Leveraging Your Financial Intelligence Read online

  And because lower-income couples are more likely to deal with high levels of financial stress, they have a higher divorce rate than that of middle- or upper-income couples.13

  Debt and Depression

  For most people struggling with financial challenges, being in debt plays a major role in their experience of financial stress. John Gathergood, an economist at the University of Nottingham, conducted research that demonstrated that people who have difficulty paying off debts are more than twice as likely as others to experience mental health problems such as depression and severe anxiety. Analyses of numerous research studies confirm that the higher the amount of debt, the more severe the symptoms of depression and anxiety.14 People carry debt for various reasons: some because of poor financial habits, or because household and medical costs exceed their income. As the PwC study indicated, people with student loans experience the most financial stress. And given what we know about the cost of higher education, student loan debt amounts can be extremely high. Since Millennials bear the brunt of student loan debt, it's important for Millennials themselves, as well as parents, employers, and financial advisors, to pay particular attention to the potential impact of financial stress on Millennials' emotional well-being.

  The relationship between finances and happiness is probably stronger than the research about annual income and financial stress can fully capture. Many people are “just one paycheck away” from financial disaster. Consider these scenarios in which you currently have a well-paying job and you comfortably make monthly payments on debts such as a mortgage, car payment, and a student loan:

  You are unexpectedly laid off from your job.

  You are diagnosed with a serious illness.

  A family member now needs 24/7 care.

  Your child has special educational needs that cannot be met in a public school.

  How would you manage these changes in your life situation? Though you may have a good job, it's likely that you may not have enough savings to handle unexpected crises. In fact, a recent Bankrate.com survey showed that only 37 percent of Americans have enough savings to cover a $500 or $1,000 emergency.15 When it comes to being prepared for financial crises, women are at even greater risk. According to the 2017 PwC Employee Financial Wellness Survey, 54 percent of women reported that they don't have enough emergency savings to cover unexpected expenses.16 Clearly, a high percentage of people either currently experience financial stress, or are at risk of unexpected situations that would trigger significant financial stress. That's why we authors place so much importance on the relationship between financial stress and happiness. As you'll see in Chapter 4, taking steps to minimize financial stress by developing and leveraging your financial intelligence is one of the most powerful approaches you can use to enhance your life satisfaction. Several years ago, co-authors Doug and Ryan met with Helen Riess, Associate Professor of Psychiatry, Harvard Medical School and co-founder of Empathetics, Inc., to discuss her findings on the relationship between finances and overall well-being. Riess confirmed, “When it comes to happiness the most basic fundamentals are related to physical health, relationship health, and financial health. If you can take steps to reduce financial stress, that will definitely favorably impact your physical health and therefore your happiness.”17

  MONEY AND HEALTH

  So far we've focused on the intersection between finances and happiness. In this section we'll concentrate on the intersection between money and health.

  Not Enough Income; Not Enough Health

  Income and health have always been interrelated. Sandro Galea, dean of the Boston University School of Public Health, points out that as far back as 1841, pioneering British epidemiologist William Farr discovered that death rates in English asylums were highest among poor patients.18 Fast forwarding to the present day, a 2016 UNICEF report, “The State of the World's Children 2016: A fair chance for every child,”19 presents disturbing statistics on the relationship between income and child and maternal health:

  In terms of child survival, while the absolute gap has substantially narrowed since 1990, great inequities remain between rich and poor countries. The relative child mortality gap between sub-Saharan Africa and South Asia on one side and high-income countries on the other has barely changed in a quarter of a century. Children born in sub-Saharan Africa are 12 times more likely than their counterparts in high-income countries to die before their fifth birthday, just as they were in 1990.

  A child born in Sierra Leone today is about 30 times more likely to die before age 5 than a child born in the United Kingdom. Women in sub-Saharan Africa face a 1-in-36 lifetime risk of maternal mortality, compared to 1 in 3,300 in high-income countries.

  According to U.S. Centers for Disease Control (CDC) research, poor adults (annual incomes less than $35,000) are about five times more likely to report they are in fair or poor health than adults earning $100,000 or more. Low-income adults also have significantly higher rates of a wide range of diseases and health conditions.20

  Figure 1.2 illustrates the prevalence of diseases among adults based on their income.

  DISEASE OR ILLNESS ANNUAL FAMILY INCOME

  Less than $35,000 $35,000-49,999 $50,000-74,999 $75,000-99,999 $100,000or more

  Coronary heart disease  8.1  6.5  6.3  5.3  4.9

  Stroke  3.9  2.5  2.3  1.8  1.6

  Emphysema  3.2  2.5  1.4  1.0  0.8

  Chronic bronchitis  6.3  4.0  4.4  2.2  2.4

  Diabetes 11.0 10.4  8.3  5.6  5.9

  Ulcers  8.7  6.7  6.5  4.7  4.4

  Kidney disease  3.0  1.9  1.3  0.9  0.9

  Liver disease  2.0  1.6  1.0  0.6  0.7

  Chronic arthritis 33.4 30.3 27.9 27.4 24.4

  Hearing trouble 17.2 16.0 16.0 16.2 12.4

  Vision trouble 12.7  9.8  7.5  5.7  6.6

  No teeth 11.6  7.8  5.5  4.2  4.1

  Source: U.S. Centers for Disease Control

  FIGURE 1.2 INCIDENCE OF DISEASE RELATED TO INCOME

  There are a number of reasons why low-income individuals suffer poorer health than others. In some instances, lack of financial resources may limit access to healthcare. For example, 28 percent of those who responded to PwC's Employee Financial Wellness Survey said that financial issues have affected their health. APA's Stress in America: Paying with Our Health survey21 revealed that nearly one in five Americans either skipped or considered skipping a necessary visit for medical treatment because of financial constraints.

