Each aspect of your life plays a critical role in your health, well-being and overall quality of life. When just one aspect is ignored, it’s impossible to create a healthy and balanced lifestyle that positively impacts your mental, physical and emotional health.

This image helps us visualize each aspect of life — with your health and well-being at the center. When you step back and take a holistic approach, you can begin to see how all of the different elements impact what your current life looks like and which aspects you’ve been ignoring.

Our goal is to help you better understand the role that your financial life plays in this equation and how to improve the impact it has on your ability to create the life you want to live.

This requires a similar type of holistic approach. To ensure that your financial life is positively impacting your overall well-being and quality of life, you need to make sure that all of its components are working together to get, and keep, you on the path toward financial success. A financially-fit lifestyle will reduce stress and increase your confidence in making successful financial decisions.

The health risks of ignoring your financial life

It’s no secret that money problems can be very stressful — especially when there’s not enough of it or you’re afraid there won’t be enough in the future. This fear and stress can then often cause feelings of helplessness and hopelessness — making it easier for us to just pretend the problems aren’t there, rather than tackle them head on.

But ignoring the problems doesn’t make them go away. In fact, it often increases the stress, which begins to have a negative impact on our health. And the hormones released by this type of chronic stress — stress you deal with day after day, week after week — can wreak havoc on your body.

“It’s a kind of never-ending, seemingly endless loop of problems that gets created if the person doesn’t deal with the dilemma,” says Nancy Molitor, PhD, a clinical psychologist and Assistant Professor of Psychiatry and Behavioral Health at Northwestern University Feinberg School of Medicine. That type of prolonged chronic stress response is associated with developing health problems, like obesity, type 2 diabetes, stomach ulcers and cardiac problems.

“And uniquely, chronic stress about money seems to activate that [fight-or-flight response] system at a very high level,” says Molitor. “That means more hormones get released that cause more damage to the body.”

The psychology of money

No one is entirely rational when it comes to money. We don’t follow a budget or spending plan when we know it’s in our best interest. We spend more than we can afford, out of recklessness, guilt or some other reason. As a result, our money behavior often causes shame, which easily creates a vicious cycle.

Money is something we all have a complex relationship with, and your personal finances aren’t a fixed entity – your money is a complex combination of numbers, challenges and opportunities you interact with and have feelings about. You make decisions about money that impact your financial situation — and in turn, these choices affect your feelings and future behaviors. This relationship is something that has evolved over your entire life and will continue to evolve in the future. And the good news is that you can change what this relationship looks like and the impact it has on your overall well-being and quality of life.

Here are a few things to understand and consider when it comes to the psychology of money and your relationship with your personal finances:

• Emotion plays a huge role in your relationship with money.

  • Very often involving fear, guilt, shame and envy — and these emotions tend to override our ability to make rational decisions.

  • Common shameful feelings/thoughts:

    • I don’t have enough money; I’ll never have enough money.

    • I’ve avoided thinking about my financial situation and/or how to improve it.

    • I’ve avoided doing what I’m supposed to do about finances (creating a safety net, planning for retirement, sensible budgeting).

    • I don’t know anything about money.

    • I spend too much.

    • I buy stuff when I’m unhappy.

• Anxiety and avoidance create a vicious cycle.

• Psychologically, you can’t entirely escape your family and your past.

  • Things/beliefs that may have been instilled in you at an early age: What can be talked about, who should be in control, what money responsibilities are assigned to what gender, how important money is or is not, how much money there should be, money is good or evil etc.

When you consider all of the factors that impact your relationship with money, you can begin to change how you interact with and use your money to improve your life.

What is financial wellness?

Overcoming money problems may not be easy, but it is possible — and that is the type of mindset you need to begin to develop if you want to change your current situation. This is where financial wellness comes in — an approach to money that helps you create the mindset, confidence and lifestyle you need to create the life and future you want.

Financial wellness is a constantly evolving state of well-being in which all aspects of your financial life are positively working together to maintain and improve your overall quality of life. It is not one destination; it’s a lifestyle — one that offers financial security and stability, freedom of choice, and the ability to live the life you want.

Achieving financial wellness involves learning how to successfully manage each aspect of your financial life all at the same time. The way you get there is by tackling each area one step at a time, so it doesn’t become too overwhelming. This process doesn’t happen overnight — it requires a commitment. And if you stick to it, you will be able to change your habits and behaviors in order to create the life you want both now and down the road.

