New Year’s resolutions to take better care of your health, reduce stress or “make self-care a priority” are very popular and show a commitment to improving your health. Financial health – budgeting, understanding your personal finances or starting a savings plan – often doesn’t make the list when you’re committed to improving your overall health.
But did you know that financial stress can be a major contributor to health outcomes? According to an October 2022 survey by the American Psychological Association (opens in a new tab), 72% of Americans reported feeling stressed about money at least in the past month. Researchers have found that chronic stress can cause physical problems such as headaches and stomachaches, along with mental health problems such as anxiety and sleep problems.
It’s easy to bury our heads in the financial sand or rationalize that “retail therapy” is the solution to stress, but we need to recognize that some, or perhaps a lot, of stress -an attitude that we may blame for the demands of work or Personal relationships may be an unconscious reaction to financial stress that we do not accept.
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Neglecting credit card balances, not knowing where your money is going or arguing about money with a loved one can be signs that you need to talk about your financial health as part in your new year’s resolution.
Where do you begin to make financial security an important part of your resolutions this year? Trust that small steps are all it takes to get off to a good start.
Step 1: Build an emergency fund.
It’s common to hear that you need to have three to six months worth of savings in an accessible savings account. If that amount seems too much or may take too long to achieve, start with the goal of saving one month’s expenses so you can be successful faster.
Keep in mind that an emergency fund is just that – money to use for emergencies. I hear people are so focused on keeping cash in the bank that they use credit cards for emergencies – car repairs, unexpected medical expenses and so on – and then have to pay interest. when carrying a credit card. balance instead of using the money allocated for such situations.
It’s okay to use your emergency funds (for real emergencies, not just what you want) and then start building those funds back up – that’s what these funds are for!
Step 2: Empower yourself with financial planning.
Financial planning often has a default exclusion. “I can’t take that vacation because I don’t have enough money.” “We cannot live in this area.” “Budgeting takes all the fun out of life.”
In fact, having control over your financial life can be a source of self-esteem. Many times, keeping track of your spending, knowing how much money you have and knowing where you can make different choices is key to living the life you want.
I’ve had conversations with clients where they’re really shocked that they’re spending so much money on things they don’t care about at all. By making simple changes in their spending patterns, they can easily meet their needs – but they won’t even know it’s possible until they know their financial plan. Talk about a big boost to her energy and satisfaction in her life!
Step 3: Plan a reward.
Commit yourself to achieving the financial goals you set (and budget for them too!). The key to sticking with our resolutions is making sure we enjoy and see the benefits of these changes. If you decide you want to save for an emergency or pay off debt, also put aside a small amount to celebrate when you reach that milestone.
One of my friends got a huge student loan for getting an advanced degree. She budgeted with the goal of paying more than the minimum amount each month so she could pay off the balance as quickly as possible, but it would take more than two years to pay off the entire amount. He knew he would be disappointed in those two years if he didn’t plan to have something to look forward to to keep going.
He budgeted for the loan each month and then set aside an extra $20 each month for savings. Every six months, she sat down and added up the amount she paid for the loan, and if it was over $10,000, she booked a massage using the savings to pay for the massage. That small amount of money she saved paid for stress-relieving therapy and, in addition to the satisfaction of reducing her debt balance, helped her focus on her goal of maintaining a fast-track repayment schedule.
Making New Year’s resolutions is easy. The key to success and staying focused is to truly understand what your problem is. If you’re looking for ways to be more physically fit, improve your mental health or prioritize your personal care, taking the time to understand your financial situation can be a great step toward making your decision a reality. despite the fact. you start with small steps.
Your financial advisor is your best advocate on your journey to long-term financial health.
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Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and does not include investment services. Mercer Global Advisors is registered as an investment adviser with the SEC. The content is for educational and illustrative purposes only and does not constitute an offer or solicitation to buy or sell any particular security or to participate in any particular investment strategy. All comments represent the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings presented in this presentation come from third parties that are not affiliated with Mercer Advisors. Information is believed to be accurate, but not guaranteed or provided by Mercer Advisors.
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