When it comes to your life, you want to stay physically and mentally healthy. And this also applies to your personal finances, which is commonly called your financial health.
While your physical and mental health is far superior to your financial health, it’s still crucial to work on this too. And as I know and you may too, finances can cause some serious stress.
That financial stress can then put a toll on your body, mind, and relationships.
Yet, when it comes to your personal finances and financial well-being there is one area that is critical to master: self-control. The challenge is, it might be the toughest thing to be consistent with throughout your lifetime.
What is Financial Health?
Before we get into how self-control affects your financial health, I think it’s important we are all on the same page on the definition.
Financial health is the term used to describe your own personal finances and how healthy it is. This includes things like how well your saving, what you put away for retirement, how little debt you have, etc.
There is a bit more to it than that, but for the sake of this post, we’ll keep it that simple.
Why Self-Control Matters to Your Financial Health
As I mentioned in the introduction, I think self-control is one of the toughest things to master for your financial health.
Your ability to control certain desires or urges with your money, can really determine your overall financial stability and results in the long-run.
It’s also incredibly challenging, especially if you are just starting to take control of your personal finances.
I see a need for discipline and self-control in four key financial areas:
- Spending
- Tax Refunds
- Getting a Raise
- Investing Money
Below, I’m going to dive into each area and why self-control plays a major role.
Spending
For your financial health to really be awesome, you have to get your spending under control. But not only that, you need to continue to resist the urge to spend over time.
We are the society of consuming things and buying items we want, but do not necessarily need.
It can put us into credit card debt, deplete our savings, or stop us from even building a quality savings account.
According to a 2018 CNBC article, The average American has a credit card balance of $6,375, up nearly 3 percent from previous year. There are some other stats on their infographic within the post, that are also a bit alarming.
A big part of this credit card debt is retail therapy or buying and charging anything and everything to credit cards. This is where self-control becomes vital.
But it’s not easy to break this cycle. The internet makes everything easy to consume, with you being one click away from having something you may want.
Additionally, what your friends, colleagues, or family has or recommends might entice you to spend more or seeing what others have on social media can be an influence too.
The challenge is to resist and break the cycle. Your current and future financial health
**I’m also not against treating yourself and occasionally buying something you’d want. We all need that. It’s learning when to say no. Ask yourself will this bring me temporary or long-term happiness? Can I live without it? Most likely you can.
Tax Refunds
When it comes to these types of posts, my intention is to never be “preachy” or come off shaming anyone’s financial choices.
And I almost did not include tax refunds into this, but I think it is relevant to include based on the subject matter. Mostly because it’s not my place to tell people what to do with their refunds.
But, let’s explore.
Most people I know, if and when they get their tax refund, will spend it (there’s that spending again). And on things that they probably really don’t need.
Having a nice chunk of change in one-lump sum is nice and extremely tempting to use. But if you are looking to better your financial health, your tax refund has much better uses.
It’s also pretty easy to spend it. I remember a few times taking that $800 refund and spending it all on random things. Not anything that would improve my career, finances, or household needs. Just random things, that have no added no value to me.
The point is, try resist the urge to spend your tax refund frivolously and find ways to put that money to work or use it for something much needed (like household repairs).
Related: Looking for more on tax refunds? Here are some ways you can invest your refund for your financial health.
Getting A Raise
What raise? Where can I get one of those!?
That might be what you are thinking, but I do hope you have and will continue to get raises in your career.
Hey, even if you are self-employed I hope you give yourself a raise too!
All that aside, I know one thing I used to do when I did get a raise. Start to upgrade my lifestyle or buy more useless items.
Sure this may go back to spending, but self-control applies to your raises too.
When you get a raise think about what that money can be used for, like:
- Paying down any debt faster
- Contributing more to your savings
- Increasing your 401k or IRA contributions
- Investing it elsewhere
You’ve heard the stories and you probably know people in these situations. They make six-figure salaries, have a big house, multiple fancy cars, go on the best vacations, but have little saved.
It’s incredibly common. There is more to it than just self-control, but it plays a pretty big role I think.
Investing
If you are working on your personal finances and financial health, you’ll most likely get involved with investing. Whether that is in the stock market, real estate, or something else, it’s a great way to put your money to work for you.
Besides spending challenges, self-control is major when it comes to investing. I actually think it might be more challenging than the rest on this list. But that’s just my humble opinion.
Investing your money brings a lot of temptations, like:
- You hear about a hot investment opportunity
- The markets are down, so you want to sell
- The media tells you about the markets and what to do
Those are just a sampling of things that might come-up. But without mastering some self-control, you can do some serious financial damage.
Back to those examples, self-control can:
- Stop you from blindly investing with doing your research
- Resist the urge to sell because the markets are down, saving your long-term growth
- Not making buying or selling decisions because some media expert told you
It’s easy to fall into these traps. Early on, I would sell something because I was losing a little bit of money. Yet had I held on and kept investing, I would of recovered plus made money.
Investing takes removing the emotion, creating a plan, and mastering the art of self-control.
Final Thoughts
When i look back at my last few years of personal finances and investing, I realized that the common challenge in most areas was self-control.
Without truly recognizing it and learning to master self-control, it was seriously damaging my financial health and future finances.
By not controlling spending and having discipline to keep on with my goals, I was hurting my bank account. With investing and being tempted, I would sell low and buy high, hurting my investing goals.