The Connection Between Physical and Financial Health

It’s often thought that having money solves all problems and leads to happiness. While that’s not necessarily true, being financially secure can create a sense of well-being. Being able to afford essential expenses and have additional funds for vacations, outings or emergencies can create confidence and a sense of relief.

However, when you’re experiencing financial troubles, living paycheck-to-paycheck or have unforeseen expenses to cover, your health may also be impacted. Financial stressors have been found to directly correlate with poor physical and mental well-being. To manage your physical and mental wellness, it’s important to understand how your finances and health are interconnected, to identify strategies to help you create healthy fitness overall and, no less important, to navigate your health insurance and stay insured.

Struggling financially or physically can lead to feelings of stress, which can trigger many unhealthy habits that can quickly spiral out of control. Without the right relief strategies in place, a vicious cycle of financial and physical stressors manifesting and affecting one another can form. Creating a plan to properly address your overall well-being can help you understand how this cycle works and how financial stress and physical unfitness are interconnected.

Your financial health refers to the state of your finances, such as how much savings you have, how much you have in retirement funds, how much debt you owe and how much your expenses are compared to your income.

Determining if your financial health is in good shape is essential for a number of reasons. Not only can it help you figure out if you’re on track to reach financial goals, but it can also impact how well you can handle problems in the future.

Health insurance is a great way to ensure your finances will stay intact in case the unimaginable happens. A health insurance policy can cover a part of or all your medical or surgical expenses, which can give you peace of mind that you are protected from unexpected, high medical costs.

Aside from this, health insurance plans also come with preventative care, which can let you get vaccines, have screenings or schedule checkups. By keeping track of your health and prioritizing your physical well-being, you can reduce healthcare costs over time.

Financial fitness refers to living a financially responsible life. This means making wise decisions when it comes to spending, saving and even owing money. By being financially fit, you can reduce your stress and worries — which often leads to a well-balanced life and better overall health.

However, financial fitness does not come easy. In order to become more financially stable, you need to practice certain money habits and broaden your knowledge. Below are a few ways you can start.

Budgeting is one of the first, and often the easiest, steps to becoming financially fit. This involves monitoring your income and putting a limit on certain expenses in order to accomplish long-term financial goals.

For instance, by establishing a budget, you can ensure you don’t spend too much on take out or unnecessary purchases. This means only dedicating a certain amount to your “fun money” or adding more to paying back debt by reducing costs elsewhere.

Debt can harm your health in more ways than one. Typically, debt can cause a tremendous amount of stress which can affect your physical and emotional well-being. This can lead to a domino effect of issues, all of which could have been solved if there was no debt in the first place.

Fortunately, there are many strategies to reduce and eliminate debt. This includes paying more than the minimum, consolidating debt to get a lower interest rate or getting a balance transfer credit card.

Having a safety net, also known as an emergency fund, is a good way to ensure your future self has a plan in case life changes or a crisis arises. This can give you peace of mind in case you lose your income or face an emergency.

Keep in mind that when building an emergency fund, you should have enough to cover three to six months worth of expenses.

Long-term financial health depends on a strong credit history and score. For instance, your credit score can affect what types of homes you can rent, if you can qualify for certain discounts and what types of loans and lines of credit you have access to.

Be sure to pay all your bills on time, keep your credit accounts thin and limit how much you use your credit cards. By doing so, you can qualify for long-term loans with favorable interest rates, which will save you a lot of money in the long run.

Being financially fit means looking for ways to generate passive income. For some, it's starting a business, promoting products for a commission or investing. Regardless, it’s important to find ways to make money work for you, including through compounding interest.

Over time, your financial health will rise and fall as you encounter changes in your needs and goals. This is why it’s important to regularly review your financial health in context of your current situation — even if you’ve made a plan before. If you do not analyze your financial wellness every now and then, you could end up making decisions based on outdated information.

To make the most out of your money and ensure it supports your goals, you need to regularly check in and review your finances.

The first thing you need to do in order to assess your financial health is to determine your net worth. This is a very quick and easy way to determine your financial situation and it is calculated by taking your assets and subtracting your liabilities.

