Financial stress is a very real concern for many adults—and especially so during an economic recession, and in a country where young adults carry the world’s highest student loan debt (and in increasingly debilitating amounts).

Though financial struggle may not seem like a very relevant “wellness” topic, it very much is.

Stress in general has significant negative effects on the body, including higher rates of chronic inflammation (which leads to all sorts of ailments, including heart disease, diabetes and certain forms of cancer), decreased immunity and ability to fight off or heal from illness, fatigue and trouble sleeping, reduced fertility, and mental health concerns like anxiety and depression.

Several studies have shown that economic hardship contributes to accelerated aging—meaning, reduced cognitive function and higher rates of inflammation throughout the body. And, recent polls (even those before COVID-19) have shown that most Americans are anxious about our finances. 😰

Types of financial stress

There are, of course, various types of economic hardship, some of which is outside of our personal control.

It’s important to note that systemic factors may limit an individual’s economic opportunity and contribute to financial stress. For example, we’ve talked previously about how racism affects health outcomes, and it certainly impacts education and job opportunities as well. And, a persistent gender pay gap means women are paid less than our male counterparts for the same work and qualifications. These are larger issues beyond this discussion of personal finance.

There is also collective economic hardship caused by other factors outside of our individual control, such as an economic recession.

And then there’s financial stress influenced by personal factors that are within our control—namely, our spending and savings habits, and how well we equip ourselves for the “rainy days” that may come along.

Though we can’t personally control all factors that contribute to financial well-being (like broader economies), we do have the ability to be financially literate and make the most of what we have to work with.

Financial stress & health coaching

I’m a health coach, not a financial advisor. But, I think this is an important topic to share here—not only because financial stress very much relates to overall health and well-being, but because this is a topic that doesn’t often get discussed outside of financial institutions or money blogs.

I’m sharing tips and stories from my personal experience precisely because I’m not “an expert.” These are real tips and resources I’ve personally used in my own life that have helped me to:

work jobs I love, while living in one of the country’s most expensive housing markets
pay off student loan debt quickly
save for retirement
spend money on experiences and items that bring me joy
stay out of personal debt

I’ll also link plenty of additional resources throughout this post, so you can learn more about these strategies from (real!) financial experts as well. 🤓

10 ways to improve your financial well-being

Here are ten ways to improve your financial well-being (and reduce financial stress!), for better health and well-being overall:

1. You can’t manage what you don’t measure

To effectively manage your finances, you have to know what you’re working with. This means accurately tracking every dollar you make and every dollar you spend.

There are plenty of tools for making this easy and streamlined. Personally, I like using Mint and connecting it to all my bank accounts, credit cards, investment accounts, etc. This automates all of your tracking (so you don’t have to remember to manually enter what you earn or spend), categorizes expenses so they can be tracked along your broader goals and budget items, and makes it easy to see your overall financial status and progress at a glance.

So, the very first step in improving financial “health” is to make sure you’re thoroughly tracking everything in and everything out.

2. Set financial goals

Most of us have some sort of financial goal—whether that’s getting out of debt, saving for something big like a special vacation or downpayment on a home, saving for retirement, or simply achieving a level of financial comfort where we don’t have the stress of living paycheck to paycheck.

Whatever your personal financial goals are (and there could be several!), it’s important to clarify what exactly they are and any specific timeline they’re needed by, so you can create a plan to get there. We’ll chat more about the “plan” in the next step, but the first part is to clarify the tangible goal:

How much do you need? What’s the total amount of debt you need to pay off? Or the estimated cost of the trip/wedding/etc. you’re saving for? Or the savings you’ll need to retire comfortably at the age you’d like to retire? (Here’s NerdWallet’s Retirement Calculator, a helpful tool!)
When do you need it by? Some financial goals are time-sensitive—a payment is due on a certain date, or you want to be in a new home by a certain year, or retire by a certain age.
What’s your method of getting there? Is this savings goal going to be met by scaling back your spending, scaling up your income, or a combination of both? What types of funds do you need—cash, retirement accounts, equity?

