What is financial stress? What is financial well-being? Here are a few tips on how you can transition from financial stress to the realm of financial well-being.
According to the American Psychological Association, 72% of adults feel extremely stressed about their finances, be it debt or worrying about investments or future contemplation.
The relentless stress about finances is a major cause of anxiety and other serious health issues in many adults. The current global crisis, the pandemic and periods of recession or inflation induce financial stress.
What is financial stress?
Financial stress is extreme anxiety or tension related to finances, especially income and expenses.
Money is one of the key factors behind stress globally. We worry about our finances daily, but financial stress becomes problematic when constant worrying starts interfering with our daily life and turns more problematic.
What is financial well-being?
Financial well-being is a sense of control or confidence over your finances or money.
Financial well-being generally stems from being financially stable, optimally utilizing our money, staying prepared for unexpected emergencies and prepare for a financially secured future.
When we are on our way to financial well-being, we are away from financial stress.
For example, when we stick to our budget or feel secured about the future because we have good savings or emergency funds intact or align with our current and long-term financial goals, then we are in the realm of financial well-being.
There is no specific amount of money that we need to have to derive financial wellness. It is a very subjective concept, just like physical wellness.
Just like everyone’s body requires different amounts of nutrients and exercise, everyone has different financial income, expenditure, savings and debt. Financial well-being will factorise these and play its part accordingly.
Let's take an example. Vansh and Amrita each have a salary of Rs 1 lakh.
Even though they have the same amount of income, Amrita is better off when it comes to financial well-being than Vansh. Why? Because Vansh uses a majority of his salary to pay off growing debts.
He only has the bare minimum left to meet his everyday needs. Whereas Amrita uses the money for daily expenditures and at the same time is left with enough money to save for her future and lead a comfortable life in the present too. Vansh is constantly stressed, whereas Amrita is zen.
Financial well-being at the workplace
Financial well-being at the workplace is an important aspect to consider when discussing financial well-being.
Financial wellness at the workplace is not just key to better productivity but also ensures reduced financial stress.
Presently, financial wellness at our workplace is quite important.
Gen-Z needs to pay off their student loans, millennials are about to start a phase of family life, and older employees have to save for retirement.
Our employment has a big role to play in our financial well-being.
If we are self-employed, we ought to be stressed about capital, profit margins, and other factors. If we are in the corporate world or are working under someone else, our employer plays a significant role in our financial well-being.
Employee benefits —incentives, salary, insurance, or retirement plans— play a crucial role in our financial well-being.
Financial well-being and health
It is scientifically proven that low levels of financial wellness and high levels of financial stress can lead to stress, anxiety and other mental health issues. It can reduce our productivity, cause irritation and disrupt everyday life. It can cause physical ailments like headaches and high blood pressure, all induced by high-stress levels.
How to go from financial stress to financial well-being?
- We should start with baby steps before making any grand changes in our lifestyle. We can begin by tracking our income. It can be our salary, investments, grants, pension schemes, etc.
- Similarly, tracking and analysing our expenditures is extremely important. We should cut out all the sources that are draining our wallets. Unwanted subscriptions, bad investments, etc., are all such examples.
- After we have analysed our income and expenditure and know our financial standing, keeping in mind our income, expenses, investment and debt, we should look at our short-term and long-term goals. We should also see how much we need to put in for the long-term goals and slowly, penny by penny, start working on it.
- Improving credit score! We should pay off all our debts, bills and EMIs on time. This will boost our confidence and improve our credit score, which will be very useful if we want loans in the future.
- Starting to build a significant emergency fund. Without fail, we should regularly put a certain fixed amount of money into this fund. Then we can have enough funds to see us through unemployment or a pandemic like Covid-19.
- We should be consistent with our savings.
- We must spend less than what we earn and save the rest. This is a gold mantra that works wonders.
- When taking a loan, we should only borrow if we can afford it.
- We should not imitate others' lifestyles or decisions, or investments. Their finances are different from ours!
- Financial wellness is a personal journey. We must look for the best options!
Jar app to our rescue!
Jar app helps us in saving smartly. It is one of the first Indian apps to automate savings and investments using UPI payment! Jar app helps us with micro-saving options and it democratises our investments.
Here are some of its cool features:
- We can create our account within a minute and get started.
- It helps us discipline our savings.
- It detects SMS payments from our phone and rounds them off to the nearest 10 to generate spare change for our investments and payments.
- We don't need KYC.
To derive financial wellness, we need to reduce our financial stress and to do that; we need to make sound financial decisions starting now. We shouldn't put off our pending payments, not forget our EMIs, track our expenses regularly and be disciplined about our money. Jar app can automate our investments and help us attain financial well-being.