The past year has seen unprecedented levels of destruction in the modern era. And while our personal focus and the media focus was rightfully on the COVID-19 pandemic’s effect on physical health, there were a number of collateral catastrophes that continue to deeply impact our world, and many of them are interconnected; financial health is a major underreported crisis affecting millions of working Americans.
When we consider financial health, it’s important to look at it in the context of overall well being, because it directly affects both physical and mental health. Without financial health, our overall health suffers, in the same way physical ailments can be financially costly through lost work and increased stress.
Financial health is complicated to universally define, because there are a number of factors that contribute to overall financial health. A commonly used indicator of poor financial health is the fact that nearly half of all Americans can’t afford a $400 emergency and that 78% of the population lives paycheck-to-paycheck. This lack of savings and a general lack of a safety net are major indicators of financial issues that can affect overall outlook.
Additionally, debt can hang like a dark cloud over our day-to-day lives, whether that debt be in student loans, credit cards, or home and auto loans. During the pandemic, overall personal indebtedness and personal spending have both surprisingly reduced due to government stimulus money and limited opportunities to travel and spend on entertainment. Yet with credit scores that may be damaged from past financial shocks, a lack of savings makes an emergency potentially devastating.
A major issue with the financial health crisis is it snowballs. While lacking savings in addition to carrying a great deal of debt can be disastrous, for those with a history of financial troubles, building back credit can be monumental. About a quarter of all Americans without credit cards claim they are ineligible to qualify for one, whether it’s because of a poor or nonexistent credit history, low credit scores, other mounted debt, or missed payments. This poor credit history can cause high interest rates, higher insurance premiums, larger security deposits on utilities and more. In short, for some, a bad financial future can be stalled before it even begins, even if the person suffering has every intention of building back their financial health responsibly.
What Poor Financial Health Means to Overall Health
As we mentioned previously, financial health doesn’t exist in a vacuum. Rather, our overall well being is tied to how our financial health relates to our physical and mental health. Not only can these financial ramifications cause physical and mental health problems, but these problems then reverberate back, possibly leading to increasing medical-related debt. It’s a vicious cycle. Let’s take a look at some of the health problems that can be associated with financial health issues.
On a surface level, feeling secure financially makes physical health easier to manage. In a 2015 survey conducted by a large U.S. bank, 81% of respondents said other goals were much easier to achieve once financial issues were taken care of. Without the weight of finances hanging over our heads, it’s easier to make exercise and healthy eating habits more of a priority, for example.
Financial health also heavily impacts our stress levels and sleep patterns. Those battling through financial crises can lose sleep and, when coupled with added stress, can lead to a number of medical issues including:
- Raised diastolic blood pressure
- Increased muscle tension and pain
- Digestive issues
Further, because of the costs associated with medical care, those with poor financial health may avoid doctors and delay treatment because they can’t afford it when they need it.
Mental health is another battleground for those suffering from poor financial health. An inability to pay bills and provide for our families can cause irritability and strain on interpersonal relationships. One survey showed that nearly half of all married couples argue over money. Many Americans tie their finances to self worth. Having a poor financial health outlook can leave us demoralized or lacking value.
Of course, all of these issues existed before the COVID-19 pandemic, but with an unemployment rate that peaked over 14% (but has since settled closer to 6%, which is still twice pre-pandemic numbers), the uncertainty of financial futures has been on full display over the past year.
What Poor Financial Health Means for Employers
Turning the tables slightly, financial health is not just a “worker problem”. While employees are likely to bear the brunt of this crisis, the implications to employers are also troubling.
If you’re an employer that has a staff of workers in precarious financial situations, there are a number of tangential issues that can make a workplace toxic and make staff difficult to manage. Some of these issues include:
- Absenteeism – Workers in difficult financial situations may be more likely to take sick days or not show up to work.
- Presenteeism – The workers who do show up may spend additional time on the phone talking to creditors or are otherwise distracted.
- Low Morale – Employees going through financial hardships carry that stress with them to work, which means low overall attitudes in the workplace
- Health Concerns – The ripple effect is real; employees with financial issues may be forced to take more sick days which can bring higher health costs to employers.
- Work Conflicts – Mental health issues and irritability over financial problems can cause interpersonal work conflicts.
Promoting financial literacy and offering employees tools to better their financial situation can have far-reaching implications for the workplace. This benefit can improve overall mental and physical health, reduce employee turnover, and prove to employees that they’re valued.