How Does Your Income Determine Your Well-Being?

In a perfect world, money would not be the key to happiness. However, your income can play a huge part in your quality of life. Money, or the lack thereof, can harm your mental, emotional, and physical well-being, as well as the way that we see ourselves in society.

The Link Between Income and Mental Health

Having enough money means that people are able to access basic human necessities like food, shelter, healthcare, and education ^[1]. It would be safe to say that our incomes are more than just numbers in our bank accounts. Not having enough money limits access to basic needs.

Basic Needs and Security

When basic needs are met, there is no reason to worry about having housing or food. Yet, wondering if you can pay the rent or not knowing how you will afford your next meal can cause even the strongest of people to experience chronic anxiety.

Opportunities and Social Mobility

The higher the income, the more access people have to education, personal development, and leisure activities. All of these provide positive additions to people’s lives, giving a sense of achievement and purpose. Ultimately, more money often means more opportunities.

Social Comparisons

Unfortunately, due to wealth gaps in many communities, those who do not earn enough money can become plagued with feelings of jealousy or even inadequacy, which can have a profound effect on self-esteem.

In essence, money–and having enough of it–can make or break us as human beings. This is especially true when those who earn more money have more access to resources and support systems than those in lower income brackets.

The Impact of Debt on Mental Health

Sadly, debt is a reality for many people, and its psychological effects can be debilitating. A small amount of debt is normal for most, but sometimes, large amounts of multiple types of debt can have a negative impact on your mental health ^[2].

Types of Debt and Their Effects

Not only do financial challenges affect credit scores, but they can also be the leading cause of depression, substance abuse, or even suicidal thoughts in many instances. Let’s take a look at some examples:

• Student Loans: Student loans are often seen as an investment in your future ^[3]. This is why so many students are willing to take on large amounts of debt to fund their studies. The problem is, in many cases, students are left with the responsibility of repaying their student loans and still covering their daily expenses. This can be difficult, as often their entry-level salaries are not enough to cover their debt.
• Credit Card Debt: The high interest rates on credit card loans can create the feeling of being stuck in a financial hole. The higher the repayments on credit card bills, the higher the compounding interest can be. Eventually, this can become a never-ending cycle that has a huge impact on emotional and mental well-being.
• Mortgages: Paying off a mortgage is a huge responsibility and can become daunting, particularly during economic downturns or instances of job instability. It is important to note that while a home can be one of your most valuable assets, it doesn’t officially belong to you until you have paid off your mortgage ^[4].

It is crucial to have some basic financial knowledge to try and overcome financial issues and break free from the never-ending cycle of debt. Financial literacy better equips people to handle their money and create payment plans in order to enjoy the basic things in life.

The Psychological Effects of Job Insecurity

Often, worries about career futures are caused by the state of the economy, company downsizing, or decreased work performance. No matter how stable a career seems, the thought of losing it can cause a significant amount of stress and anxiety.

The Emotional Toll of Job Insecurity

• Continuously worrying about losing a job and having no income can affect concentration and decision-making skills. In turn, this can affect productivity at work.
• People may begin to question their abilities and their worth if they do not feel secure in their jobs.
• Without money to spare, people tend to avoid taking risks or making huge commitments that can affect their bank account. In turn, this can affect life satisfaction and experiences.

Job insecurity and not having enough income can have a ripple effect, which causes tension and conflict in many households. In fact, money problems are leading causes of family problems and divorce ^[5].

Can Financial Stress Cause Physical Health Problems?

While financial stress is known to be a contributing risk factor to heightened stress and a variety of mental health issues, it can also have an adverse effect on an individual’s physical health. The reason for this is that the mind and body are interconnected, and chronic stress has a way of leading to other physical ailments.

Common Physical Health Issues Linked to Financial Stress

• Sleep disorders: Financial worries can cause insomnia or bouts of restless sleep. This negatively affects energy levels and cognitive functioning.
• Cardiovascular conditions: Chronic stress can increase blood pressure, and hypertension (high blood pressure) is a leading cause of cardiovascular disease.
• Weakened immune system: Chronic stress can also increase susceptibility to illnesses when the body remains in a constant state of anxiety and worry.
• Digestive problems: Digestive issues can be caused by overeating or undereating, each of which can occur in response to physical or mental stress. Irritable bowel syndrome is one example of how stress can affect the digestive system.

Financial problems can also cause people to turn to unhealthy coping mechanisms, such as smoking, alcohol, and substance abuse, which can further add to health problems, both mental and physical ^[6].

How to Cope with Financial Stress

Learning some healthy coping strategies can help to relieve the mental burden of financial stress, which can, in turn, improve overall well-being. Financial stress can be overwhelming, but there are ways to manage it effectively:

1. Build a Budget

Keeping track of income and expenses helps you know where money is spent. Creating a budget is the first step to taking financial control and improving related mental health. This reveals areas to cut back on expenses and other areas where additional funds are needed. It also helps put more funds into savings ^[7].

2. Improve Financial Literacy

Improving your financial literacy helps you make informed decisions about how money is spent. There are many financial concepts to be learned in the world of money. Many free online resources or community workshops can provide education about debt management, budgeting, and saving.

3. Look After Yourself

Remember that exercise releases endorphins, and being mindful helps calm a racing mind. Following a healthy diet, engaging in regular exercise, and taking part in things you enjoy will help reduce stress.

4. Look for Social Support

In specific situations, sharing financial concerns with people that you trust, like close mentors, friends, or family, may help provide encouragement and promote accountability. It has been advised to never share information about financial situations with others, but sometimes a strong support system can provide emotional relief.

5. Use Community Resources

Many communities offer people facing financial challenges, like food banks, job placement programs, and financial counseling.

6. Practice Gratitude

Consider writing down what you are grateful for in a journal to help promote positivity, even during tough times. Studies have shown that shifting one’s mindset to focus on gratitude will help express thought patterns and improve one’s mental outlook.

Breaking the Cycle: Improving Financial and Mental Health

Mental health and financial situations go hand in hand. This makes it ineffective to address one without the other.

Steps to Break the Cycle

1. Set realistic goals: An example of this could be to concentrate on and pay off specific debt or save a certain amount of money every month. Consider financial goals and break them down into small steps that are more manageable.
2. Adopt coping mechanisms: Find personal ways to help manage stress and develop healthy coping mechanisms.
3. Get professional help: Therapists can also help overcome the emotional toll of financial stress. In addition, a financial advisor can help create a realistic plan to improve financial situations.
4. Addressing inequality: Governments, organizations, and individuals need to implement and support initiatives, such as fair wages and access to education. Everyone has a role to play in inequality.
5. Financial literacy programs: Financial literacy programs address systemic issues and improve collective well-being. These programs help to create a more equitable society.

There are several financial organizations and mental-health organizations that offer affordable, sometimes even free, financial counseling services. It may be time to look for professional support if financial challenges start to interfere with your daily life, physical health, and relationships.

Final Thoughts

By focusing on the things that really matter, it is possible to overcome financial challenges while creating a path to a brighter and better future. Money does not define worth or potential, but it does have undeniable influences on mental health and well-being.