Money Matters: Creating healthy financial habits

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Financial stress can put a major strain on our mental, physical, and relational health, but a positive money mindset can make a big difference in how we handle our finances. For self-improvement month, financial expert Barry Bigelow shares how we can create a healthier relationship with money.

Your financial well-being can greatly affect your physical and emotional health. Stressing about money can cause depression, shame, anger and fear. Not only does financial stability prevent unnecessary stress, but it can give you peace of mind to enjoy the activities and things you love. Enjoying a night out with friends or surprising a loved one with a meaningful gift are experiences that wouldn’t be possible without good money habits. Money also ensures your basic needs are met: paying for gas, covering rent and keeping food on the table, all without going into debt. Unfortunately, a lot of people have poor money management skills or unhealthy relationships with money. It’s important to break those habits and improve your mindset around finances. 

Start by asking yourself, “What are my internal rules about money?” Some people believe money is only for saving, not for spending. Others believe the opposite is true! Another common belief is that you have to work really hard in order to have money. These narratives have some truth to them, but often they’re exaggerated or overextended in unhelpful ways. They can easily become roadblocks to creating healthy financial habits. 

Next, ask yourself where those rules about money came from in the first place. For better or worse, we’re heavily influenced by our family and friends. It’s important to know who’s trustworthy when it comes to financial advice. Sometimes we pick up certain habits and money rules from past experiences. It’s good to learn from our mistakes, but be careful not to build your entire money philosophy around one experience. 

Finally, ask yourself, “Is this the relationship I want to have with money?” Money often acts as the master over our lives, but it should be a tool used to create the life we dream of having. It’s important to remove the unhelpful rules you have around money to build a healthier relationship with your finances. 

In order to have the freedom to truly enjoy your money, you need to remove the stress of meeting your basic needs. Figure out your “have-to” expenses like a place to live, food to eat and gas to get around. Creating a budget or spending plan will help ensure you have enough money to cover the necessities, especially when money feels tight. Nearly 90% of people are experiencing anxiety about their finances because of inflation, but prioritizing your necessities can help reduce any money-related stress. Another “have-to” is saving. Putting money aside for an emergency fund and for retirement will make sure you’re set up for success down the road. Try to save enough for 3-6 months worth of expenses in an emergency fund. For retirement, we recommend putting aside 5-10% of your income into your employer-sponsored 401(k) or another retirement account.

Once the necessities are covered, and you’ve set aside money to save, you get to decide the “want-to’s” to spend your money on. What trips do you want to take? What things do you want to buy? What experiences do you want to have? Saving and budgeting would be exponentially more challenging if you didn’t have a goal in mind to work toward or if you didn’t reward yourself from time to time. 

Buyer’s remorse comes into play when we spend money on the wrong things, so it’s important to make sure your “want-to” purchases align with your values. If you value experiences, put money aside for dining out or activities with friends. If you value having a comfortable home, purchasing quality furniture could be a wise decision. People often feel guilty about spending money. But if you’ve saved for the future and paid your bills, it’s okay to enjoy the money you’ve worked hard for.

Saving for your future is one of the best habits you can adopt. And the earlier, the better! Your savings can grow faster by using compound interest that accumulates with time. A lot of people dream of an early and happy retirement, but that dream can’t come true without careful planning and strategic saving. Try to put aside 5-10% of your income into your employer-sponsored 401(k) or another retirement account. If your company offers a match, make sure you contribute at least enough to earn those free dollars.