3. Make a budget

When I was a kid, my dad had a strict budget and I thought it was the worst! It meant I couldn’t have McDonald’s Happy Meals whenever I wanted (which, in retrospect, was probably a good thing!). But as much as I despised the limitations of his budget, I can now see how it had a purpose—it provided the savings needed to invest in things like my education (thanks!), and his early retirement.

When I was fresh out of college, living on a tiny AmeriCorps stipend, I started my own budget (primarily out of necessity, not my father’s advice 😅), and I’ve had one ever since. It has been essential at times. And it’s been helpful always.

There are many strategies for creating a budget, and different formats will work better for different people and situations. Here’s more info on how to choose the best budget system for you.

Whichever you choose, the underlying goal is learning to differentiate between wants and needs. The budget helps you earmark income for the places it’s intended to go—rather than spending it in places that don’t help you meet your goals.

So, again: you can’t manage what you don’t measure. If you don’t have a budget helping to outline where your funds should be going, it’s pretty hard to know where they’re needed and what to do with them when they’re burning a hole in your pocket.

4. Save an emergency fund

A large part of financial stress is caused by not having enough money to cover unexpected expenses that come up, or fearing that you won’t have enough to do so. It does give peace of mind to have a savings cushion you know you can rely on if needed—otherwise known as an emergency or rainy day fund.

Most financial experts recommend having 3-6 months of living expenses in your emergency fund.

However, because there are some other important places to save as well (like retirement accounts, which we’ll get to), overstuffing your emergency fund is not necessarily the goal here. It doesn’t need to account for all typical discretionary spending, like your gym membership or monthly shopping allowance—but it should cover housing (rent/mortgage payments), utility bills, food, and all the bare essentials you truly need each month.

For some people (like those of us living in expensive housing markets, sigh!), 3-6 months of living expenses is a substantial amount. And for many different reasons, saving that amount can feel out of reach. If that’s the case, it’s best to start with smaller, more manageable goals, like saving one month of living expenses, or whatever makes sense for your situation and needs.

If you have personal debt (e.g. credit cards, student loans, a car loan), it’s typically recommended to start with a smaller emergency fund, paying off all your debt, and then coming back to continue funding your full emergency fund. Dave Ramsey’s 7 Baby Steps suggests a $1,000 “starter emergency fund” for this purpose.

5. Avoid debt

There are some types of debt that are largely unavoidable to the average American—namely, student loans and mortgage debt. Very few 18-year-olds can front the cost of college tuition (an average of $30,500 annually for the 2019-2020 academic year). And, most new homeowners don’t have hundreds of thousands of dollars in cash, and thus depend on mortgage loans.

But other types of consumer debt, like credit card debt and car loans, are generally avoidable.

Wait, what did she just say about car loans?! Of course, with car loans, they may be the only option in certain situations—for example, limited savings and an immediate need for a new vehicle. But, car loans are also used for the purpose of driving a nicer car than one can afford to purchase. And, in doing that, said car owner ends up paying much more for the car than its actual value. 😬

Because cars are a depreciating asset, and their value decreases significantly the moment they’re driven off the lot (a brand new car loses about 10% of its value in the first month alone), they’re not considered a “good investment.” It’s not financially beneficial to enter into significant debt for assets that depreciate (like cars) rather than appreciate (like a house).

Based on the advice of my very-fiscally-responsible father, I bought my first car right out of college… with cash. (Well, a check, but you get it.) It was a used Honda Civic that I drove for 10 years. Sure, it was not the nicest or newest car I could’ve been driving all that time. But it was still a great car, super reliable, and the cost of ownership was incredibly low. Its first owner absorbed most of its depreciation. For 10 years, I had no car payment. And, I paid not one cent of interest on the car.

Given that the average cost of car ownership in the U.S. is about $700/month, my comically low cost of ownership allowed lots of breathing room in my monthly finances. So, if you’re on a tight budget or are trying to meet financial goals, it’s typically best to avoid car loans if you can. Here are some tips for buying a car without a car loan.