It can be useful to calculate your net worth once, but it is most valuable if it is done at least once a year. This way, you can evaluate your progress and identify areas that need help over the years.

Your debt-to-income ratio is often calculated by lenders in order to determine your borrowing risk, but you can calculate it as well to find out how much debt you have against your income. In order to calculate your debt-to-income ratio, divide the amount you pay towards all types of debt each month by your monthly gross income.

For instance, if you owe $100 on your credit card, $250 on your car each month and $1,000 on your mortgage, but you only make $1,500 a month, your debt-to-income ratio would be 90% ($1,350/$1,500 = .90 or 90%).

After finding out your net worth and DTI, ask yourself what you’re aiming for, even if you’ve already done it before. Are you still trying to pursue higher education? Do you want to buy a house in four or five years? It can be easy to change your goals over time, especially as your circumstances change, but making the adjustments finance-wise can be quickly forgotten in the fray.

Use a budget to figure out where your money is going. This can tell you where you’re spending too much or too little and can let you allocate more funds towards addressing debt or reaching your financial goals. Being aware of where every dollar goes can be overwhelming at first, but once you get a good grasp of it, whether by using an application or writing it down in your notes, you can eventually figure out where you can do better.

As your income grows, your lifestyle will too. While budgeting can help you determine where your money goes, it takes a little more discipline to separate wants from needs and make better overall spending choices. For instance, a car can be considered a need for work or school, but it can be easy to justify purchasing a luxury SUV that costs more than a practical car.

Instead of thinking about what you can spend on, focus on what you should be doing to improve your financial health and habits. Taking care of your finances today will allow you to pay off debt, make savings and improve your financial situation in the future.

Next to your financial well-being, your physical health matters just as much. After all, being physically fit can help you reduce any stress and anxiety towards any type of problem. This, in turn, gives you a clearer mind to tackle any challenges.

If you are struggling to balance both your financial and physical health — from students to older adults looking to retire — know that there are many resources available to assist you. There are a multitude of organizations and tools that can help you manage your finances better, so you can focus on your physical fitness.

• Broker Check: Verify whether investment professionals and firms are licensed with FINRA's free online tool. Whenever beginning or continuing to do business with a particular person or company, this should be the first resource you consult.
• Clearpoint: As part of Money Management International, Clearpoint is a nonprofit organization dedicated to identifying the causes of financial concerns and finding solutions. Through their free credit counseling service, they aim to teach people to manage their money better through budgeting, understanding credit, setting financial goals, prioritizing debt repayment and making informed financial decisions.
• Investor.gov: If you’re just starting out saving using a high-yield savings account or similar, use this calculator from Investor.gov to find out the amount you should contribute to accomplish a specific goal each month.
• National Foundation for Credit Counseling: As the nation's largest nonprofit financial counseling organization, NFCC offers a wide range of services including budgeting and debt management. The organization helps people reach their financial goals and provides them with resources if they are unable to pay.
• Operation Hope: Through education, Operation Hope empowers underserved communities. By providing financial tools, they help individuals and communities become financially independent. Their programs include credit and money management, small business development, financial literacy and disaster recovery.
• Take Charge America: Take Charge America's goal is to help people around the country improve their financial situation. They offer free services on financial education, credit counseling, debt management, pre-bankruptcy counseling and even housing counseling.

• MoneyThink: Students across the country can get financial coaching from MoneyThink. Students learn about saving, budgeting and the importance of financial planning through MoneyThink, which has received resources from financial institutions, corporations and foundations.
• Net Price Calculator Center: The Net Price Calculator Center is a site by the U.S. Department of Education which allows students to find the Net Price Calculator of a college or university. This lets them find out how much students like them have paid to attend the institution after grants and scholarship aids and can give them an idea of how much they need to save.
• Student Aid: Using Student Aid’s Loan Simulator, students can calculate their loan payments and choose a repayment option that is best for their needs. This is a great way to reduce or consolidate debt.

• American Association of Retired Persons: Calculate your net worth and see how it changes over time using this calculator from the AARP.
• Social Security Administration: Based on your actual Social Security earnings record, the SSA has a Retirement Estimator that calculates your benefit amount. Note that these are simply estimates, but they are a good place to start to determine what you’ll need for retirement.