Your health takes center stage at the start of a new year. Eating right, losing weight, and exercise are the top New Year’s Resolutions. Your financial health is an often overlooked factor contributing to poor health.
What is financial wellness
Financial wellness is feeling good about your financial health now and in the future. Paying your bills on time, saving for an emergency, and saving for retirement are all indicators of good financial health.
What is the status of Americans’ financial wellness
Americans report a low amount of financial wellness. More than half the population report that worrying about money keeps them up at night. This worry causes stress that is not temporary, but chronic. Chronic stress can have a huge impact on your physical and mental health.
Consequences of financial stress
Chronic financial stress can cause a loss of sleep, anxiety, headaches, lowered immune system, digestive issues, high blood pressure, muscle tension, depression, and overwhelm.
According to Forbes, those with financial stress report being 2x more likely to have poor over all health. They also are 4x more likely to report ailments.
Stress and illness get people stuck in a spiral of lost wages and increased medical expenses. This loop leads to poor coping mechanisms such as drinking, drugs and over eating.
If you are dealing with financial stress, it could be a reason you are having a hard time staying active and eating right.
Financial stress costs U.S. businesses $4.17B per week.
According to an article in Benefits Pro, financial stress is very costly to employers.
Financial stress negatively affects employee mental and physical health, leading to less productivity and engagement. Other studies have shown the mental distraction leads to more accidents at work.
How to assess financial health
There are two ways to assess your financial health. The first way is quick and does not require any special financial knowledge. You can take a free financial wellness assessment here:
https://measure.datapoints.com/survey/e/ukOhsbFQnXldxQAmL9SE
The second way is more quantitative and uses a few key personal financial indicators. For example, your liquidity ratio measures your ability to absorb a financial shock. To calculate this ratio, you divide your liquid assets (cash) by your monthly expenses. Any answer below 3 indicates a deficit in emergency savings.
Other important metrics include Debt-to-Income or Debt-to-Take Home Pay ratio and overall Net Worth.
How to improve financial health
If you have a high level of financial stress, the first step is making a plan.
First, take time to document all your expenses. Look at your prior month’s bank statement to see where the money went.
Next, document all your sources of income. Subtract your monthly expenses from your income to see how much extra you have, or if you have a deficit.
If you have a deficit, find ways to increase income, reduce expenses, or both.
Once you are able to come up with extra money each month, figure out where it should go to improve your situation. Saving for emergencies and paying off high interest debts are good places to start.
What can employers do
Employers can take an active role in helping employees become financially fit. Having good benefits in place is a start, but studies show that personal advice is most important. Having a confidential, unintimidating relationship with a financial coach is an option. Financial coaches provide knowledge, skills, and support to make good financial decisions. Education alone is not enough.
If you or someone you know is coping with a high level of financial stress, or or you want to know how you are doing, contact me for a free consultation. You can sign up on my Calendly link or e-mail me at nicole@frombroke2baller.com