Being money stable isn’t just good for your bottom line — but your mind. Here’s why.
Financial freedom looks different to everyone. For some, it’s being debt-free and having enough money to live comfortably. For others, financial freedom means being able to care for children or loved ones without budget strain. Or it can simply be the knowledge that you’ve saved enough to retire at a decent age.
No matter how you define financial freedom, the rewards of achieving it are more than just monetary: The psychological payoff is just as valuable, if not more so. Here are five ways financial freedom benefits your state of mind:
Relief from daily anxieties
Tara Well, Ph.D., an associate professor of psychology at Barnard College at Columbia University says while money can’t buy happiness — it can buy more control. And for those who fear the unknown (guilty!), a sense of control reduces everyday stress. Being financially stable means not sweating it when unexpected expenses pop up. It allows you to hire a babysitter so you can run errands, or choosing what you want to eat on a menu rather than basing your choice on the price. All of these experiences help you to feel prepared for anything. “By increasing predictability and creating a greater sense of stability, financial freedom can help relieve stress and anxiety,” Well says.
(Feeling overwhelmed? Here are five ways to fight money anxiety.)
Room to dream beyond the day-to-day
There’s is an immeasurable psychological burden that many people feel when they are carrying steep student loan debt or sky-high credit card bills that feel impossible to get on top of. Debt makes people feel like they’re being controlled and unable to focus on things besides simply trying to survive financially, says psychologist Dr. Yvonne Thomas, Ph.D.
However, once you find a strategy to become debt-free — and actually meet the goals — dissipating anxiety makes room for hope, peace and bigger dreams. “You may feel inspired to expand your world and experiences by being able to try different and new things that you may not have had the financial ability to attempt before,” Thomas says. “Thus, you will become enlightened and grow as a human.”
(Got debt? Here’s how to strategically manage it.)
Increased fulfillment
Having money in the bank gives you the unique opportunity to take risks that other people, well, can’t. “When you’re confident you’ll be able to meet your ongoing financial obligations using the money you’ve already saved, it gives you the freedom to make your own choices about how you want to spend your time, knowing you’ll be able to deal with the consequences,” Well says.
Financial security can make you bolder and more courageous. It helps clear the path to pivot your lifestyles in a healthy, secure manner, allowing you to quit a job you dislike or take a much-needed sabbatical to reconnect with your purpose. These feats are only possible with cash cushions.
(Answer these leading questions to map out your dream retirement.)
A reinforced sense of resilience
Everyone will face financial hardships during their lives, whether it’s a diagnosis you never saw coming, the end of a marriage, the death of a loved one or a disaster beyond your control. Financial freedom will help you better weather the storm and bounce back and move forward, faster, Well says: “A sizable rainy day fund can provide those in hard times with a glimmer of hope: a reason for optimism that they will be able to recover from setbacks.”
Having savings also help to pay for recovery from the storm, whether it’s learning to date again after a divorce, going to therapy to manage grief, or treatments to strengthen our health. Cash flow makes these self-care necessities accessible.
(These six women were saved by having real money on hand when emergencies arose.)
Higher self esteem
There is strength found in patting ourselves on the back. Self-accomplishment and autonomy are great for our confidence. The pride and sense of progress in achieving financial freedom is a gateway to even better things. “With these positive consequences occurring, increased self-confidence and self-esteem can also develop,” Thomas explains. “As you feel more financial freedom and self-pride, you can improve other areas of your life, such as the quality of your relationships, and your ability to live up to your full potential in life.”
(Master your money mindset: Listen in as Jean talks with Kathleen Burns Kingsbury, wealth psychology expert and author of “Breaking Money Silence: How to Shatter Money Taboos, Talk More Openly about Finances, and Live a Richer Life.”)
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