Financial Health

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BY: Troy Murphy |August 2018
Our finances are not independent of our well-being. Insufficient means to live disrupts security.
Traditionally, finances are conveniently separated from well-being guidance. This is a travesty. Financial health impacts our quality of life in many important ways. Riches can’t buy happiness; but insufficient means to cover needs creates anxiety and too much anxiety destroys happiness. So, while we are delving into the psyche to discover happiness, we should also make a side journey into our wallets. BY putting finances in order, we free ourselves of the pains of lack, and can better concentrate on living that happy life we desire.
 
Several studies have shown a correlation between money and happiness with a diminishing return. This means that up to a point happiness and wealth grow together but eventually riches reach saturation where riches have less and less impact on happiness. I suppose as riches accumulate they extract a heavier and heavier demand on our time, interfering with relationships and other factors that impact happiness. We can have sufficient money and be sad or poor and be happy. The studies simply state that increased money, up to a point, have a positive impact on our over-all well-being.
 
While financial struggles can stand apart from other aspects of our lives, often the same character traits that disrupt financial stability rudely butt their way into other sacred areas of or lives, bothering relationships, employment, while inviting addictions into our already fragile life.

"Financial health impacts our quality of life in many important ways. Riches can’t buy happiness; but insufficient means to cover needs creates anxiety and too much anxiety destroys happiness. "
Long introduction made short, Finances aren’t everything, but they are something. Struggling to pay rent, growing levels of debt, and an uninviting credit rating, play out in our psychic lives through anxiety—and anxiety conflicts with happiness. Like other irritants, we can adapt with unhealthy responses, ignoring the root of the problem—our financial statements are ugly.
 
Distressed finances need purposeful attention like any other detrimental features of our lives. We must recognize the problem and respond effectively. Generally, acknowledging that our finances are chaotic and silently committing to do better will not cure the ills. Even the best intentions fail when shroud in vagueness. There is too much room to fudge resolves, lack of measurement, and denial of the underlying causes.
 
My financial life changed with a simple excel document to measure the monthly and annual pulse of my accounts. The ignorant evaluation (mentally) from reading monthly statements and guessing upcoming expenses is always subject to misleading optimism, seeing improvement where there is none. Like a gambler sitting at the table, calculating a near miss, as something positive, enforcing further bets on a losing game. Accounting isn’t a science of guessing. Accounting is governed by generally accepted principles that allows for beneficial comparisons.  In our personal finances this means comparing January balance to February balances to gather helpful information, seeing past the natural fluctuations that disguise the actual patterns afflicting our stability.
America is drowning in dept. Consumer debt has reached all time highs. Something must give. Eventually, the rising weight of burdensome interest will catch up to the weary spender. Credit cards, Amazon, and smartphones have simplified spending. We can buy ourselves into oblivion without ever leaving the sofa. The ease of spending must be countered with increased self-discipline, which, unfortunately, many of us have forgotten to bring to the party.
 
Credit is the nasty philosophy of enjoy now pay later. The same concept that can break relationships commitments, eat unhealthy, or postpone professional development. We buy because we want without thought of the impact. The momentary joy of something new blunts the impeding doom slowly creeping into our lives.
After reading dozens of articles over the last few years, listing the basics for financial stability, I have found that finances, unlike suggestions for mental health, has a great amount of consistency. Here is a short list of bench marks to set the beginner on a course of freedom:

  1. Pay down those credit cards:  Paying ridiculously high interest to give our money to retailers is stupid. By paying minimum balances, we may double or triple the cost of those new tires. We will never emerge from financial crisis spending twice as much for goods and services as those who have mastered the use of credit. Credit limits seen as an asset eventually pounces on its unsuspecting prey. Once conquered, our credit card spending becomes a blessing, paying rewards, and never costing a penny.
  2. Start an Emergency Fund:  An emergency fund allows for flexibility with cash that too many have delegated to the credit cards. Tight budgets do not allow for the additional expense of car repairs, broken water heaters, or an emergency trip out of town. Having an emergency fund available for these common but unplanned expenses releases the burden of an occasional slap to credit card balances. Pay for the expense with your credit card, earn the reward, and then pay off the credit card with your fund.
  3. Eliminate unnecessary expenses: Some of the most nagging expenses are the unseen little jabs to our budget. I watch some co-workers routinely eat both breakfast and lunch out, not to mention the drive through morning caramel latte. These repeating expenses add to hundreds a month—before adding the interest charges. Eating out can wreck almost any budget. While budgets are helpful, they don’t work for everyone. I’m one of those people. I keep credit card balance within an acceptable limit that I am can pay off at the end of the month without dipping into my savings. I structure my life around those limits. We should periodically review checking and credit card statements in detail, evaluating spending practices, and make changes.
  4. Take advantage of Employer 401k matched contributions: This is free money that will grow exponentially over the years. Missing the early critical years of investing will painfully be extracted from your life in extra years of work. Grab that free money and invest in an aggressive mutual fund, slowly moving to something more secure as you close in on retirement.
 
A few disciplined years and your expendable income quickly surpasses those burdened with ungodly interest rates. We can then make educated choices on using our surpluses to increase savings, finding investments, or upgrade our lifestyle. We achieved freedom, escaped binding anxiety, and now can enjoy the happiness reward of healthy finances.
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