8 Ways to Improve Financial Wellness During Challenging Times

  • The pandemic is causing increased stress related to finances.
  • Attaining financial wellness is possible, even during financially challenging times.
  • Uncovering beliefs around money can help attain financial wellness.

Between the pandemic and political unrest, no doubt, there is more than enough stress to go around.

For many of us, money is one source of stress at the forefront of these difficult times.

According to the American Psychological Association, 64 percent of Americans say money is a significant source of stress in their life, and 52 percent report having experienced negative financial impact due to the pandemic.

While the connection between stress and physical and mental health is widely understood, recognizing how stress impacts your financial wellness can help you take control.

“When I’m stressed about money or worried that I’ll have unemployment or a lot of debt, that’s going to add additional stress, and if I have mental health challenges, they will be triggered more often,” Nathan Astle, therapist and board member of the Financial Therapy Association, told Healthline.

If a person is struggling with their mental health, Astle says they might behave differently toward their finances. For instance, they may be more likely to engage in retail therapy or avoid looking at their budget.

“The stress we are under during the pandemic is certainly affecting how we handle our finances. Every person feels anxious about some things, and our anxiety response gets overly activated when we see danger in a lot of places. It can be overwhelming, and it makes making good decisions harder. Working through the symptoms of anxiety and cause of anxiety is helpful,” said Astle.

Understanding what financial wellness means is a good place to start. Astle says financial wellness consists of three components:

  1. Financial literacy isknowledge about finances, such as what your credit score is and what the score means.
  2. Financial behavior includes decision-making around how you spend and save money.
  3. Internal emotions toward money involve how you feel or think about spending money. For instance, do you think all wealthy people are greedy?

Financial wellness is not about wealth, says Christina Klenotic, senior vice president and head of brand and strategic partnerships at Laurel Road.

In fact, a widely trusted surveyTrusted Source by Princeton University found that while making less than $75,000 a year can cause unhappiness, having a greater yearly income does not impact emotional well-being.

“[Ultimately] it comes down to your handle on your personal finances and how they support your overall goals in life. Having a deep understanding of your finances and how to manage them toward your goals in a way that minimizes the stress that comes from money management is the best path to financial wellness,” Klenotic told Healthline.

While financial wellness takes time and trial and error, it’s possible to attain, even during financially challenging times.

The following are eight ways that can help you get started.

1. Hit the reset button

According to a study from Laurel Road, 52 percent of millennials and Gen Zers regret how they handled their finances in 2020.

“As we start a new year, give yourself a clean slate and reset your financial plan. The spending habits of last year belong in the past; now you need to look forward,” Klenotic said.

2. Uncover your money beliefs

To get an understanding of why you handle your money the way you do, Astle recommends taking the Klontz Money Script Inventory quiz that consists of about 50 questions.

The quiz helps to uncover your money beliefs, financial behaviors, and unconscious beliefs about money that are rooted from childhood.

“It will put you in one of four groups. One group is the belief that money is bad. If I have that belief, I might subconsciously do things to sabotage my financial success because I don’t want to be greedy,” said Astle.

3. Practice mindfulness

When making financial decisions, Astle says practicing mindfulness keeps you in check with your emotions.

“Anxiety and depression lead to a disconnect with our bodies. Our heads are in the clouds, and we’re not paying attention to the sensation in our bodies,” he said.

Before you are about to look at your finances or talk to your partner about them, Astle says practice being present in the room. For instance, look at your surroundings — the colors in the room, where you are sitting, and more.

“Then you’ll notice your emotions easier and be able to approach those emotions with the rational good decision-making part of your brain, which will help you connect with [your partner],” said Astle.

4. Make a budget

Set time aside to write down your income and spending.

“This doesn’t need to be complicated, and you’re also not expected to nail budgeting the first time you give it a go,” said Klenotic.

She suggests using the 50/30/20 rule for budgeting:

  • 50 percent goes to fixed costs like rent, utilities, and car payments.
  • 30 percent goes to flexible spending such as variable costs for groceries, entertainment, or shopping.
  • 20 percent goes to financial goals like building an emergency fund, paying down credit card debt, and saving for retirement.

“See if this works for you, and also consider using an app to help manage and organize your budget,” said Klenotic.

5. Set realistic savings goals

Figure out a percentage of your income that you’re able to put toward savings and use your budget as a guide, suggests Klenotic.

“For those who may be unemployed right now, don’t feel pressure to save and don’t beat yourself up if you do dive into your savings; that’s why you have them,” she said.

“If you are concerned about depleting savings, consider scenario planning for how to rebuild your savings once you are employed (i.e., forecasting what you’ll need to save over the coming year to build your nest egg back) or even tapping into your 401(k).”

6. Refinance student loans

Refinancing student loans to a lower interest rate or different payment plan can maximize your total savings on student debt and also reduce your overall monthly expenses.

“Look for a digital lending platform that is simple and personalized, like Laurel Road’s, that makes the process easy and gives you peace of mind. While most lenders require employment for refinancing, this is absolutely an option to keep in mind for you when you do start work again to help build your savings back up,” said Klenotic.

7. Don’t panic about debt

Paying off debt immediately is unrealistic, says Klenotic.

“Especially for ‘good debt’ — debt that’s used to pay for something that has long-term value — like student debt,” she said.

Taking steps to budget and save are first steps toward being able to address debt.

“There are also options available to manage more specific kinds of debt, like negotiating a lower credit card interest rate for credit card debt or refinancing your student loans for student debt. Check out your options, you may be surprised what’s available to you,” said Klenotic.

While stories of people who have seemingly achieved financial wellness by eliminating all of their debt or paying off a major loan are easy to find online, she notes, “It’s always good to remember that financial wellness is a personal journey and everyone’s will be different.”

8. Get people in your corner

While talking about finances is taboo and uncomfortable, Astle says discussing it is a way to financial wellness.

“If you are having struggles with your financial wellness whether it’s needing to know more about your money, or needing to make good financial behavior decisions, or you are experiencing internal psychological emotional stress, not having ways to connect with others, will make you feel really alone and make that mountain a lot harder to climb,” he said.

Reaching out to others for help is a way to success.

“Getting people in your corner can look like engaging with family and friends, or getting professional help from a therapist, financial counselor or financial planner,” Astle said.

There are also nonprofits that provide one-on-one financial counseling, such as GreenPath and Advantage Credit Counseling Service.

“Trying to do it on your own is difficult. There are resources to help build that circle of people who can help you get to a better place,” said Astle.