How Financial Habits and Situations Can Affect Productivity.
By: Carl Pullein
Tags: Stress, Financial Health, Financial Stress, Productivity, Personal Finance

This week’s blog post is a guest post by the wonderful, Luke Smith. Thank you Luke for writing this for us.

If you’ve ever worried about money, you know that the effects of financial stress seep into nearly every facet of your life. You don’t just worry about your finances when rent is due or you see the stack of bills on your kitchen table. Even when you punch in for work, you’re still agonizing over your situation.

Stressing about money while you’re supposed to be earning it can negatively affect your productivity. Taking your financial worry to work with you could potentially jeopardize your livelihood. Since losing your job would only compound your stress, you must make a plan for how to improve your financial habits so that the worst-case scenario doesn’t happen.

The first step is understanding how your financial situations affect your work performance. From there, you will see how building strong financial habits translate into improved productivity.

Why Financial Situations Cause Stress

According to the 2020 “Getting Paid in America” survey by the American Payroll Association, approximately 69% of people living in the United States would experience financial strain if their paychecks were delayed for a week. The survey respondents said a missed paycheck would put them in a position where it was either somewhat or very difficult to meet their financial obligations.

Individuals living paycheck-to-paycheck are existing on the edge of financial ruin. High debt, medical bills, and health insurance are just some of the financial obligations that can cause stress. If you aren’t managing your money well, financial setbacks and unforeseen expenses can skyrocket your stress levels.

A major reason bad financial situations cause stress is that people often don’t know how to get themselves out. People see a mountain in front of them and have no idea how to climb it.

Frequently, there’s a lack of knowledge regarding taking on debt and a cloudy understanding of how to repay it. Missed payments can quickly spiral out of control and have negative consequences for not just your credit and finances but also your mental health. To avoid these negative consequences, you must commit to conquering the mountain in front of you and put a strategy in place to do so.

How Stress Affects Productivity

Regardless of the source, stress can impact your mental health and physical well-being. In the workplace, the negative effects of stress look like lower job performance and decreased productivity. Other consequences included reduced work quality, delayed deadlines, conflict among colleagues, workplace accidents, and burnout.

A 2019 study by Colonial Life revealed that more than 20% of respondents admitted to spending at least five hours of the workweek thinking about stressors such as health, jobs, and finances. Using additional data from the U.S. Bureau of Labor Statistics, Colonial Life estimated that employers are losing billions of dollars annually due to stress-induced productivity loss.

Fortunately, there are steps you can take to improve your financial situation and, in turn, return to your normal productivity output. Having a plan to establish solid financial habits will help you to feel less stressed and more in control of your financial future.

Tips for Building Good Money Habits

Establishing solid financial habits starts with knowing your expenses inside and out. Before you can save money, you need to know exactly how you’re spending it. Learning how to budget begins with tracking your income, spending habits, and various expenses. No purchase is too small not to be noted. With such information in hand, you can then use a simple budget calculator to get a clear picture of your financial situation.

Whatever budget calculator you choose to utilize should have a section for savings. At a minimum, set aside money each month for an emergency fund. With savings set aside, you will have more options should an unexpected situation arise and that knowledge alone will give you greater peace of mind. Beyond an emergency fund, you can set up separate savings accounts for investments and retirement.

Finally, and perhaps most importantly, you must put together and take action on a plan to get out of debt. To pay your debt down in the most efficient way possible, you need to know what options are available to you. If you have multiple debts, research the debt avalanche and debt snowball repayment methods. The former involves paying off your largest debt first while the latter advises beginning with the smallest one. These strategies can help you rebuild your credit (even after bankruptcy) and keep you from spiralling into debt again down the road.

From paying down your debt in the most efficient way possible to saving an emergency fund, establishing good financial habits will decrease your stress levels and allow you to focus your energy on important tasks. When your mind is occupied with money worries, it’s difficult to be productive. Having a plan to manage your finances will boost your confidence in other areas of your life. Embracing financial responsibility will help you to feel happier and more secure as well as free you up to perform better at work.

Luke Smith is a writer and researcher turned blogger. Since finishing college he is trying his hand at being a freelance writer. He enjoys writing on a variety of topics but leadership and digital marketing topics are his favorite. When he isn’t writing you can find him traveling, hiking, or gaming.

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