(BPT) – With recent news reports focusing on professional athletes’ mental health, the conversation has turned to a broader shared experience. According to a report from Insider, athletes can suffer from mental health issues due to the public and financial pressures they face when competing. Many athletes have been candid about their difficulties and discussed how they cope. For former U.S. speedskater Apolo Ohno, an important aspect of caring for his holistic health is tending to his financial health.
“Finances tend to get overlooked when talking about mental health,” Ohno said. “But in the same way mental wellness affects athletic performance, your finances can have a huge impact on your mental health.”
Defining financial health
Several dimensions make up financial health, like how much you have in savings, how much you’re investing for retirement and how much of your income goes toward nonessentials.
According to recent data from Personal Capital and Empower Retirement, 77% of surveyed Americans say their financial well-being significantly impacts their mental and physical health. Additionally, 57% say their financial health directly correlates with their happiness.
So clearly financial well-being is important, but how do you achieve it? Unfortunately, there’s no easy answer or a one-size-fits-all solution for achieving financial health. Ohno says for him, it’s more about the journey rather than reaching specific milestones.
But there are some steps you can take to start establishing some of the basics of a financial plan. So, if you are on your own journey to find financial wellness, here are a few tips to help you get started.
Get clear on your short-and long-term financial goals
Fifty-nine percent of Americans say having clear goals is an important aspect of financial health. No matter your goals, try making each of them SMART, meaning they are:
- Specific: Know precisely what you want to do with your money.
- Measurable: Know the exact dollar amount you need to achieve your goals.
- Attainable: Know how you can reach your goals based on your current budget.
- Realistic: If a goal is out of reach, find ways to make it more attainable.
Your SMART goals don’t have to stay the same. If you’re working on long-term goals, you can review and adjust them annually as life changes.
Create a budget and know where you stand
A budget can give you a holistic view of your money habits. With a budget, it’s easier to manage, track and allocate your spending based on your needs.
Establishing a budget can be daunting, but it doesn’t have to be. There are plenty of tools that can simplify the process. Rated as one of the top budgeting apps of 2021, the Personal Capital app is an excellent resource for tracking your finances. Link everything from your checking, savings, investment, loan and retirement accounts to see your cash flow and financial picture all in one place.
This type of free app can also help you figure out your net worth – what you have minus what you owe. While more than half of surveyed Americans say their net worth is a critical component of their financial health, fewer can estimate theirs. “If you can’t measure it, it’s very difficult to gauge where you’re going,” Ohno said.
Build a rainy-day fund
In an emergency, your financial safety net can determine your preparedness. Whether you endure job loss, car trouble or a medical emergency, your safety net can give you extra financial cushion when the unexpected happens. If you don’t have one already, there’s no need to panic. You can build your emergency fund through automatic deposits to your savings account and by cutting out unnecessary expenses. If you can, save 3 to 6 months’ worth of expenses.
Pay off bad debt
While 35% of surveyed Americans say debt significantly impacts their financial health, another 69% associate being debt-free as a necessity for long-term financial well-being. While paying off debt gives you more independence, not all debt is bad. Mortgages, student loans and business loans can be considered “good” debt. Credit card balances, auto loans and personal loans are usually regarded as “bad” debt. That’s because bad debts can come with high interest rates and typically decrease in value over time.
Eliminating your bad debt can take time but isn’t impossible. Financial advisors generally recommend paying off debt with the highest interest rate first. Then, as you work your way down, you’ll pay less and less as your balance goes down.
“Whether you’re an athlete or not, it’s important to understand how your financial health relates to your overall health,” Ohno said. “Talking about and dealing with money doesn’t have to be taboo. When you’re aware of your financial wellness, you can face life’s ups and downs with confidence.”
Apolo Ohno is a paid Financial Hero. He is not a client of Personal Capital Advisors Corporation and does not make any endorsements or recommendations about securities offerings or investment strategies.