And, all of that said, there are some instances when it makes more sense to finance your car, even if you have the cash on hand to pay for it outright—here’s more on when to finance a car vs. when to pay cash.

So, putting student loans and mortgages aside, consumer debt is caused by purchasing things you can’t otherwise afford. And, in doing so, you end up paying more than the item was initially worth, and in some cases, getting stuck in the debilitating effect of accumulating interest. It’s not uncommon for people with credit card debt to repay more in interest than the amount initially borrowed. (Yikes!)

I have nothing against credit cards. Personally, I use them for all purchases I make, because of the cash-back perks they offer. However, I’ve never carried a balance on a credit card, and instead treat it like a debit card—I only get to spend what I have.

Though some financial experts disagree (Dave Ramsey says to cut up all of your credit cards and pay cash for everything so you feel the money leaving your wallet), I think credit cards are financially beneficial if you are 100% sure you will be able to pay the balance in full each month.

And, yes, it’s quite easy to justify over-spending with “Oh, I’ll find a way to pay this off / I think I’ll be getting a nice bonus check / I’ll just save more next month,” etc. But here’s the thing: most people knee-deep in credit card debt did not intend to get there. Entering into debt is a slippery slope that can spiral out of control quickly.

The point here is to live within our means and avoid consumer debt at all costs. If you’re not able to afford a discretionary purchase, that’s likely a sign you shouldn’t be making it. Credit cards may allow living above our means in the short term… but at a much greater cost down the road.

6. Pay off all debt

Okay, so avoiding debt is key! But if you already have it (and most American adults do 😔), the next step, of course, is to pay it off.

I mentioned I’ve never had a car loan or credit card debt. But I did have a student loan from grad school, which I paid back within a year of graduating.

Nothing fancy, I wasn’t making a giant salary at the time, but I had been accustomed to living on a budget as a student, so just stayed on it a bit longer in order to get my student debt out of the way. Even though I could have made small payments for 10 years, in paying it off quickly I saved thousands of dollars in interest over the lifetime of the loan. (And, for anyone wondering, not having that “good debt” longer didn’t harm my credit score—it helped it.)

I realize this is a bit of an unusual experience with debt repayment—but I share it to bring up the point that just because you’re required to make a certain minimum monthly payment doesn’t mean that’s all you can pay. It’s generally most beneficial to pay off debt as early as you’re able.

For more strategies on this, I’ll refer to Dave Ramsey—the guru of getting out of debt. He uses the “Debt Snowball Method” to prioritize debt repayment and has helped millions of people become debt-free and improve their financial health (yay!).

7. Invest (early!) in your retirement

As a millennial whose early- to mid-20s were spent as an AmeriCorps volunteer, grad student, and non-profit employee, it was pretty annoying to have my father aggressively reminding me to save money for retirement. Besides the fact that my early career was not particularly lucrative, most people starting their careers and financial independence are just trying to get our sea legs with that—we’re not ready to start thinking about retirement 40 years early.

But, the earlier you can start investing in retirement accounts, the better. It’s more helpful to invest smaller amounts of money sooner than it is to invest larger amounts later. That’s the “time value of money” good ol’ dad was always referring to!

There are a few different types of retirement accounts, each of which has different regulations and tax implications. Here’s an overview of the different types of retirement plans, and how to choose the best account(s) for your needs.

It’s a good idea, no matter how far away you think you are from retirement, to get a sense of what you’d need to save to live comfortably when you’re no longer working. This Retirement Calculator allows you to play around with numbers to get a sense of what you’d need to save monthly, what age you could retire at, etc.

Again, the more you can save as early as possible, the more that money will grow for you before retirement—which means you’ll actually be contributing less overall than you’d need to if you didn’t start saving until later.

