spreadsheets, records management software, automated transfers and online banking, digitally streamlining manual processes can take additional worries off of people’s minds as they transition towards better financial habits.
Moreover, digital money transfer services have emerged within the past decade to ease people’s financial experiences. These services give people a user-friendly interface to help them to move money hassle-free to friends and family in real-time or near-real-time. Knowing that you can quickly send money to anyone can relieve lots of stressors—whether it’s settling debt or giving gifts.
While these tools accomplish different things, all of them make funds more easily accessible. We maintain a budget, an emergency savings fund, a debt reduction strategy and retirement savings so that we can always have easy access to money in case we need it. Similarly, digital money transfer services make it easy to send money to others, as well.