Unexpected Effects of Poor Money Management
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Studies have shown a direct correlation between stress levels and health complications. When energy is spent combating stress, it weakens your immune system, which can lead to declining health and an overall lower quality of life. And the most common source of that stress? Money, according to a 2018 survey by Northwestern Mutual.
Forty-four percent of respondents said money was the dominant source of their stress, surpassing personal relationships at 25% and work at 18%.
Learning how to effectively manage your finances can bring down stress levels and improve your health, if you know where to start.
How poor money management affects your health
Those who bear the weight of financial burdens may neglect their health in an attempt to avoid spending money they don’t have; for example, they may put off doctor visits or not refill prescriptions if the cash is tight.
A 2018 American Psychological Association report, “Stress in America: Generation Z,” stated that nearly 64% of all adults reported money as a common source of stress, and 63% cited having health-related concerns. A whopping 81% of Gen Z adults said they’re stressed about money, and 75% were cited as being concerned about their health.
Financial stress can influence your appetite, mood, ability to focus and even increase your blood pressure. Continued high stress levels can also increase the risk of a heart attack, heart disease or stroke, according to The American Institute of Stress.
How poor money management can affect your job
Your health is not the only thing negatively affected by poor money management habits.
Your career can also suffer from stressors caused by mishandling your finances. People with unhealthy money habits tend to carry the stress stemming from their financial troubles into all aspects of their lives. Considering we spend about a third of our lives working, it’s easy to see how our financial burdens can bleed into our ability to perform well.
If unhealthy spending habits have put you in a place where you’re constantly preoccupied with how you’re going to pay the bills, your ability to focus on your job will suffer. Without taking action to overcome your economic troubles, you could be setting yourself up for poor job performance, possibly jeopardizing your career.
Even if you have the ability to compartmentalize financial stress and not let it affect your job, there are still ways that being irresponsible with your money can come back to haunt you on the job front.
For example, prospective employers may require applicants to undergo a background check for employment, which can often include looking into your credit history and other financial information.
If an employer sees that your credit report includes an excessive amount of negative marks or an overwhelming amount of debt, it can be interpreted that you are unorganized, unreliable or irresponsible. It can also appear that you lack the skills to manage your personal finances responsibly, and therefore should not be put into a position of power to make decisions that could have a negative impact on the company.
5 money management habits to break right now
The first way to disrupt the cycle of financial stress is to recognize any mistakes you are making. Getting your financial life in order will have a positive effect in every area of your life. These are the top 5 money management habits that you need to break if you want to regain control of your financial well-being:
Paying bills late
Late fees are expensive and late payments destroy your credit as payment history accounts for 35% of your credit score. Plus, that extra cash you’re forking over in late payments could be used to pay off debt or invest in your future. Poor credit scores lead to paying higher interest rates on future credit lines.
Spending money before you have it
Stop spending money you don’t have. For example, continually treating yourself to expensive dinners or clothing items on your credit card that you can’t pay off in full when the bill comes due could eventually put you over the edge if the balance gets out of control. Unless it’s an emergency, always avoid spending money you don’t have!
Paying bank fees
Bank fees, such as insufficient funds or overdraft fees for a checking account can cost, on average, $34-$38 for each occurrence. If you overdraft every month, that can add up to more than $400 by the end of the year.
One way to avoid overdraft fees is to link your savings account to your checking account. If the checking account gets overdrafted, then the bank will automatically pull money from your savings and avoid charging you an insufficient funds fee. But that only works if you have a savings account and contribute to it regularly. Open one today and start small, but be consistent. Just $10 a week will net you $40 a month, or almost $500 a year.
Conversely, just because you have the money to buy something doesn’t mean you should. Even if you’re not relying on credit cards, draining your bank account so you’re living from paycheck to paycheck will increase your stress as you will have nothing to fall back on in case of an emergency. Instead, try to distinguish your wants from your needs.
For example, you need to pay your rent or mortgage and buy food, but you don’t really need four pairs of running shoes. If you are fortunate enough to have some extra cash left over every paycheck, sock it away. And then, if you really need something, you won’t have to jeopardize your finances and can withdraw cash from your savings.
Having a financial safety net can do wonders in easing financial stress, even if it’s only a couple hundred dollars at first.
Taking out unnecessary loans
If you have to take out loans or use credit cards regularly just to cover your bills, you know you’re in trouble. By consistently using credit, you are also adding interest costs every month, which leads further into debt.
Take steps, such as visiting a nonprofit credit counselor, or drafting up a budget to get a clearer picture of what you owe versus what you are bringing in, to help you figure out what you need to do to get your finances under control.
You may find you need to get creative, such as taking on a second job for a while or renting out a room in your house, to eliminate debts. The silver lining is that once you buckle down, pay off your debts and have some savings to fall back on, that financial stress will lessen tremendously.
Once you begin to put an end to the vicious cycle of mismanaging your finances, you will quickly start to notice the positive effects of financial freedom.
Having your financial life in order will allow you to begin feeling more relaxed, focused and ultimately, less stressed out. These positive effects can carry over into the workplace, improve your health and ultimately lead to a better quality of life.