Financial wellness: What is it and how does it impact your mental health
by Kat Rowe | October 10, 2023
What is it and how does it impact your mental health
Are you feeling stressed and anxious about your financial situation? You’re not alone. One in three Australians identify money as a significant cause of stress in their lives.
With the cost of living continuing to rise, many Australians are finding themselves worrying about money, as bills and debts stack up and expenses like the weekly shop start to blow out.
All this anxiety can take a toll on one’s overall wellbeing and mental health, and that’s where financial wellness comes in.
Financial wellness is a state of being that usually occurs if you have financial stability and security. Although it’s not easy to achieve in the current climate, there are certain steps you can take towards getting there, which we’ll discuss in this blog.
The Dimensions of Wellness
Your wellbeing is made up of many parts that interconnect with each other, all with an individual aim to improve your overall mental health.
A successful approach to wellness has 8 dimensions, which can be broken down into the following areas: occupational, physical, social, financial, emotional, environmental, spiritual, and intellectual wellness. Read more on the dimensions of wellness.
Tips on managing your financial wellbeing
We believe taking care of your financial wellness is an important part of your overall mental health. And that’s why we’ve put together our top tips on managing your personal finances to help you achieve a state of financial wellness.
Tip 1: Know where your money goes
Knowledge is power. The first step on your journey to improving your financial wellbeing is knowing where your money goes. Only then, can you go on to manage your finances efficiently.
To gain a better understanding of where your money is going, try tracking all your income and spending for one month. Check your account daily using your banking mobile app and make notes on where your money is being spent. There are plenty of free money management apps that can help you keep a record of this, including ‘Empower’ and ‘Buddy’. If you don’t use apps, you could also create a personal spreadsheet or even write it down in a notebook. Once you have audited your spending and expenses, you can then make more informed decisions about where to reduce costs.
This is going to be different for everyone and will be specific to your lifestyle and circumstances. However, some examples of this might be, making dinner instead of ordering takeaway or removing one of your streaming sites – they really do add up!
To work towards your goal of financial wellness, it’s also worth checking your essential expenses and seeing if there is a chance that you could reduce these costs. For example, if your phone contract is coming to an end, instead of getting an upgrade or renewing, consider your options and shop around for a cheaper deal.
Tip 2: Rid the debt burden
Unfortunately, there is a strong correlation between debt and poor mental health, as debt can impact our sense of freedom.
It isn’t pretty, but the best way to get rid of debt is to face it. To achieve financial wellness there needs to be a plan in place to start reducing the debt, even if it’s little by little. We recommend making a list of your debts, the terms of any loans, and interest rates. If you have more than one debt, it can be a good idea to identify which has the highest interest rate and try to reduce that one first.
Fortunately, there is government help and advice to help you through this, so don’t feel like you are alone. The National Debt Helpline is one organisation that can offer free and independent advice to help you get on top of your debts. Additionally, if you’re feeling overwhelmed and want to understand more about your rights and entitlements, free government legal advice is also available.
It can be overwhelming to begin to face debt, but accessing services that will help you make a plan of attack can help relieve this burden.
Tip 3: Set a budget
It’s budget time! By being clear about how much your income is and your expected expenses, you should be able to stress less about your financial situation and set a budget that will work well for you.
Budgeting is about allocating funds to each area of expense and leaving room for unexpected costs that may come up. By thinking ahead and planning out your spending, you are less likely to make impulsive purchases and can feel confident that you have things covered. You can also allocate what is left to your savings account, and start to see some progress.
Keep the momentum going by updating your budget regularly and adjusting it for new incoming costs or changes in your financial circumstances.
And remember, if you stray from your budget sometimes or don’t meet your goals that is okay! Simply restart your plan for the next pay cycle and get back on track. It’s an ongoing process that you will refine over time.
Tip 4: Start Saving
The popular rule of thumb suggests you spend 50% of your after-tax income on needs such as your rent or mortgage and household bills, 30% on purchases of things that you want or need and 20% on savings and debt repayment. However, this is just a guideline. You should adapt the rule to fit with your personal circumstances.
At the end of the day, it doesn’t matter how much or how little you can save, it’s the act of saving that matters. Getting into the habit of regularly saving money and building up funds that can go towards emergency spending, investments and your retirement will give you financial peace of mind, otherwise known as financial wellness.
Prioritise your mental health
If you have concerns about your financial wellbeing or are worried about someone who is having a tough time financially, there is help available.
Reach out to The National Debt Helpline online or call 1800 007 007 to receive free, professional and confidential financial advice.