What do you think of when you hear the term “financial health?”
Maybe to you, financial health means balancing your checkbook every month.
Maybe you track your spending on a new app – if it’s green, you’re good. Maybe your ideal vision of financial health exists in the future, when you’ve reached your target retirement date and you’re ready to sail off into the sunset.
No matter how you define it, financial health and wellness play a crucial role in your overall health and wellness. These two facets combine to create what can be either a rewarding retirement or constant struggles leading to much less desirable outcomes.
Research shows a direct correlation between higher incomes and improved health outcomes. * Conversely, lower incomes can lead to higher rates of chronic disease and even shorter life expectancy.
The same research review shows that the emotional strain of financial challenges can cause higher rates of stress and anxiety leading to other physiological issues and may cause individuals to delay getting needed healthcare. This unfortunate cycle is sometimes described as “financial cancer.”
By keeping your mind, body and your finances healthy, you’ll be able to enjoy your full “health span” – your healthy, active lifespan.
Getting Started
First, it’s important to consider that, just like your physical health, it is very appropriate to ask for help and coaching regarding your financial fitness!
Whether you’re going it alone, or preparing to work with an advisor, the two key factors will be income and expenses. If you are spending more than you’re earning, you either need to cut back on expenses or find a way to increase your income. I know, I know, easier said than done! Here are a few key considerations to getting started:
- Can you trim anything from discretionary spending or find other ways to save?
- Can you ask for a raise, work additional hours or upskill for a new role?
- If you’re retired and living off investment income, review the numbers to ensure you’re spending at a sustainable rate.
Keeping this equation in balance really is the key to financial health. It doesn’t matter if you have $100 or $10,000,000 in the bank, it still has to be in balance.
Once you have space in your budget to accommodate your basic needs, it’s time to start saving. Many people find it helpful to establish “buckets” for different spending/saving purposes. It’s always a good idea to have a dedicated savings account for emergencies as a first step. Once you have these basics covered, you may be well on your way to enjoying a sense of financial health and wellness.
As your savings grow, you’ll be able to allocate funds toward broader goals as part of your financial plan. These may include retirement savings, education funding, charitable giving, and more. If you have a high-deductible health insurance plan, a health savings account is a great tool to use for current and future health care needs.
I Did The Saving, But Things Are Still Tough
While higher income earners may have better access to healthcare and better health outcomes, it doesn’t mean they’re immune to challenges and stresses.
Any financial planning process should include health and wellness planning. A recent study conducted by Greenwald & Associates on behalf of MassMutual found that, compared to the amount of retirement assets, "health actually appears to be the more important driver of well-being in retirement.”
This includes not only your health, but the health of your loved ones as well. From lifestyle choices to family dynamics, these can be complicated issues that may require careful planning and expert advice.
- Are you or will you be caring for aging parents?
- Are you and your spouse/partner working to maintain your health so that you can enjoy the retirement you had envisioned earlier in life?
- Do you have a child with health concerns?
- Are your children prepared to navigate the future as your health-span fades?
How to Plan for Your Healthiest Financial Future
It’s important to start with open communication. That means talking through these issues with your family and then meeting with your advisor(s).
As part of your work on these items, make sure that you have all your important documents updated, organized and stored in a place where key family members can find them!
If you don’t have a team you can rely on, perhaps part of your financial health check-up should be interviewing advisors to find a better fit – someone your family can be comfortable and confident working with for the long term.
It’s a Marathon, Not a Sprint
Our financial wellness directly impacts our physical health, and our physical health is crucial to enjoying the long, healthy lives we are planning for as we build our financial foundation. The two are inextricably linked and I’m here cheering you on as you invest in both!
* Source: “The Other Side of the Coin: An Integrative Review Connecting Pay and Health” by Gordon M. Sayre (Emlyon Business School), Samantha Conroy in the Journal of Applied Psychology.