Real Money, Real Families: Good health includes financial health, too

By Luke Erickson

Health has received a lot of attention over the past year and half, what with the ‘Rona after us and all. Being healthy is pretty much required for a happy life – ask anyone who lacks health and you’ll see that pretty clearly. Heck, forget happiness. If you’re at the very bottom end of the health spectrum, that actually means that you’re dead, which is not a very happy place to be – or so I’ve heard.

Health and happiness go hand in hand. But one of the problems with health is that we all understand it a little differently. A perfect example is how we all dealt with COVID. Those who opted or were forced to quarantine for long periods of time were clearly less likely to contract COVID-19. But many folks quickly realized that there were other health costs that came with long periods of isolation. The costs for many included a loss of health in other areas of life like mental, social, spiritual, financial health or, ironically, physical health due to a lack of exercise and adequate nutrition.

Well, as they say, hindsight is 2020, ba dum pshh. You’re welcome for the bad pun. With 2020 in the rear view mirror, we can now see this a bit more clearly: Physical health can be protected to a point, but it can’t be done in isolation to other dimensions of overall health.

So, want to be happier? Be healthier, and not just physically, but in all areas of your life.

And how can you be healthier? Avoid the ‘Rona for starters, but also exercise and eat right. Is that it? Not even close. If we’re really going to find lasting and sustainable well-being and health, there are many dimensions of health we need to pay attention to, such as emotional, spiritual, intellectual, physical, environmental, social, occupational, and yes, you guessed it, even financial health.

Each dimension can be and is influenced by the others. Much like a car full of kids on a long road trip. All it takes is one disgruntled, under-snacked, under-napped kid without a movie to watch to make the trip miserable for everyone else. Likewise, if one of your dimensions of health is throwing a tantrum, it is very likely that it is affecting many of your other dimensions of health.

So can your overall health and happiness suffer if your personal finances are in shambles? Without a doubt.

For example, according to research, a person who has a large amount of debt is likely to be stressed, losing sleep, eating poorly, not exercising, not taking time to socialize, not using work time productively, and has degrading mental and emotional health. Yes, poor financial health can lead to all sorts of negative ramifications on the other dimensions of health, overall well-being, and happiness.

Think your finances might be dragging other areas of your life down? The good news is that you don’t need to have it all figured out in order to make progress in this area of health. A recent study by O’Neill, et al., out of Rutgers University found that if you keep a budget, you’re more likely to have better overall well-being and happiness.

“But budgets are no fun!” your tantrumming financial-health dimension might be protesting. And it’s true, I don’t even think they’re fun, and I teach, talk about, and use them all the time. The best budget is going to be the one that works, and there are a million ways to budget. Just like you can Crossfit, yoga, Tai Chi, Zumba, hike, run, or weight-lift to be physically active, you can choose a budgeting strategy that fits you. Do it your way, and as long as you stick with it, it is the right way.

What is a budget anyway?

In a nutshell, it’s having an intentional plan for saving and spending. Think about it this way. You may accidentally get some exercise on a walk into the grocery store to buy ice cream, and you may get a few vegetables on a Whopper that comes with fries and a keg of soda. Similarly, some good financial things might happen to us by accident. But just like getting six-pack abs doesn’t happen by accident, strong healthy finances don’t happen by accident either.

The great news is all it takes are a few rules of thumb to really up your financial health through budgeting. A good starting point is the 50/30/20 rule. Plan to spend 50% of your income on bills like housing and transportation. Spend 30% of your income on lifestyle like entertainment, eating out and clothing. Last, spend 20% on financial goals like paying off debt or saving for retirement. These are not definitive guidelines, nor are they hard rules to follow. They may require some big adjustments to your habits up front, but after making those adjustments there is still a lot of wiggle room within these broad categories.

The key is to disrupt old habits and replace them with new, more convenient habits. You can help good budgeting habits stick by using technology to track spending, using automatic deposits to pay off debt, or saving for retirement or other long-term goals before you have a chance to spend it on other things.

Additionally, when teaching your kids about finances it’s good to help them set similar patterns. Encourage them to spend a portion of their own allowance or earned income, say 50%, on lifestyle expenses like toys, games, clothing, eating out, etc. Encourage them to save the rest. This will help them avoid the habit of spending the bulk of their income on lifestyle expenses, a habit that can be hard to break later in life.

Research shows that just over half of working age adults are not financially healthy. Interestingly, obesity rates in the U.S. are similar, about half of U.S. adults. Since we already know the dimensions of health are interconnected, one way to look at financial health is that if you improve this area of your life, it’s likely that other areas will also improve.

In summary, a great way to improve your overall health, well-being, and happiness is to focus on one dimension of health like personal finances and give it your all to improve it. You may find that other areas of health in your life improve as well. Or, at the very least, if you can quiet a tantrumming dimension, your other dimensions will be, oh, so grateful.

Luke Erickson, Ph.D., AFC®, REALTOR® is an associate professor of personal finance for the University of Idaho. He works and lives in the Treasure Valley with his wife and four energetic children. Contact him at erickson@uidaho.edu.

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