Building a more positive relationship to your finances often begins with small steps in the right direction.Getty images
If you’re into wellness, you might be familiar with ways to take care of yourself physically and mentally: Move your body more, eat nourishing foods, meditate and spend time in nature.
But, have you thought about how you could translate those same philosophies into boosting your financial well-being? At a time when Canadians’ financial stress levels remain high, there’s never been a better time to tap into whatever the cash flow and debt management version of “green juice and yoga” could be.
That’s where the Financial Wellness Lab of Canada at Western University could help.
Its principal investigator, Matt Davison, explains that this unique laboratory was created to help Canadians enjoy a more positive financial existence by analyzing real-world data.
“Everyone thinks, ‘If I just made $5,000 more, I’d be good,’” explains Davison, who’s also the dean of Western’s Faculty of Science. “The reality is oftentimes that’s not true. If you make $5,000 more, but you spend $5,100 more, you’re right back where you started, albeit with more stuff.”
In fact, research conducted by the Financial Wellness Lab of Canada at Western University, found there is financial stress at all levels of the economic scale. Though those at the lower end are more susceptible to financial struggles, those at the top aren’t immune.
The Financial Wellness Lab recently secured a $2 million investment from the Ontario Research Fund (ORF) Research Excellence program, and another $2 million donated by corporate partners, to further that mission.
Davison explains the lab offers a counterweight to a marketing machine that leverages human psychology to encourage spending, often to the detriment of financial well-being.
“It’s not rocket science, but if you’re spending more money than you’re making, and you’re making up the difference with debt, you’re going to become stressed,” he says. “Particularly if it’s credit card debt, and if the debt is to finance consumption, rather than to finance a home purchase.”
Davison likens spending irresponsibly to eating unhealthy food, suggesting the immediate reward can lead to long-term challenges and regrets.
“We’re not telling people, ‘You shouldn’t have gone to see Taylor Swift, that was stupid, you could have saved $2,000.’ If that’s really what you want to do [with your money] who are we to judge?” he says. “But what we can say is that people who spend too much end up feeling miserable about it; not because of any one thing they bought, but because of the fact that they overspent.”
The best way to achieve financial wellness, according to Davison, is to define your household financial priorities, and create a budget that helps you achieve them. Aligning on those long-term goals, calculating what it will take to achieve them, and setting aside the appropriate amount puts people in a position to splurge on a pricey concert ticket, for example, without regret or misery.
“When it comes to budgeting, people have a real habit of obsessing on the inessential parts of it and missing the main point,” he says. “The main point of a budget is not to predict exactly how much money you’re going to spend on onions in March; the point of a budget is to make sure you have a rough idea of what your goal is and how you’re going to get there.”
Having a rainy-day fund is also an effective way to both guard against unanticipated challenges and to feel more confident in your financial well-being. As is contributing to long-term savings plans, especially those that include government or employer support, like RRSPs and RESPs.
Though much in the macro-economic forecast remains uncertain, Davison suggests that collective financial challenges have proven to encourage better financial habits, as seen during COVID, when household savings skyrocketed. That is why he is optimistic that Canadians can improve their financial wellness in any economy.
“Just start taking little steps, and eventually they’ll turn into big steps,” Davison says. “For most people, little steps over a long time can make a big difference in the way they feel about their life.”
