Alison F. Salka, Ph.D.
Senior Vice President and Director, LIMRA Research
As the pandemic wears on, the concepts of “wellness” and “well-being” are top of mind for everyone — from businesses and governments, to us as individuals. We are more aware than ever of how precious our physical health and wellness are, and we are doing everything we can to protect it and stay safe.
Maintaining mental wellness is equally important, as people’s emotional strength is being incredibly challenged during the COVID-19 crisis. However, one additional type of well-being is critical to include in these considerations — financial wellness.
Why? While much attention has been paid to physical and mental wellness over the past year, financial wellness may be viewed as a secondary concern. In fact, these three components of well-being are interconnected. If individuals ignore the financial element and feel financially unstable, then their physical and mental well-being can suffer. Financial stress cannot be compartmentalized — it can hurt these areas as well.
Research among U.S. employees shows that financial stress has a negative impact on their health and engagement, especially among those living paycheck-to-paycheck. Almost half of these struggling workers say they have experienced anxiety or depression. Another measure cites financial risk as one of the primary threats to mental health. Specific to physical health, financial anxiety can produce negative outcomes, such as increased blood pressure, higher blood glucose levels, difficulty sleeping, and poor nutrition.
Defining financial wellness
To begin to address financial wellness, we need a clear idea of what it means. A helpful definition is “feeling confident in your financial situation, being able to withstand unexpected expenses, and enjoying a financially secure future.” These three pieces show the sense of financial wellness comes from both practical and emotional factors. You must be financially prepared for unanticipated costs and plan for the future, while also truly feeling comfortable and confident where you are.
Once you have this understanding of financial wellness, there are many ways to work on achieving it. Here are some steps in the right direction:
- Make a true commitment to working toward financial wellness: It will take some time and effort, and possibly some shifts in how you do things, but remind yourself that you are worth it. You will enjoy the many benefits that come with feeling financially secure.
- Identify your financial needs and create a plan to meet them: Everyone is in a different situation, so it is important to outline goals that address what is most pressing for you. You may need to pay off debt, start an emergency fund, or increase savings. In fact, when LIMRA asked retirees what advice they would give their younger selves, “save” or “save more” was their most common answer. In addition to traditional savings accounts, you may also need to focus on saving for retirement. (If you have access to a company-sponsored retirement plan, this is the best place to start.)
- Review your expenses: Understand where you spend your money on a daily basis, and find opportunities to save and use discounts wherever possible.
- Protect what matters most: Consider life insurance as one measure to ensure your family will have the financial resources they need, even if something should happen to you.
The bottom line is that improving your financial wellness is possible, and you can do it by taking one step at a time. Henry Ford is known for saying, “Whether you think you can, or you think you can’t — you’re right.” You can do this by adopting a positive mindset for tackling your goals. Financial security, and the peace of mind it provides, is one of the most valuable gifts to give yourself and your family.