Stress of any kind can contribute to mental health problems, and financial stress in particular is one of the biggest causes of anxiety and depression. Many of us know the fear of not having enough money for our needs, but there are ways to gain financial stability and have peace of mind no matter what comes up.
People like to say that money doesn’t solve all problems, but it solves a lot of the most important ones. Whether it’s being able to afford a home or needing to pay for healthcare, smart financial management is essential to our survival.
When you manage your money well you minimize the risk of financial problems impacting your mental health. Here are three things you should know about money management to improve your financial and mental well-being.
1. There’s a strong link between debt and mental health issues
46% of people with debt have a mental health problem. The link between debt and mental health goes both ways. Poor mental health can worsen financial problems, and financial problems can worsen mental health.
This means it’s common for people to experience a vicious cycle in which their mental health and problem debt gets consistently worse over time as each issue feeds the other.
If you’re struggling to manage existing debt, the first step is to talk to your lenders. Many are willing to offer payment plans or temporary holds on interest.
The next step is to look at shifting your debts, which means consolidating multiple debts into just one or two places, such as a loan and a credit card. This can help you to reduce the amount of interest you pay overall to make repayments more affordable.
2. Your credit score affects your financial freedom
The better your credit score is, the more options that are available to you when shopping for financial products. A good credit score makes it easier to make important purchases such as buying a property with a mortgage.
Plus, it gives you peace of mind that should you need credit in an emergency situation, you won’t have too much trouble accessing it. When you keep an eye on your credit score, you can feel confident in your financial freedom.
It’s true that some credit checks impact your credit score, but only if they’re hard inquiries. These are usually performed by lenders who want to check your credit report before offering a loan.
Soft inquiries, such as checking your own report, don’t impact your credit score, so monitoring your own credit history doesn’t cause a change in your score. It’s wise to check your credit score at least once each year but preferably more often.
3. You should have three to six months’ expenses as savings
One of the biggest sources of financial stress is a lack of savings to fall back on when unexpected circumstances come up. Many people live right up to their means without keeping any of their income back.
This means they’d struggle to get by if they suddenly lost their job, became too sick to work or had to deal with emergency expenses such as car or house repairs. You can immediately alleviate a great deal of anxiety when you have spare money on hand to deal with situations that are stressful enough in their own right.
Unfortunately, many people are seeing a drop in their savings compared to last year, with Covid-19-related financial disruption to blame. Average personal savings are 15% less in 2022 than in 2021.
Since the reassurance of a good savings pot is so beneficial for mental health, it’s important to prioritize saving whenever your financial reserves are depleted.
Financial well-being is key to good mental health
Money and mental health go hand in hand. Financial instability can generate a huge amount of stress and contribute to poor mental health. When you improve your financial well-being, your mental well-being is bound to improve with it.
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