Signs that you’re financially healthy

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.