How Financial Security Can Impact Your Mental Well-being

Summary: Having a healthy relationship with money is not just about your financial security; It can have a lasting effect on your mental health and resilience.

Feeling cash-strapped and struggling with debt can be nerve-wracking. In fact, finances and money are the number one cause of stress for most people, according to a 2023 survey conducted by the American Psychological Association.

About 40% of those surveyed claimed that financial worries stressed them more than work, the economy, violent crime and global conflicts. Financial challenges can chip away at your mental wellness, and at times, may lead to serious conditions like depression and anxiety. On the flip side, financial security may help improve both your mood and mental well-being.

The connection between financial security and mental health

When you are overwhelmed by bills or deep in debt, your finances can weigh heavy on your mind. You aren’t the only person losing sleep because of anxiety over money concerns. A study conducted by the Financial Health Network, a financial services nonprofit, found that seven out of 10 Americans are struggling with some or all aspects of their finances.

The connection between mental well-being and financial security runs deep, especially for those who are on the lower end of the pay scale or who have heavy financial burdens. The Financial Health Network reports people who earn lower incomes have a three times higher risk of suffering from mental health conditions like anxiety and depression, than those who do not face financial hardship.

Debt is a major financial stressor that takes a tremendous toll on people’s health. Those struggling with considerable debt are more likely to have serious health concerns such as chronic insomnia, hypertension, cardiac problems and even psychiatric disorders, according to a 2021 study published in The Journal of Clinical Psychiatry.

The importance of financial security

Research shows that financial security can help lower stress significantly and improve your mindset. About 75% of Americans who describe themselves as financially secure, also report their mental well-being as “excellent” or “very good,” according to the Financial Health Network.

Financial security can be defined as your ability to live comfortably and confidently on the income you earn. It means you can pay your bills on time and have at least an extra 20% of your paycheck to set aside in savings.

In reality, it’s more than the number in your bank account though; it’s how well you manage the money you do have that fosters a feeling of financial wellness.

Steps to take to achieve financial security

For those of us who have yet to feel that financial freedom, here are five steps you can take to improve your financial security and set your mind at ease:

Create a budget: There are several different budgeting models that can help you manage your money and get you on a path to financial security. One popular budgeting tactic is the 50/30/20 model, where 50% of your income goes for your needs, 30% is spent on wants and 20% is put into savings or used to pay off debts.

Having a budget and sticking to it will help you feel more in control of where your money is going. It can also help you plan and achieve financial goals, which can improve feelings of mental wellness.

Cut back on spending: Once you’ve created a budget, look at your discretionary spending and decide where you can cut back. If you spend too much on online shopping for things you don’t need, consider deleting the app from your phone and unsubscribing from tempting sales emails, so you cut off temptation right at the source.

If your spending habits feel out of control, you may be using impulsive spending as a coping mechanism. Practice financial discipline by sticking to your budget and putting off purchases with a self-imposed cooling off period. Social media platforms often fuel shopping addiction. It’s best to unfollow any accounts that trigger impulse purchases. Don’t hesitate to seek help from a mental health professional if you find yourself spiraling out of control or are unable to modify your spending habits.

Start saving money: It may seem like obvious advice, but it’s important to start building an emergency fund, even if you don’t have a lot of money left over after you pay your bills. Many banks have accounts that automatically put a percentage of your deposits into savings. A little can go a long way to build your nest egg — and it’s never too late to start.

The assurance of having some savings can help you feel calmer and more resilient about facing the future.

Make a plan to pay down your debt: Take control of your debt, don’t let it control you. Use the “debt snowball” or “debt avalanche” methods to pay down your debts one at a time. If high interest is making it difficult to put a dent in your debt, consider talking to a debt consolidation company that can potentially negotiate a lower interest rate so you can pay off your debt quicker.

Owing money that you cannot pay back can have a debilitating impact on your sense of comfort and mental wellness. Take concrete steps — even if they start out small — towards minimizing your debt.

Talk with a financial professional: It never hurts to talk to a financial professional who can help you manage your finances. Financial representatives with Mutual of Omaha can help you get on the path to financial security.

You don’t have to go it alone. The right advice from a qualified professional can show you a path towards financial security that you may not have considered. So prioritize your mental wellness and seek advice when you need to.

Conclusion

There is no doubt that your finances can have a direct and lasting impact on your mental health and well-being. While some financial factors are beyond your control, there are targeted but simple ways you can manage your money and achieve financial security.

Financial literacy, the advice and support of dedicated professionals and good fiscal habits can help set you up for a lifetime of financial and mental wellness.

If you’re struggling with mental health conditions, know that you are not alone. Reach out to a doctor or mental health professional or consider contacting a crisis center or hotline for care. Help is just a phone call away.

FAQs

Q1: What are the financial factors affecting your mental health?

There are several financial factors that could affect your mental wellness, especially if those factors are out of your control, such as a job loss or an unexpected medical issue. Other financial factors that can stress you out include:

• Debt
• Rising prices (inflation)
• Limited retirement savings
• Not having an emergency fund
• Living above your means
• Lack of a budget

Q2: What is the financial impact of mental health?

The relationship between mental health and your finances is undeniable. While your financial standing can impact your mental health, mental health issues can also affect your finances. For example, a gambling addiction or impulsive binge shopping can lead to financial struggles, which, in turn, can strain your mental health. Diminished mental health can affect your ability to work or study and reduce income.

Q3: How much knowledge do you need to feel financially secure?

Financial security comes from being educated on financial management, implementing that knowledge to build your financial health and having a healthy relationship with money. As much as external coaching and planning are important, so is the inner confidence to use money well and ultimately help create financial security.

Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.