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Business News/ Money / Personal Finance/  World Mental Health Day 2023: How can managing your finances effectively support your mental health?
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World Mental Health Day 2023: How can managing your finances effectively support your mental health?

Many people have toiled hard to make money and escape the rut of endless poverty and financial dispossession. Managing finances is easy with the following steps

Money and mind go hand in hand. Declutter your finances for better mental health.Premium
Money and mind go hand in hand. Declutter your finances for better mental health.

Your thoughts control your behaviour, which is why you must focus on how well your mind responds to fight or flight situations. Your mental health has a lot to do with your financial health. While many contend that one’s self-worth should not be determined by money, it’s essential to acknowledge that a deficiency in financial resources can lead to a deterioration not only in physical well-being but also in the ability to process emotions.

As the world observes “World Mental Health Day 2023" today, it is essential to evaluate the relationship between mind and money for overall growth.

Money is essential for paying for our necessities and vital expenses, thus, enhancing the overall quality of life. A shortage of funds may compel us to make sacrifices in other crucial areas of our lives. Poor financial health begets an adversely affected mental health. This situation can also drive many individuals to turn to addictive behaviours and engage in actions that defy logic and reason.

Managing financial stress

Remember the following adage “If you are born poor it’s not your mistake but if you die poor, it’s your mistake?" This provocative proverb has been attributed to one of the most successful entrepreneurs and richest men of this century. Being riddled with poverty can drag you into a black hole that is in no way appreciable. If lack of money bugs you, remember that you are not the first person to be stuck in this situation nor will you be the only one to have got out of it. Many people have toiled hard to make money and escape the rut of endless poverty and financial dispossession. Managing finances is easy with the following steps.

Take charge of your finances

Keep an account of how much money you earn. This will help you gauge the amount you can save and invest in the long run. Also, instead of relegating the earnings to a bank savings account, it would do a lot of good if you start investing your money early in life. How much you can invest depends on how much you are willing to save, which involves cutting down on unnecessary and unwanted expenses. Begin by unsealing your bills, reviewing your monthly statements, and so on.

You can retroactively assess your expenditures by reviewing prior receipts, as well as your bank and credit statements. Conducting this financial inventory will provide you with valuable insights to determine the most appropriate course of action. Initiating your financial planning with a comprehensive inventory of your current assets, income, debts, and monthly as well as future expenses is an excellent foundation. Below are several advantages of maintaining a comprehensive financial record.

Enhanced expense monitoring: By diligently recording your expenditures, you can pinpoint areas where you might be exceeding your budget and take corrective measures.

Facilitates goal setting: Armed with a clear picture of your monthly income and expenses, you can begin setting specific financial objectives, whether it’s saving for a home down payment or reducing debt.

Informed financial choices: A thorough grasp of your financial position empowers you to make sound financial choices, including selecting appropriate investment opportunities and insurance coverage.

Create a financial strategy

Do you have a financial plan in place? Now that you know how much you can earn and save, make a plan to get rid of your debts first. If the liabilities are more, look for additional income sources. Taking up freelancing work or weekend jobs can help you prepay your loan and get rid of it earlier than anticipated. Apart, it will help in efficiently increasing your cash flows. Additionally, ensure that your income is appropriately distributed among your expenditures, savings, and an emergency fund. Strive to set aside a minimum of three to six months’ worth of living expenses within your emergency fund. A useful guideline to consider is dividing your income in the following manner:

  • 50% for necessary expenses
  • 30% for discretionary spending and desires
  • 20% for savings and debt settlement

Nevertheless, it might be necessary to adapt this allocation according to your unique financial situation.

Plan your finances

The daily expenditure on food and transportation will fluctuate based on various factors, such as your geographical location, lifestyle, and financial objectives. To effectively adhere to your financial plan, start with a monthly budget and then refine it into a daily budget. This way, you can determine your daily spending limits for both food and transportation.

Once you’ve established your budget in line with your income, commit to following it consistently. Developing a habit of tracking your daily expenses against your budget can make it significantly easier to stay on track with your monthly financial plan.

Make your money work for you

You work hard to make money. Why not make your money work for you? If you want to avoid financial hardships later in life, the best way is to take cognizance of your immediate and long-term needs, assess your risk appetite, and then decide on your investments. If you are young and willing to take risks, seeking market-linked returns may be the best thing to do with your money though you must put a part of your earnings in high-yield bank deposits like fixed deposits and recurring deposits too.

Don’t attempt to tackle all your financial issues simultaneously. Approach them one day at a time. Through perseverance and patience, you’ll gradually resolve your financial challenges, one step at a time.

The interconnectedness of finances with one's quality of life, stability, and social standing can impose a substantial emotional burden. Take charge of your finances now if you are aiming to improve your mental health conditions.
 

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These are the key things to keep in mind if you are building an emergency fund. 
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These are the key things to keep in mind if you are building an emergency fund. 

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Published: 10 Oct 2023, 01:57 PM IST
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