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In honor of Mental Health Awareness Month, we aim to emphasize the importance of financial balance in relation to our mental health. Jee-Woon Ha, our financial expert, will provide some tips on how we can achieve a healthy balance in our financial decision-making.

Q: How does financial balance play a role in our mental health?

Financial balance is crucial for overall well-being. Allocating most of your salary to immediate wants can lead to financial stress and a lack of savings. Conversely, saving most of your salary for the future without enjoying the present can also leave you feeling deprived. Striking a balance between responsible saving and reasonable indulgence ensures both present enjoyment and future financial security, promoting mental well-being.

Q: Where should we start when it comes to achieving a healthy balance in our finances?

At FLC, we advocate the importance of creating a financial plan. From speaking to my clients, their anxiety and stress are often centered around uncertainty. A plan acts as a roadmap, providing direction and actionable steps that are essential to reducing anxiety. Start by knowing where to begin, understanding the next steps, and having a clear vision of the desired outcome.

It helps to create a written spending plan aligned to your life goals and what you value most. This will empower you to be in control of your money. Assign a job for each dollar every month, dividing it into needs, wants, and savings. If you can, automate your savings by allocating a portion to different accounts for short, medium, and long-term goals. Paying yourself first also ensures you save money without emotional decision-making.

Finally, educate yourself about available options, as simple adjustments to your plan can save thousands of dollars and provide emotional relief. Understand the cards life has dealt you and learn the best ways to handle them.

Q: When creating a financial plan, how do you develop a healthy relationship with fulfilling your wants, but not overspending?

I think it is important to evaluate how you would like your money to serve you.

  • Review your shopping list and determine the necessities that will enhance your life satisfaction.
  • Learn to appreciate the things we already have rather than focusing on the things we don’t have.
  • Understand the emotions and feelings that surround your purchases.

I suggest managing your spending by having a fixed amount of cash that you withdraw each month and keep in an envelope labelled “shoes,” “make up” or “skincare.” Then, only spend the amount within that envelope. This is called the envelope method and is used to moderate our spending no matter how great the sale may be.

Another pro tip is to worry less about impressing others. When looking at studies of wealth and happiness, material purchases are some of the least fulfilling uses of money. Experiences and giving on the other hand, have been shown to provide more satisfaction. Refer to the Deserted Island Test:

Imagine you buy a car, but you can only drive it on a deserted island. No one can see or know that you have that car. Do you still want it? If the answer is yes, you are buying it for the right reasons. The purchase should simply be for your own joy, rather than impressing others.

Q: Aside from saving to reach our future goals, what else is there to consider putting our money aside for?

It is important not to neglect the significance of having an emergency fund. If you have dependants, make sure your emergency fund is higher. If you are single, it is safe to have a lower emergency fund. Various life events can take a toll on your mental well-being, but having proper insurance and liquid cash can provide great assurance and protection. A guideline is to keep 3-6 months of your expenses aside in a high interest savings account (HISA) or have a line of credit available. Currently, many HISA’s are offering 4%+ with zero risk!

Final Remarks

In conclusion, having balance in our financial decision-making is essential to our overall mental health. However, navigating the complexities of personal finance can be overwhelming, which is why seeking the guidance of a professional is highly beneficial. A Certified Financial Planner (CFP) can help you create a balanced plan tailored to your needs, while also alleviating the anxieties and pressures associated with managing your finances. Collaborating with a professional can help you understand the emotions surrounding your money habits and achieve a truly balanced and sustainable financial future. Consult with a Certified Financial Planner today and pave the way toward financial well-being and peace of mind.

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This article was written, designed and produced by Financial Literacy Counsel, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities.

Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.  Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.

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