Money is the No. 1 stressor in America today. Meanwhile, 92% of employees are stressed about their finances.
With financial wellness and mental health closely linked, it’s no surprise that most of us include items like “become debt-free” or “make more money” on our New Year’s resolutions list. Without the proper planning, knowledge or tools, however, financial wellness won’t become a reality; it falls off the to-do list, and reinforces the cycle of stress and anxiety many Americans live in.
The good news: Struggling with money isn’t who you are. It’s a result of your wiring and how you were taught—which means change is possible. First, I’ll explain what I mean by this. Then, I’ll share three tips you can use to succeed in your New Year’s planning and move “financial success” out of the eternal bucket list, and into reality.
Why It’s So Hard To Break Bad Financial Habits
When you make a purchase, your brain gets a “hit” of feel-good neurotransmitters and hormones, such as dopamine, reinforcing the fact that buying feels good. This is what often keeps people in the same looping pattern of overspending, and why it can feel so hard to change this habit.
In addition to your brain’s dopamine hit, we live in a society that encourages consumerism. The U.S. is the world’s largest consumer market. According to Common Objective, citing 2016 worldwide fashion consumer statistics from Euromonitor International, “Although China as a country has the largest amount of purchases due to its large population, an average individual consumer in China spends just under a quarter of the amount than an average US consumer – and buys 23 fewer items per year.”
Businesses have become masters at the art of marketing and sales. It seems like they always know how to say the right thing to get you to one-click buy, again and again.
Putting aside any judgment of whether capitalism is good or bad, remember this: If you want to change your spending habits, but find change difficult, that’s because it is!
Three Ways To Improve Your Financial Wellness
So, how do you stop spending (or spend less) when both your brain and the world around you promote and encourage that behavior?
A little bit of elbow grease: In the same way your brain “learned” to associate spending with feel-good emotions, you can unlearn this pattern.
Here are three strategies you can put to the test this year, and take actionable steps toward financial wellness.
1. When You Spend, Do It Mindfully
Spending often gets out of hand when people are not tracking their finances. But checking your bank account every week can get tiresome. So, come January, don’t plan to do this. Why? Traditional line-by-line strict budgeting is really hard to stick to: 84% of people exceed their budget. I don’t want to set you up to fail.
If you suspect you’re “allergic” to budgeting, here’s a different strategy to try: Pick one number. Just one. Instead of creating multiple categories with different spending brackets, set one number you can afford as your budget after you have covered your must-pay items (such as housing, insurance, food, etc.)—and stick to it like glue. For example, you could allot $500 per month for nonessential items. A single number like this is much easier to remember, and you’re more likely to catch it when you’re going over.
2. Focus On Your Payment Plan, Not Your Debt
The average American spends 9.8% of their income on paying off debt. Between mortgages, credit cards and student loans, debt is a mountain the majority of us must climb.
There are many sages who repeat (more or less) this same message: When climbing a mountain, you don’t start from the top; you climb from the bottom, one step at a time. So, don’t think about the mountain; just take the steps.
Instead of thinking about your total debt and feeling discouraged by the mountain in front of you, focus on your monthly payments. This makes your debt feel more manageable, which also tends to improve your ability to feel in control of your financial situation, and empowers you to take more steps toward financial wellness.
3. Don’t Just Save; Invest
This tip is especially important when it comes to accounts with tax benefits, such as 401(k) plans or IRAs. Consider keeping your emergency and immediate-need savings in a high-interest savings account. The rest? Instead of allowing your cash to sit in “storage” forever, sustainable investing allows your money to grow over time. (This is also key since time and interest are often the top two factors that influence wealth buildup.)
Investing gets a bad reputation, especially among women. The irony? Women tend to be more successful investors than men. A common misconception most people (women included) have is that investing involves an “eat-risk-for-breakfast approach.” But this is neither sustainable, nor financially responsible.
Whatever You Do, Don’t Avoid The Problem
If you create a New Year’s resolution list in January and close your eyes to the problem by February, nothing will ever change. Finance can be a tough and complex subject for many, but if you’re open to change, you can find free and paid resources to get your finances back on track and make financial wellness a reality for you in 2024.
So, this January, give it a try. Ditch the old, strict budgeting habits that often don’t work. Or do a Google search for things like “how to invest for the first time” and “how to create a conservative, well-balanced portfolio”—and watch your money grow. Happy earning.