How Saving Money Safeguards Your Mental Health

Our mental health is undoubtedly affected by the state of our lives. When our finances decline — which greatly impacts our ability to enjoy and move about the world — it’s no surprise that it can take a mental toll.

However, mental health isn’t a one-way street. When we’re not feeling mentally well, our financial situation can start to crumble. Understanding the interconnectedness of these two aspects of our lives is key to living happier, healthier futures.

In this article, we’ll explore the relationship between money and mental health, then offer ideas to help you improve your finances and safeguard your mental health.

The Link Between Financial and Mental Health

For the many people around the world who struggle with finances, the impact of money on mental health is clear. When you find yourself in a less-than-desirable financial situation, you can be faced with feelings of stress, anxiousness, depression, and more — especially if you’re living paycheck to paycheck or have a dependent in your care. Plus, even small non-essential purchases can lead to feelings of guilt.

While therapy is becoming more accessible for people struggling with finances, money still remains a barrier to mental health treatment. Unfortunately, when people don’t actively take care of their mental health — whether through professional treatment or consistent self-care routines — their mental illness can cause their financial health to deteriorate. This is where the other side of the financial and mental health relationship comes in.

Illnesses like depression can take away your motivation to work, budget, and make smart financial choices (like cooking at home versus ordering in). Other conditions, like mania or addictions, can lead to poor purchase decisions and increased debt. This can continue the cycle of declining mental and financial health.

How to Start Improving Your Finances

On a positive note, taking action to improve your financial situation and mental health can help you break the cycle with greater ease. While mental illnesses can take time to combat, a great place to start is getting your finances under control and making the most of your income. Here’s how you can do so.

1. Create a Budget

Spending within your means is key to alleviating your financial struggles. With a budget, you can set guidelines for your spending and reduce impulse buys. Rather than spending freely with no consideration of your actual income, you can put a halt to overspending and ensure you’re putting a little of each paycheck toward your financial goals.

2. Maintain an Emergency Fund

Researchers from Prosperity Now, an economic advocacy group, have found that 40% of Americans are a single missed paycheck away from poverty. If you want to safeguard your finances and your mental health, you need an emergency fund to keep you afloat in the face of unemployment, medical bills, car repairs, and other unexpected costs. Start building your fund by setting aside money within your budget. Then, avoid dipping into these savings unless you’re truly facing an emergency.

3. Invest Your Cash

If you want to multiply your earnings, investing can be a great financial strategy if used wisely. While some forms of investing can be risky — which can heighten your anxiety, but offer large returns — others, like diversified retirement profiles and certificates of deposit, can help people with low risk tolerance and low budgets improve their financial situation. Setting goals and a sustainable investing budget, which shouldn’t take away from your savings or essential payments, is key to secure investing.

Safeguard Your Mental Health

Mental wellness and financial health are strongly interlinked. If you want to avoid declines in mental health, you need to take steps to control your spending, maintain your savings, and invest your extra cash to fight inflation. At the same time, taking steps to combat existing mental illnesses is crucial for maintaining your motivation and ability to make strong financial decisions.

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