  The relationship between low income and health isn't simply a matter of inability to pay for health services. The impact of financial stress itself is a major contributor to health problems. One study on the negative effects of financial stress on physical well-being comes from Laura Choi of the Federal Bank of San Francisco.22 Among her key findings:

  When people are dealing with significant debt, they are much more likely to report health problems.

  The threat of ongoing debt or insufficient income can result in feelings of loss of control, anxiety, and other mental and emotional stress.

  Chronic financial stress has been linked to a cycle of increased workplace absenteeism, diminished workplace performance, and depression.

  According to a paper in The Journal of the American Osteopathic Association, between 75 and 90 percent of visits to primary care providers are for stress-related issues. Arta Bakshandeh, senior medical officer with Alignment Healthcare in Los Angeles, highlights the relationship of stress to health when he says, “Of the patients that I would attribute their medical problems to stress, the overwhelming majority have money at the root Most commonly, these patients complain of headaches, elevated blood pressure, ulcers, depression, and moderate to severe anxiety.” Since financial stress is the most common type of stress, in effect, it's likely that a majority of primary care patients are seeing their care providers for conditions related to financial stress.

  Financial stress can contribute to a
host of physical conditions, including heart disease, gastrointestinal problems, weight issues, diabetes, and high blood pressure. Another potential impact of financial stress may be seen in the growing prevalence of substance abuse. The U.S. “opioid epidemic” is now receiving long-overdue attention as a serious issue. However, most media reports provide superficial explanations for the crisis, tending to attribute the root of the problem to excessive prescribing of opioid drugs for pain. Most political responses center around legislation restricting legal access to opioids in various ways. Not enough attention has been paid to the fact that the opioid epidemic seems to be most acute in certain parts of the United States, such as the “Rust Belt,” where manufacturing and coal industry jobs have been decimated over several decades, and where unemployment and underemployment is high. Bloomberg is among the few media outlets that report on the connection between this tragic social issue and economics.23 We believe that a major contributor to the opioid crisis is financial stress caused by job loss and lack of job opportunities in economically depressed regions. Dealing with such severe financial insecurity is likely to cause a host of health conditions and emotional issues that may lead people to seek out pain medication, whether from qualified medical professionals or illegal sources.

  How Financial Resources Support Health

  Now let's turn to the upside of the money–health relationship. One clear connection is that having a certain amount of money gives us access to resources that promote health, for example, high-quality food, access to better healthcare, ability to live in safer neighborhoods, and access to fitness resources such as expensive sports equipment and gym memberships. Most of us recognize that financial health and physical health can and ideally should be related. For example, according to a survey conducted by TD Bank in 2015, 70 percent of Americans believe that being in good shape financially can have a positive impact on overall health and well-being. This number increases to 80 percent among those who have a financial plan.24,25 A report by UK-based global financial services company Aviva reinforces the link between financial planning and happiness. According to Guardian's Rebecca Smithers, the Aviva study reveals:

  …overall happiness, well-being, and self-esteem are influenced by our sense of financial control and not by how much we lodge in the bank every month…

  …those with sensible financial plans in place are happier overall and have a stronger sense of “financial wellbeing,” regardless of their pay packet.26

  What accounts for this belief? Most people say that when their finances are in good shape—and they have a financial plan—it's much easier to achieve goals for fitness and health.

  When it comes to Americans' current fiscal and physical health status, only about one-third of respondents (36 percent) said they are satisfied with their current financial health. Yet among those who are satisfied with their physical health, 65 percent said they are also satisfied with their financial health.

  “It's no surprise that getting your finances in order can relieve stress, but our research shows that it can also positively affect physical fitness,” said Ryan Bailey, head of Retail Deposit Products, TD Bank. “With [New Year's] resolutions still top of mind, it's important for Americans to know that working on your wallet can also benefit your waistline. You don't have to choose one or the other.”27

  Erin Livermore and her husband, Doug, suffered sticker shock when they first moved with their two young girls to the pricey Washington, D.C., area after 10 years living in several different parts of the country where cost of living was fairly low. Though they both found good professional jobs, housing and childcare costs left them in a precarious financial state, barely covering basic expenses each month. Erin felt oppressed and stressed. Then after a year at her job as an accountant with a major media company, she landed a promotion to senior accountant, with a modest salary increase. But it was enough to give her a little leftover money to pay for some exercise classes. Those classes helped her in many ways: She gained physical strength, lost weight, and felt better about herself. Though Erin was getting up an hour earlier many mornings to go to her fitness class, she began to experience more sustained energy and focus during the day. Erin believes that her fitness program increased her productivity at work, and actually helped set the stage for a rapid second promotion to assistant controller. Erin promptly signed up for some additional exercise classes she hadn't been able to afford before.

