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June 30, 2022

Financial Well-being: Balancing Money and Mental Health

Rosie Robinson

Extra! Extra! Read all about it! Global supplies plummet, inflation skyrockets!

Lately, the news has left me feeling a little strung out, to say the least. Just as I wrap my head around one life-altering event, my phone chirps sadistically to tell me that doomsday is nigh… again.

The Cost of Living

The latest threat to life as we know it? The cost of living crisis. As prices surge, people across the globe are suffering from the emotional strain of financial insecurity, forcing many to make difficult decisions about their money.

While for some of us this means cutting down on trips in the car and scrimping on our weekly food bills, others have had to make untenable decisions about whether to spend their last few dollars on a meal or on heating their home. In fact, studies show that the cost of living has caused over two million people in the UK to skip meals for a day.

What Is Financial Well-being?

The cost of living crisis undeniably affects some more than others. But no matter your income, money can be a source of tremendous stress, anger and guilt. When times are tight, it's easy to think that the answer is… well, more money. But even people with high salaries can struggle to make it through to the next payday. One thing that could help is to address our relationship with money and, by doing so, improve our financial well-being.

According to the Financial Health Institute, financial well-being is "the dynamic relationship of one's financial and economic resources as they are applied to or impact the state of physical, mental and social well-being."

In short, your overall health is dependent on finding a careful balance between your emotional, physical and financial well-being. For example, spending every penny you have with little or no safety net will likely end up causing you high anxiety. On the other hand, excessive scrimping can prevent you from truly enjoying your life.

Making a Choice

At the start of 2022, my rent went up. It wasn't excessive but that extra money leaving my bank account each month was a wake-up call.

I loved my little one-bedroom apartment but, as friends moved away, I felt increasingly isolated in the seaside town I'd called home for two and a half years. During this time, I'd also been slowly saving to buy a house. But as the cost of living crisis hit and my outgoings increased, that goal felt like an increasingly distant dream.

A choice had to be made: say goodbye to my freedom and move back to my parents to save for a house, or spend more money and live closer to friends and civilization.

It wasn't until I took a hard look, not just at my finances, but at all parts of my life, that I realized how unhappy I’d become with my hermit lifestyle. So, I bit the bullet and signed the contract on a much more expensive (albeit much bigger) apartment in Brighton. My dream house would have to wait.

Perhaps this wasn't the most sensible financial decision. Perhaps Martin Lewis is cursing my name right now for frittering away my money on a property I don't own. But after two weeks in my new home, I know this was the right decision. Not only has my emotional well-being improved, but moving to a city also meant I was able to get rid of my car (a significant source of stress for me over the years) and save just as much money as before.

Improving Your Financial Well-being

Achieving financial well-being can be tricky, and it won't look the same for everyone. So, take an honest look at your money and ask yourself these questions:

"What are my priorities?"

Whether it's going on regular trips abroad, living alone, or retiring early, consider what matters most and brings you joy. Once you've established your priorities, you can weed out any expenses that might be getting in the way.

"What are my personal and financial goals?"

Many people don't have the luxury of saving money. But if you can, think about what you'd like your life and finances to look like in six months, a year, five years, and so on. Planning for the future can help you to avoid spontaneous spending that only brings short-lived satisfaction and that you may well regret later down the line.

"How can I achieve these goals on my budget?"

Chances are, reaching your financial goals will take some compromise. Perhaps you'll need to adjust your timeline, or cut down your costs. Start small, and remember to be realistic with your budget – being too strict with yourself could cause "future you" to burnout or even spend more out of rebellion!

"Am I happy?"

Most importantly, remember that your current happiness is just as important as your future. Does your lifestyle and spending allow you to enjoy your life? Or is money-related guilt weighing you down?

Many people struggle to take control of their finances out of shame or fear of being judged. But author of "Real Life Money" and financial coach Clare Seal believes that shame has no place in a healthy relationship with money, "...we are all so much more than what we earn, what we own and what we owe."

How do you balance your financial and emotional well-being? Share your stories and ideas in the comments section, below.

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