Healthy, Wealthy & Wise: May 2009

The first sites I ever added to my Google Reader were financial blogs, namely Poorer Than You and Get Rich Slowly. This was a couple years ago when blogs were becoming more specialized and a lot higher quality, and less about what people watched on TV last night and what their boss said to them this morning. Actually, I'm sure this happened much earlier, but in my own personal History of the Internet timeline, that's how it went.

Recently, I came across Queercents which obviously is a financial blog for the GLBT peeps. It's pretty fantastic whether you identify as "queer" or not. Practical financial advice transcends all sexual boundaries, it turns out. Weird!

Anyway, a post published last week by Carol seemed appropriate to highlight in this blog. The Financial Component of Wellness briefly discusses the relationship between savings and stress and links to a pretty interesting study that looked at the two factors.

The study (which you can find at MSN Money) was conducted by Stephen Brobeck of the Consumer Federation of America. Brobeck looked at the savings trends of a low income group and a high income group and the issues and variables that accounted for why some saved and other did not.

There is a lot of interesting data from the study, but the most relevant statistics are those concerning the psychological impacts of keeping "emergency funds" (or EF) or at least $500 in the bank. The participants were broken up into two groups: low-income (earning less than $25,000) and moderate-income (earning $25,000-$50,000). Here are two tables reflecting the results:

For both groups, nearly two-thirds of people with less than $500 saved worried about money frequently compared with about a quarter of those who had at least $500 saved. Of those frequent worriers, A LOT of people are losing sleep: 68% of the low-income group and 60% of the moderate-income group.

The gap between the savers and non-savers widens even further when respondents were asked about their health. Fifty percent of the low-income, non-saving worriers reported that their health was negatively affected, as well as 35% of the moderate-income non-saving worriers. Of those who saved, 19% of the low-income and 22% of the moderate-income worriers reported worse health.

Interestingly, those respondents who had $500 or more saved typically used one or more of the following techniques to manage their finances:

Knew net worth
Had a spending plan with goals
Had a saving plan with goals
Had a spending plan that allowed meeting saving goals
Outside of work, saved automatically through pre-authorized transfers from checking.

Like any study, this one has some flaws (they used self-reporting and phone interviews to name two), but I don't think it clouds the issue too much. Clearly, people who worry about money suffer more than just a lack of funds, but some of those effects can be offset by giving yourself a little cushion and employing some basic money management techniques.

To be honest, I was pretty surprised by these percentages. I worry about money sometimes, and while I will occasionally wake up with a start because I forgot to pay a bill, I wouldn't say that I lose sleep over it. However, I have over $500 saved and a relatively stable job (although I had a dream last night that my boss had to let me go because his business was failing... yikes).