Steps to achieving financial wellness

Understanding your money story

This is the first step to getting on the path toward financial wellness. Most people don’t realize that there’s something in the back of their mind controlling what their financial life looks like and their ability to get what they want — this is called your money story. Your money story is made up of the beliefs and thoughts that psychologically impact your financial decisions and behaviors.

So before you can get on the path toward achieving a positive state of financial wellness, you need to better understand how your relationship with money was formed and how it’s currently impacting your life. Think about the lens through which you see life — a lot of things have shaped the way you see and experience the world — your childhood, parents, family, friends, relationships, marriage, divorce, tv, movies, advertisements and other life experiences. These same experiences also impact your relationship with money and overall financial life and well-being. During childhood, you probably heard some version of “we can’t afford it” or “money doesn’t grow on trees” or “do you think I’m made of money?” Phrases like this, along with other experiences, have contributed to your money story and your mindset around the almighty dollar. 

This mindset has played a role in your financial habits, choices and overall lifestyle your entire life — likely without you even realizing it. For example, if you grew up in an environment where there was never enough money, you might believe that you don’t deserve to get what you want or constantly fear that there will never be enough money to create the life you want to live. This belief then impacts how you interact with and use money, and whether you see it as a positive or negative part of life. It affects the jobs you get, the things you buy, your ability to “have enough” and your ability to use money to improve your life.

If you’ve never thought about this, that’s OK! Most people haven’t. The best part is, you are capable of changing this story you tell yourself on a daily basis — and the impact it has on your life. Once you better understand your mindset about money and how it was formed, you can begin to reshape your thoughts and start developing better habits.

• Think about the way that money makes you feel on a daily basis — what stresses you out the most and how does that stress manifest itself in your life?

• What is your earliest memory of money? How do you think it impacted your mindset?

• What kind of environment did you grow up in? Was there a lack or abundance of money?

• What fears do you have that are associated with money?

• What are some positive and/or negative thoughts you have about money and your ability to get what you want in life?

• Think back through your life experiences and consider how they could have shaped these thoughts you continue to carry around with you. If a friend told you these same thoughts, how would you respond?

• Write all of this down to start to get a better idea of what your relationship with money looks like and how you want it to change.

• Create a list of thoughts or anything else you want to change about your mindset and the way you view and use money.

Rewriting your money story

Once you get a better understanding of this story that’s been lingering in the back of your mind likely since childhood, you can start to identify how it’s impacting your life and how you want it to change.

Since your money story directly impacts your mindset, behaviors, decisions and overall well-being — learning how to rewrite this story will help you develop a more successful and sustainable relationship with money. For example, if you realize that you have past beliefs that are hindering your efforts to become debt free, then you’ll want to reshape your mindset, which will allow you to change your financial habits and reach your goals. When you better understand your thoughts and emotions around money, you can begin to reshape negative beliefs and behaviors so that you can create a lifestyle that is aligned with your values and sets you up to live the life you want to live. Rewriting your money story allows you to create a positive and sustainable mindset around money that provides you with the freedom and confidence to create the life you want. 

Here are a few things to know and consider when it comes to reshaping the way you view and use money:

• Disproving of any negative aspects of your money story is the first step toward creating a new, positive and more effective one.

  • I will never have enough vs. I need xx amount of money to live the lifestyle I desire.

• Disassociate your self-worth from your net worth.

  • Your money is not who you are — it’s simply a tool that allows you to be more of who you truly are and live out your desired lifestyle accordingly.

• Devalue wants and become more appreciative of what you do have.

• Forgive your past mistakes and decide to move forward with a new outlook on how you can use money to improve your overall well-being and quality of life.

• Start making small changes by giving your money a purpose.

• Determine your goals and values in life — this will give meaning to your money and each financial choice you make.

• Learning to take the emotion out of money will help you make more reasonable decisions.

• Viewing money as a tool to get what you want in life will help you make choices that are aligned with your goals and values.

You can begin the process by doing and asking yourself a few things:

• How can you reshape negative thoughts into more positive and empowering ones?

  • For example: “I don’t have enough money to do that…” vs “I do have enough money to do this and I need to save xx amount to do that.”

