Financial Wellness: An Important Part of Good Mental Health

In this article we’ll review research which explores the connections between financial distress and wellbeing, the surprising lack of research into any impact that saving money may have on wellbeing, and finally we’ll review an exercise for brainstorming ways to reduce nonessential spending while still leading meaningful and engaging lives.

First, let’s take a look at what financial wellness means. Then, we’ll review some research on finance and wellbeing. Finally, we’ll explore ways to reduce nonessential spending, including through a no spend challenge.

Financial wellness

Financial wellness, from a mental health perspective, means that our personal finance is not a source of regular psychological distress. Financial wellness doesn’t mean being filthy rich. In fact, it probably means being keenly aware of budgetary restrictions. However, it means feeling comfortable within those self-imposed restrictions. When we achieve financial wellness, we feel that we can make responsible life choices big and small without dread of the financial ruin hanging over us. The first step toward financial wellness is understanding the ‘hidden costs’ of overspending.

‘Hidden costs’ of overspending

Overspending is an easy way to derail financial wellness.

Most Americans are not in good financial shape: 76% of households live paycheck-to-paycheck, and 85% do not have a six-month emergency fund. Overall, 72% of adults are stressed about money.

Financial distress doesn’t just dampen our weekend plans; it derails our entire lives. It is a top threat to relationships, and can lead to serious health problems. This research paints a clear picture: overspending is a threat to wellbeing.

Let’s consider whether any mental health benefits gained from spending — even buying experiences — might be outweighed by anxiety, stress, or depression that subsequent financial stress can cause.

But what about buying experiences?

By now we have all heard that buying experiences is more likely to bring about lasting well-being than spending money on things.  This research, which dates back to 2003, is great news for the travel industry, but it might not be as great for you or me.

It’s nice to know that we should buy experiences instead of things when we have some cash we need to spend. But maybe the issue is: why do we feel like we need to spend that money in the first place? And does buying experiences contribute to overall wellness if it sabotages financial wellness?

I’m not sure this question has really been addressed. In fact, there has been very little researching into how saving money impacts wellbeing.

What does the research say about saving and happiness?

Not much, as far as I can see.

Research on the psychological impact of saving versus spending is scant (if you know otherwise, please let me know). An often-cited survey about the benefits of saving comes from an upstart bank. The bank, conveniently, found that depositing your money in it makes you feel good! Not exactly an unbiased source. Still, I tend to think they are probably right.

The Gallop poll annually finds that Americans value saving more than spending. However, this poll doesn’t address whether people actually are saving — it merely confirms that most of us know we should be doing it.

Elsewhere, researchers at Beyond the Purchase have found that people who manage their money tend to be happier than people who don’t, though saving is one aspect of many that is attributed to the broader activity of ‘money management.’ Warmer, but not quite there.

Here’s one recent example: Participants in a study were given a sum of money. Half were told to spend it on others or make a charitable donation, while the other half were told to spend it on themselves. The participants recorded their level of happiness before and after the experiment, and results indicated that those who spent the money on others reported greater happiness after-the-fact than those who had spent the money on themselves.

This is valuable information, but it doesn’t paint a full picture. Why wasn’t there a third group asked to save the money?

With all the interest in the science of well-being, and all the cash we have spent on happiness elixirs, self-help books, and wellness retreats, it seems we have forgotten to consider what happens to us when we simply stop trying to buy happiness in the first place . . . even happiness-by-way-of-buying-experiences-not-things. This appears to be a huge blind spot in the study of well-being.

A case study: my path to financial wellness

I am a saver. It is a habit I learned from my mom. I resented her frugality when I was younger — why was I the only kid at the lunch table with a juice box instead of a Surge? But now that I am an adult, I am grateful for the habit of mindful spending she instilled in me.

When I entered the work world after grad school in 2010, I began saving at least half of every paycheck. If I had to live with five roommates to do it, then so be it. The financial security it brought me was liberating, and allowed me to pursue opportunities I wouldn’t have been able to if I were cash-strapped and overspending. ‘Aggressive’ saving allowed me to walk away from my salaried job in 2015 and start a private practice. Now I’m more able to focus my career towards things that align with my values and interests.

Though I can’t quantify it, I can say with little hesitation that there is nothing — no experience, no exotic vacation, and certainly no status symbol — that could have provided the wellbeing I was afforded by focusing on my financial wellness.

Before you buy, do the free stuff first

Obviously, we have to spend money if we want to participate in our communities and in society at large. I’m not advocating for going off the grid or anything. Rather, I think a good rule of thumb is to look for the free stuff first.

Make use of the local trails before shelling out hundreds of dollars on hiking equipment for an epic hike you may never take. Play the guitar you have until the neck falls off, then get the one you’ve been dreaming about. When stuff starts to look a little worn and scruffy, embrace wabi-sabi, and let the marks of time tell a story.

How to stop spending money with a no spend challenge

All this is great, but how can we put this into practice to stop spending money? Here is a great way to stop spending money without sacrificing any happiness:

1. Create a list of free stuff to do
2. Give yourself a no spend challenge day
3. Save the money that you didn’t spend

1. Create your list of free stuff to do

First, here’s an exercise to help you come up with ideas for how to reduce spending. Use the following categories: exercise, outdoors, learning, arts and creativity, community, around the house, finance and family, etc. to help you create a list of free(ish) stuff to do. Add five to ten ideas for each category.