  Health Practices Can Improve Your Finances

  As mentioned, you can improve your health by leveraging money to access health-promoting resources, including medical care, fitness activities, and high-quality foods and nutritional supplements. But the reverse is also true: Adopting health-promoting practices can result in financial gains. For example, seemingly minor actions intended to improve physical health have also been found to have positive effects on financial well-being. For example:

  A full night's sleep has been linked to a 5 percent increase in pay.28

  Regular exercise is related to a 7 to 12 percent increase in pay.29

  How do health-promoting practices translate into such financial gains? One example: Employees in midlife who get involved in fitness activities become more productive on the job. Since they tend to continue fitness practices after retirement, they place less of a burden on retiree healthcare programs. Therefore, forward-looking companies who provide physical activity programs or fitness centers encourage the kind of physical fitness behaviors that result in lower employee and retiree costs down the road.

  HAPPINESS AND HEALTH

  In recent years, there has been a wealth of research trying to identify the link between emotions and health. One of the most significant studies, one being conducted by Harvard's School of Public Health, seeks to answer these questions:30

  Could a sunny outlook mean fewer colds and less heart disease?

  Do hope and curiosity somehow protect against hypertension, diabetes, and respiratory tract infections?

  Do happier people live longer—and, if so, why?

  Common sense tells us that negative emotions lead to unhappiness. But what are the emotions and personal characteristics that can positively influence our health? Social psychologist Laura Kubzansky, Lee Kum Kee Professor of Social and Behavioral Sciences at the Harvard School of Public Health, is part of the HSPH research trying to understand how positive emotions influence health. In a large study that followed adults across their life span for 20 years, Kubzansky found that “emotional vitality” (which she defined as a sense of enthusiasm, hopefulness, engagement in life, and ability to face stresses) reduced the risk of coronary heart disease. Figure 1.3 summarizes the research on certain happiness-related attributes that the Harvard School of Public Health study and elsewhere have identified as promoting positive health outcomes.

  Keys to a happier, healthier life

  Research suggests that certain personal attributes—whether inborn or shaped by positive life circumstances—help some people avoid or healthfully manage diseases such as heart attacks, strokes, diabetes, and depression. These include:

  Emotional vitality: a sense of enthusiasm, hopefulness, engagement

  Optimism: the perspective that good things will happen, and that one's actions account for the good things that occur in life

  Supportive networks of family and friends

  Being good at “self-regulation,” i.e. bouncing back from stressful challenges and knowing that things will eventually look up again; choosing healthy behaviors such as physical activity and eating well; and avoiding risky behaviors such as unsafe sex, drinking alcohol to excess, and regular overeating

  Source: Laura Kubzansky, Harvard T.H. Chan School of Public Health

  FIGURE 1.3 KEYS TO A HAPPIER, HEALTHIER LIFE

  Other research demonstrates the impact of happiness on health. Happiness is heart-protective. Middle-aged men and women who rated themselves as being happy over the course of a working day received a variety of laboratory test results that are associated w
ith lower risk of heart disease. Happiness has also been shown to reduce the risk of viral illness, suggesting that happiness has a beneficial effect on our immune systems. So there's clear evidence that health and happiness are related, but does one cause the other? It's easy to imagine that being healthy leads to feelings of happiness. But can the mere fact of being happy improve your health? The answer is probably yes. There is some intriguing research suggesting that maintaining a happy mood can have positive health effects later in life; that is, happiness can prevent future disease. Take, for example, results of a large, long-term Canadian study of heart disease:31

  …researchers invited nearly 2,000 Canadians into the lab to talk about their anger and stress at work. Observers rated them on a scale of one to five for the extent to which they expressed positive emotions like joy, happiness, excitement, enthusiasm, and contentment. Ten years later, the researchers checked in with the participants to see how they were doing—and it turned out that the happier ones were less likely to have developed coronary heart disease. In fact, for each one-point increase in positive emotions they had expressed, their heart disease risk was 22 percent lower.

  Based on these results, the researchers concluded that heart disease risk could be dramatically lowered by working with people to treat any depression and by helping people increase their level of positive emotions. And as you'll discover later in the book, there are many direct and practical ways to increase your level of happiness.

  * * * * * *

  By studying the research and through years of experience in coaching individuals to improve their business and personal performance, we co-authors have developed effective tools to help you leverage the intersection of money, health, and happiness in positive ways. Co-author Doug developed a model (the alignment model) and a set of practices that have brought him and many others a great deal of life satisfaction. Following the alignment model doesn't mean you'll always be 100% happy. There are times when the intersection of money, health, and happiness can become a vicious circle. There are life events you can't control that can trigger a downturn in your well-being, and make it more difficult to follow the steps that sustain your well-being. But even during dark times, there are practices we'll share that can keep you from hitting rock bottom and restore your sense of well-being much more quickly than otherwise.