• Write down past mistakes and forgive yourself — this will help you begin to focus on what you can do to change the future.

• What are your values in life? In other words, what do you want from your life?

  • Write this down and keep it somewhere you’ll see it.

  • This will help give your money a purpose — it’s the why behind each decision you make and helps reduce wasteful spending. When you use it as a tool to live out your values, money becomes a more valuable asset.

• Determine whether your current financial habits align with your values. Are you using money to create the life you want?

  • What are some habits you can change?

  • For example, if you waste too much money shopping online, make it a point to only buy things in person. This will help you reduce wasteful spending.

• Think about other small changes you can make that will help you begin to align your money habits with your overall values and goals in life.

• What will it take for you to implement these changes and what can you to hold yourself accountable?

A few examples of values

If you aren’t quite sure what your “values” are, think about the things that drive you in life — what is your purpose and what do you care most about? These are the things that should be driving your financial decisions and habits — allowing you to reduce wasteful spending and use your money to focus more on these important aspects of life. Here are a few examples to get you thinking more about it.

• Core values

  • Family

  • Friends

  • Community/Sense of belonging

  • Security, stability and sense of comfort

  • Charity and volunteering

  • Physical, mental & emotional health and well-being

• Financial values: These can be the same and/or different from above. The most important thing to know is that you don’t need a lot of money to have strong financial values. In fact, living by your financial values is what will allow you to improve your overall financial situation.

  • Sustainability

  • Security and stability/protection

  • Organization

  • Sense of comfort

  • Discipline

A few examples of goals

Living by your values is what will allow you to reach your goals in life. Having goals gives you a target and a purpose for your money. If you aren’t quite sure what your financial goals are, here are a few places to start:

• Build an emergency fund of $1,000: Keep it in a savings account to use for unexpected expenses.

• Build a bigger, longer-term emergency fund: This is 3-6 months worth of living expenses in case of a job loss or other major financial setback.

• Savings for a big purchase: This may be a home, car or big vacation.

• Retirement fund: Start putting aside a small percentage of your income toward retirement.

• Sustainable spending plan that increases savings: Here’s how to get started on creating a budget that works for you.

Read more: The millionaire’s approach to budgeting

Habits that build financial well-being

Developing the right mindset is crucial in order to actually make changes to your financial life. It essentially prepares you for when it comes time to overcome any fears you have about money and the tough decisions that come along with changing your lifestyle.

To start taking control of your money and create a successful state of financial wellness, there are a few things you can do that will help you develop a more financially-fit lifestyle that’s sustainable long-term. Some of these things will take time, while others you can implement immediately. Working on implementing these habits into your current life will help you start to take control of your finances and the impact they have on your overall quality of life.

• Spend less than you make: It’s the simplest concept that can have a life-changing impact. It will allow you to reduce wasteful spending, reduce overall expenses and boost your savings. Spending less than you make requires you to identify the difference between what you want and what you need — and prioritize your spending accordingly. Doing this now will ultimately create more freedoms and choices for you in the long run.

• Save for future spending: Preparing for future expenses will prevent you from racking up debt on things you know you’ll want (or need) to spend money on down the road. Get yourself into a habit of saving. Start simple by having a certain amount of money from your paycheck directly deposited into a savings account each month. You’ll be able to watch your money grow as you get closer to your goal — giving you more momentum moving forward.

• Create a spending plan: This will help you prioritize your spending and give every dollar a purpose.

• Only borrow what you can afford: Especially if you are already in debt, this is a critical aspect of building a financially sustainable lifestyle. Consider the impact that borrowing money will have on you in the future — will the purchase have been worth it?

• Don’t ignore your credit: Your credit has a major impact on your ability to borrow money and make big financial decisions. Get a free copy of your three credit reports once a year and do frequent check-ins with an app like Credit Karma. Here’s what you need to know about your credit and how to start improving your score.

• Grow your money: Take advantage of high-interest savings accounts and other investment opportunities. Contribute as much as you can to employer-sponsored retirement plans, especially if your employer makes matching contributions.

• Protect your future: This is similar to growing your money, but we want to highlight the idea of protecting your future financial life. This means saving for retirement, saving for short- and long-term goals and having the cash on hand to cover emergencies, to avoid going into debt.