Example: Here’s a list of free(ish) things I came up with for myself

EXERCISE

1. Hike a local trail
2. Go for a walk
3. Go on a bike ride
4. Take your dog for a walk
5. Offer to take a friend or neighbor’s dog on a walk
6. Train for a community race
7. Go out on a canoe, kayak, paddle board, or other boat
8. Practice yoga, martial arts, other discipline
9. Do push-ups and sit ups or other exercises around the house
10. Play a sport (with the equipment you already have)

OUTDOORS

1. Go camping
2. Go fishing
3. Hunt for relics (just be sure it’s legal . . .. . .)
4. Garden/plant a vegetable
5. Look at the stars
6. Go bird-watching
7. Hang out on the porch
8. Whittle

LEARNING

1. Read a book on your bookshelf you haven’t started
2. Reread one of your favorite books
3. Read a different news source than the one you are accustomed to
4. Practice a foreign language
5. Learn about a different culture
6. Watch a free lecture on YouTube
7. Check out a book from the library
8. Audit a class for a local community college

ARTS & CREATIVITY

1. Practice dancing/learn some new dance steps
2. Paint
3. Free-write/journal
4. Start a blog
5. Put on some of your favorite music
6. Find some new music to listen to
7. Play a musical instrument/write a song
8. Create a beat on free software
9. Sing
10. Write a poem, short story, or get started on a novel
11. Make a meme
12. Write an opinion article and submit it to a local paper
13. Create a YouTube tutorial

COMMUNITY

1. Write a thank you note
2. Play a board game with friends
3. Have a video game night
4. Have a movie/Netflix marathon
5. Host a pot luck
6. Play music with a friend
7. Start a book club
8. Go to church/religious service
9. Volunteer
10. Help out a local political campaign
11. Go to a free concert (check for events at local college)
12. Go to a museum / art exhibit

AROUND THE HOUSE

1. Do some yard work
2. Clean around the house
3. Go through your closet and donate old clothes
4. Research making the switch to cloth diapers for your little one
5. Plan/have a yard sale
6. Rearrange your furniture
7. Practice meditation
8. Do a progressive muscle relaxation exercise
9. Practice deep breathing
10. Organize your movie/music/book collection
11. Scan old photos
12. Write down your favorite recipes
13. Create a new recipe based on the things you have in the kitchen

FINANCE

1. Schedule autopay for your bills
2. Create or review a budget
3. Read up on the stock market
4. Review your investments
5. Review your debts/loans
6. Plot out how to create or build an emergency fund
7. Create a list of things you can do for free 😉

FAMILY

1. Call or visit your parents
2. Call or visit another relative
3. Play with your children or grandchildren
4. Play with your niece, nephew, cousin, or other relative
5. Collect your family history from living relatives
6. Research your family history online
7. Compile the family history for future generations
8. Visit a family member’s grave site
9. Write your will

That’s almost a hundred things!

Admittedly, some things on this list require some cash — driving involves gas money, for example. But compared to an online shopping spree, most of these things will help you come out ahead on your balance sheet.

This list turned out to be a pretty accurate list of my interests and values. Further, many of these activities fall into that category of ‘things I really should be doing but never seem to have time for.’

Limiting the exercise to things that are free-ish allowed me to hone in on these things much more effectively than if I had simply listed one hundred things I enjoy doing. In that case there probably would have been a lot of things like go to the movies, which, while fun, isn’t as important to me.

2. No spend challenge

How can creative limitation help you with your no spend challenge?

Often, retail therapy is just a distraction from the important things in life. Intentionally creating limitations for yourself can cause you to be more purposeful. Reducing consumption is a great way to do that.

For this reason, I would encourage you to create your own list above and then try a no spend challenge. While your list may likely cover a lot of the same ground as mine or anyone else’s, it’s also likely that you’d come up with some ideas that reflect your own unique interests. My list, for example, is pretty heavy on artsy stuff and less heavy on, say, sports. That reveals a preference of mine that might not generalize to you or others.

My list also includes some things that suggest a certain cultural background — whittlin’, for example (yep, I actually did that as a kid . . . ). Your own list will similarly reflect your interests and experiences.

Now that you have your list, give yourself a no spend challenge.

1. Start small: pick one day a week, let’s say Sunday.
2. Set your creative limitation: “I will not spend money on Sunday.”
3. Use your list of free stuff to do that you created from above and leverage your new creative limitation to get you doing things other than spending money.
4. Don’t spend money on that day!
5. See how you feel at the end of the day. Did saving bring you any happiness that day?
6. Did you like the results? Repeat the following week. (Choosing a different day, as necessary).

3. Save the money that you didn’t spend

Take the money that you saved that day (that you would have normally spent) and set it aside. Start a “No spend challenge” free savings account or a piggy bank on your dresser. Don’t have a piggy bank? Use an old sauce jar instead and save the money that the piggy bank would have cost as your first deposit along with the money you saved from your no spend challenge day. Keep on doing a no spend challenge day here and there and see how the money adds up! After seeing the money, ask yourself, how you feel now? Did watching your saved money add up bring you happiness? Take it one step further and learn how to invest your savings.

In conclusion

If the idea of saving for a rainy day is just too droll, or if ‘anti consumerism’ gives you chilling visions of anarchistic soirées , then here’s another way to look at it: Every time you squirrel away some cash, you’re spending that money on your well-being and building your financial wellness. Money doesn’t buy happiness but saving money will. And using creative limitations and implementing a no spend challenge to get you back to your values can add real, lasting happiness to your life.

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References:

• Dunn, E., Aknin, L., Norton, M. (2008). Spending Money on Others Promotes Happiness. Science. Vol. 319, Issue 5870, pp. 1687-1688
• The Pew Charitable Trusts (2016). “The State of American Family Finances.”

Photo credits:

• All photographs licensed under Creative Commons Zero

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