‘Money is not everything, but everything needs money’ is a popular phrase that sums up the importance of money in our lives. We need money to not just survive and fulfil our needs, but also need it to accomplish our financial goals and lead a comfortable life. The absence of money or the struggle to attain it can have serious effects on your well-being, especially on your mental health. October 10 is World Mental Health Day, and so we delve deep into issues that affect your financial and mental well-being, and look at solutions that can help.
Spending More Than You Earn
You can create wealth by spending less than you earn. The more you save, the more your potential for creating wealth. If you’re able to do this consistently in the long run, you would be able to achieve most of your life goals and have peace of mind. On the other hand, if your expenses exceed your earnings in the long term, you would experience financial distress through capital erosion, mounting debts, and inability to handle economic shocks.
Suppose your monthly income is Rs. 30,000 and your expenses stretch beyond this to Rs. 40,000, you will have to rely on borrowed funds to arrange the extra Rs 10,000. In the long run, such a practice can result in a debt trap as you will borrow money to meet your basic needs, and your financial health will deteriorate. With this, your mental health will also be impacted. If you’re currently spending more than you earn, it would be wise for you to cut back on spends and seek a financial planner who can help prioritise your spends, allowing you to focus on what’s truly important.
Tax mismanagement is another big issue that causes mental stress. Sometimes, people spend their hard-earned money without figuring out their tax obligations. Not much later do they fall short of paying the tax liability or commit mistakes in the tax assessment. Tax mismanagement often leads to litigation, penalties, and erosion of wealth. Ideally, you should start tax planning from the beginning of the financial year to have some time in hand and identify right investment instruments to help you save taxes.
Unnecessary and untimely debt also leads to an increase in financial stress. People sometimes discount future earning and buy things on loans, and later live with squeezed financial capacity, putting themselves in financial duress. Before taking any loan, you should always assess your repayment capacity.
What Could Be The Repercussions Of Financial Stress On Mental Fitness?
Financial stress often results in spending blunders, feeling of social neglect and financial inferiority, which may take the shape of anxiety and depression. Financial stress not only affects an individual but also people around him.
How Can People Handle Financial Stress?
The first and most important step to handle financial stress is to stick to your financial planning, budgeting, and setting a realistic goal. A higher goal, which is beyond your financial capacity can put you at risk of becoming stress-prone.
The second step is to assess your income, expenses, and savings at a regular interval.
The third step is to avoid unnecessary debts, especially high-interest debt. Borrow to build assets and cap your borrowing for consumption.
The fourth step is specifically for people already in financial stress. They should consult a financial advisor to get out of the situation, and if need be a mental health expert.
Do Health Insurance Plans Cover Mental Problems?
According to mental healthcare act 2017, the IRDA has directed all health insurance providers to include mental illness in their plans. Most health insurance products provide a cover for mental illness; they only allow cover for the hospitalization cost and not the OPD cost. However, while buying a health policy, you should prefer the product that allows wider coverage against mental illness. Mental health insurance is still evolving and insurance companies are expected to provide better coverage to the policyholders in coming times.
Physical illness can easily be diagnosed but it’s difficult to figure out mental illness. So, before your financial stress becomes a mental illness, take steps that to avoid it. You can build up an emergency fund as soon as you start earning to have financial backing in place for all the tough uncertain situations. Do not ignore necessary protections like a Term Insurance plan or a health insurance plan to help you deal with unannounced emergencies.