5 Ways Making (and Sticking With) a Budget Can Be Good for Your Health
Feeling sick with financial worries? Budgeting could be a key tool in reducing your stress and improving your health.
5 Ways Making A Budget Can Be Good For Your Health
If you’re feeling stressed about your finances, you’re not alone.
A 2020 Stress in America report from the American Psychological Association (APA) showed that 64 percent of adults say money is a significant source of stress in their life. And only 39 percent of Americans could comfortably cover an unexpected $1,000 expense with their savings, according to a 2021 survey carried out by financial publisher and comparison service Bankrate.
For many, financial stress has only increased during the pandemic, according to a 2021 PWC survey. And when it comes to our health, that’s not a good thing.
“Financial stability is so important for survival,” says Sheila Dowd, PhD, associate professor in the department of psychiatry and behavioral sciences at Rush Medical College in Chicago. “The fear related to that can trigger a stress response.”
Our bodies respond to stress by releasing hormones that elevate blood glucose, and raise blood pressure and heart rate, explains Lewis Coleman, MD, a board-certified anesthesiologist based in Glendora, California, who studies stress theory in mammals. “This can all be triggered by emotional adversity due to financial stress,” he says.
Some stress is good. Stress is our body’s response to changes or challenges, per the Cleveland Clinic. It helps us respond to and cope with life’s daily challenges; heightened anxiety when you’re running late, for example, motivates you to hurry up.
But stress becomes harmful if the stress response outsizes the actual challenge or stressor, or if the stress response never gets turned off (creating chronic stress).
“Acute stress can turn into chronic stress if there is no resolution,” says Dr. Dowd.
And financial stress is hard to turn off — it lingers in your thoughts even when you’re doing something unrelated. You might know for months that you’re underwater on your mortgage or don’t have enough to pay for an emergency, and this becomes chronic stress.
Chronic stress can increase your risk of chronic conditions such as anxiety, depression, heart disease, and high blood pressure, notes the Mayo Clinic.
And chronic stress tends to be cumulative, Dowd says. “The more chronic the stress, the harder it is on the body.”
While financial stress affects all people, it disproportionately affects individuals in Black, Indigenous, and People of Color (BIPOC) communities, according to an October 2020 survey carried out by The Harris Poll on behalf of the American Staffing Association. The survey found that Black and Hispanic Americans were more likely to be worried about being able to pay for rent or mortgage, student loans, and childcare than white Americans.
While the reasons behind financial insecurity are complex — and it may not be feasible to eliminate financial stressors — it may be possible to change your emotional response to it.
Specifically, Dr. Coleman says quieting your stress response and relieving anxiety can help. Coleman and Dowd agree that one way to combat financial stress is to create a budget.
“An action like that could help the person feel more secure, help the future feel less uncertain and therefore reduce the stress and anxiety related to an uncertain financial situation,” Dowd says.
The Health Benefits of Budgeting
According to Northwestern Mutual's 2019 Planning and Progress Study, 92 percent of Americans over 18 said nothing makes them happier or more confident in life than when their finances are in order.
But what can a budget specifically do for other measures of health and well-being?
- Budgeting can reduce the physical symptoms of stress. A budget helps you control how much you’re setting aside for savings and retirement, and lets you know where you stand with those goals — which, according to a small past review, may help reduce existential dread and anxiety. If a budget helps you feel in control, it can help you relax, says Dowd: “It reassures people that they have it under control and they have a plan.” And when someone starts to feel like they have a plan, they’re more likely to feel like they have agency over a situation and feel more in control — which is usually an antidote to stress, explains Dowd. Because this will help dial down the stress response, the physical symptoms (like muscle tension, stomachaches, and elevated blood pressure) should ease, too, she says.
- Budgeting may support healthy immunity. Things that help reduce stress (like budgeting, for some) can help reduce pressure on your immune system, says Coleman. When you feel threatened, your body moves into survival (fight-or-flight) mode, redirecting energy expenditure to the most key functions — meaning the parts of the immune system that fight chronic disease and digestion slow down. Once your fight-or-flight response is turned off, Coleman says, your body can return to its calmer, baseline state, in which all of those less-emergent bodily functions can kick back into gear. That’s why when you’re less stressed, you might notice you feel and look healthier and aren’t getting sick as often.