8. Reduce or eliminate unnecessary expenses

Ah, this seems so simple, but it’s worth saying: One of the easiest ways to create more space in your monthly budget is to reduce or eliminate unnecessary expenses. Small, seemingly negligible expenses do add up over time and scale.

Some of the questions my husband and I have asked ourselves: Do we need all these different streaming platforms (Netflix, Hulu, Amazon Prime, YouTube Premium, etc.) or could we get rid of some? Do we really enjoy fancy dining that much, or could we stick to more casual, affordable restaurants for date nights? Are we actually using our yoga/meditation apps, or nah?

Some other common questions that might apply: Do you definitely need your nails/hair/etc. done professionally, or could you do them yourself until you reach your financial goal? Are you using your gym membership for what it’s worth, or could you get just as much out of at-home workouts? Do you have a spending plan for new clothing or those random Target shopping trips?

I really don’t believe in depriving ourselves of little luxuries we enjoy (more on that in the next two items!), but sometimes we have recurring expenses we kind of forgot about that, upon closer review, we don’t really use / need / or find much value in. And those are some simple ways to free up cash to put to other uses.

Here are 17 ways to save money by shopping smart, bundling services, canceling subscriptions, and more.

9. Get creative about income

Sometimes, our income minus our needs and wants doesn’t quite work out. The options here are to reduce expenses (whether fixed expenses like housing payments, memberships, etc. or variable discretionary expenses, like how much we choose to spend on new clothing or dining out)… or to increase income.

Reducing expenses is often a bit easier, especially if you have some existing unnecessary discretionary spending you could cut out, and/or if you work a job that doesn’t have variable income (i.e. you make a certain salary, and that’s that).

However, sometimes we really want (or perhaps need) those extra line items in the budget and it’s necessary to increase income to get there.

Even if you have a full-time job that you can’t directly increase your income from, there are other ways to make additional money on the side. Here’s a helpful list of 25 ways to make money online and offline. I also share resources for starting your own health coaching or wellness business (if that’s your thing), and over on Five Design Co. (my web design company), I share more tips and resources for growing online businesses—both side hustles and full-time gigs—in other industries as well.

Often, people assume their income is fixed (“I make what my job pays me, nothing I can do about that”). However, there are many ways to get creative and add additional income streams to your household if you’d like.

10. Cultivate a healthy money mindset

One of the most significant lessons I’ve personally learned about money is to cultivate a healthy money mindset.

Many people I know, including myself, were raised with or somehow developed unhealthy money mindsets—whether that’s a deficit mindset that there’s never enough (and therefore spending is innately a bad thing), or it’s an overly optimistic “everything will work out” mindset that leads to irresponsible spending and a small mountain of debt. Though these are opposite ends of the spectrum, they’re both unhealthy mindsets to frame financial management.

First, money and wealth are not fixed—there is much that can affect and change them over time. How you begin, or where you’re at now is not necessarily how you end. Some people grow up in poverty and later become multi-millionaires. Some people are born into wealth, make bad investments and end up broke. Those are extreme examples, but most of us do have many different ways of influencing our income and expenses, and it’s helpful to keep that in mind, rather than assuming that things must always be the way they currently are.

And secondly, we chatted through this in the section on debt, but trusting “it will all work out—I’m not sure how, but I have faith” is a lovely sentiment… but doesn’t tend to work out too well as a financial strategy.

A healthy money mindset involves respecting money: recognizing its power, its benefits, its risks, the responsibilities you have regarding it, etc. Yet that does not mean revering it (obsessing over wealth accumulation), nor fearing it (feeling guilty for earning or spending).

Over time, I’ve found that it’s possible to be financially responsible (e.g. stick to a budget, save, contribute to retirement plans) and also develop the flexibility to spend guilt-free on things you enjoy. Of course, the specifics of this will look different for different people with different income and expense levels, but the point is:

A healthy money mindset is a balance of responsibility & enjoyment.

With a healthy money mindset and an understanding of your household finances and financial goals, you can create a clear plan that allows the best combination of living well both now and in the future.