5 Ways Giving Can Improve Your Financial Wellbeing

As we head into the holiday season, I am filled with gratitude for my loved ones and community. Each day, I work to reflect on the ways my co-workers support me, the ways my community members improve my daily life, and the ways my family brings me joy. This sense of gratitude and abundance has encouraged me to give back to others, whether through words, actions, or gifts. In the past, gratitude for the first responders in my community encouraged me to make a Thanksgiving meal for a local fire station. Gratitude for my children has led me to call them and leave them a sweet voicemail.

As I’m moved by gratitude towards the spirit of giving, I’ve found an attitude of abundance and generosity has improved my own mental and financial wellbeing. My positive attitude has helped shift my behavior. With that said, I encourage you to focus on gratitude this season. Allow the spirit of abundance to fill you, until you’re overflowing with joy that you can share with others. You just may find yourself blessed with some of the following financial benefits.

1. Your investment returns could improve in the long-run because you respond more thoughtfully and carefully to market loss and volatility. Most of us struggle with a bias known as loss aversion. When driven by loss aversion, our bodies and minds tend to focus on losses more than gains. Even if we experience a gain the same size as a loss, we still remember and respond more to the loss. As a result, we may react poorly to stock market losses, pulling our money out of the market prematurely or making other reactionary decisions that negatively impact our returns in the long-run. However, giving back to our community can help your body release serotonin, increasing your overall happiness and satisfaction. As satisfaction increases, our hyper-focus on negativity and loss decreases, and we are able to make more level-headed decisions that could beneficially impact our investment returns.

Stock market downturns also uniquely impact philanthropic organizations. Experts have found that the performance of the S&P 500 is a strong predictor of household giving. When the S&P 500 is down, households tend to give less than when it’s up. With philanthropic organizations potentially receiving fewer donations this year as a result of stock market volatility, your donation could make an especially meaningful difference.

2. