Signs that you’re fi­nan­cially healthy

The Dominion Post - - Your Money - Opin­ion Liz Koh

As we move into what is one of the most fi­nan­cially stress­ful months of the year, it’s im­por­tant to re­flect on the link be­tween fi­nan­cial health, phys­i­cal health and men­tal health.

There is no doubt that money prob­lems take a toll on phys­i­cal and men­tal health. Wor­ry­ing about money causes stress, which in turn can cause phys­i­cal symp­toms such as headaches, nau­sea, mus­cle ten­sion, in­som­nia, skin com­plaints and chest pain. Over an ex­tended pe­riod of time, stress can cause de­pres­sion, anx­i­ety, weight change, ex­haus­tion, and other more se­vere symp­toms such as high blood pres­sure and stom­ach ul­cers.

Stress can also im­pair brain func­tion in the frontal lobes, which are re­spon­si­ble for higher-level func­tions such as rea­son­ing, anger con­trol, at­ten­tion and judge­ment. Emo­tional dis­tur­bances from changes to the brain can af­fect re­la­tion­ships and work per­for­mance. It’s lit­tle won­der then, that the Christ­mas pe­riod sees a spike in do­mes­tic vi­o­lence, divorce, sui­cide, binge drink­ing, drug abuse and crime.

Nu­mer­ous stud­ies have shown that money is the lead­ing cause of stress – rat­ing higher than re­la­tion­ships or work. For ob­vi­ous rea­sons, fi­nan­cial stress is more preva­lent in peo­ple with lower in­comes. De­spite the link be­tween money and health, when we think about main­tain­ing phys­i­cal health we think of ex­er­cise and diet and when we think of deal­ing with stress we think of re­lax­ation, med­i­ta­tion and mind­ful­ness. When there is fi­nan­cial pres­sure, these reme­dies will al­le­vi­ate the symp­toms of stress but will not elim­i­nate the root cause.

Fi­nan­cial stress is dealt with by im­prov­ing fi­nan­cial health. Hav­ing good fi­nan­cial health means hav­ing enough money to cover ex­penses as well as sav­ings to cope with un­ex­pected fu­ture events. There are a num­ber of key in­di­ca­tors of the state of your fi­nan­cial health.

You spend less than you earn.

If you are not sav­ing, you have lit­tle re­silience for un­ex­pected events and you are less able to achieve long-term goals.

You pay your bills on time and in full.

Your abil­ity to man­age your cash flow and on­go­ing com­mit­ments is demon­strated by your ef­fi­ciency in pay­ing bills. Be­ing late can in­cur penal­ties and mount­ing bills add to fi­nan­cial stress.

You have an emer­gency fund.

The amount of money you have ac­cess to at short no­tice with­out in­cur­ring high in­ter­est costs is one of the best mea­sures of your fi­nan­cial re­silience. Liv­ing from pay-day to pay-day with no buf­fer is a lead­ing cause of stress.

You are able to save enough to buy a home and save for your re­tire­ment.

Get­ting by from one week to an­other is not suf­fi­cient in the long run. To­wards the end of your work­ing life, fi­nan­cial stress can be caused by not be­ing in a strong enough po­si­tion to re­tire. That means hav­ing a debt-free home and pot of money to top up your su­per­an­nu­a­tion.

You have a man­age­able level of debt. Short-term, high­in­ter­est debt is a killer.

Strug­gling to meet min­i­mum pay­ments for short-term debt is highly stress­ful and makes sav­ing even harder.

You have in­sur­ance in place to cover your fi­nan­cial risk.

No in­sur­ance means you and your fam­ily have lit­tle re­silience when it comes to un­ex­pected events such as ill­ness or death.

You plan ahead with a bud­get and long-term fi­nan­cial plan.

Plan­ning ahead means you are bet­ter equipped to secure your long-term fu­ture through set­ting goals and be­ing pre­pared for changes in your fi­nan­cial sit­u­a­tion.

Sadly, there is a grow­ing per­cent­age of the pop­u­la­tion for whom sav­ing is ex­tremely dif­fi­cult due to their low in­comes. How­ever, hav­ing a high in­come doesn’t mean you are fi­nan­cially healthy. It’s what you do with your in­come that counts, no mat­ter what your in­come level is.

Be­ing fi­nan­cially healthy on a mod­est in­come means your phys­i­cal and men­tal health, and there­fore your over­all well­be­ing, could well be bet­ter than some­one on a high in­come who is fi­nan­cially un­fit.

Liz Koh is an au­tho­rised fi­nan­cial ad­viser and au­thor of Your Money Per­son­al­ity: Un­lock the Se­cret to a Rich and Happy Life, Awa Press. The ad­vice given here is gen­eral and does not con­sti­tute spe­cific ad­vice to any per­son. A dis­clo­sure state­ment can be ob­tained free of charge by call­ing 0800 273 847.

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