- Budgeting can help fund your healthcare. Your budget can literally make you healthier if you set aside money for activities and appointments that are good for your health — think regular checkups, preventive care, therapy sessions, gym memberships, massages, healthy groceries, and more. To budget for healthcare costs, the U.S. Department of Health and Human Services recommends considering medication use, which doctor appointments you typically schedule in a year, and any procedures you plan to have done, as well as the premium, deductible, and copayments or coinsurance associated with your insurance plan.
- Budgeting can help you not overextend yourself. Not overextending yourself financially can help you not overextend yourself emotionally. Saying “no” to plans and obligations can be hard to do, but taking on too much can lead to burnout, which can be taxing on your health. Saying “There’s just no room in my budget this month” can help you feel more engaged in the healthy self-care practices you do decide to spend your time (and money) on. “The hope is that with the budget, you’ll have that long term goal in the front of your mind, and you’ll feel accomplished with having been true to the budget and not overspending,” Dowd says.
- Budgeting can help you build the life you wish to live. “When you have a budget that reflects your personal values, it can go a long way toward making you feel happier,” says Mandi Woodruff-Santos, a financial journalist and cohost of the Brown Ambition personal finance podcast. “If you love spending $500 a month at Sephora or going to a Broadway show every month and that is essential to your happiness and that is the life you want to lead, make a budget that can accommodate that.” Plus, a study published in 2016 in Psychological Science suggested money can actually improve happiness when spending aligns with the buyer’s personality. The study found that introverted people were more likely to be happier after spending money on an activity or hobby that they could enjoy alone, while extroverted people reported feeling happier after spending money on a social experience.
How to Get Started With a Simple Budget
According to a 2021 survey carried out by Debt.com, 80 percent of Americans reported that they had a budget — up from 68 percent in 2019.
But for many, making and sticking with a budget can be difficult, says Claire Wasserman, the New York City–based founder of financial educational platform Ladies Get Paid.
It can cause you to feel shame for overspending or undersaving, she says. The goal is to reduce your financial stress, not add to it with an unrealistic, punitive budget, so Wasserman says be goal-oriented, rather than scarcity-oriented. “Look at budgeting as an opportunity to make financial decisions that are aligned with who you are and how you want to live your life,” she says.
Creating too rigid of a budget — one that doesn’t allow life to happen — sets you up to fail, because when you see you’re not hitting your inflexible goals, it can feel like you’re never making any progress, adds Woodruff-Santos. “Budgeting can be as helpful or as hurtful if you do it wrong.”
And remember, there’s no such thing as a one-size-fits-all budget, Woodruff-Santos says. Your age, location, living situation, family size, and goals will all affect your budget. And your budget needs to realistically fit your situation if it’s going to work.
Woodruff-Santos and Wasserman both agree the 50-20-30 rule is a good starting point.
First popularized by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi in their 2005 book All Your Worth: The Ultimate Lifetime Money Plan, this budget focuses on broad strokes rather than penny-by-penny tracking. To get started with the 50-20-30 rule, take all of your income after tax and divide it into three groups: essentials (50 percent), savings (20 percent), and wants (30 percent).
Woodruff-Santos also suggests zero-sum budgeting (or zero-based budgeting), in which you’ll allocate all the money you earn into either living expenses, savings, or debt repayment, according to personal finance tool Nerdwallet. “It literally gives every dollar in your budget a ‘job’ to do and makes you feel in control,” she says.
Another option is working directly with a financial planner or money coach. You can find a list of financial planners who offer pro bono guidance at the Foundation for Financial Planning.
No matter what budget you use, bake in time to regularly recalibrate (Woodruff-Santos has a quarterly calendar alert) so that your budget reflects your actual needs, wants, and personal goals, even if they change. For example, during the holiday season, you might spend more money on purchasing gifts for your loved ones, or ahead of a large purchase like a house, you might want to allocate more money to your savings. It’s okay to allow for this kind of flexibility in your budget, says Dowd: “You can always circle back and rework the budget to include this added expense.”
Remember, the goal here is to reduce stress and increase control so you can experience the maximum health benefits of budgeting, not to mention get the most out of your money — whatever that means for you. Woodruff-Santos says the only way to be successful is to be flexible: “You’re a human whose lifestyle changes, so let’s account for that.”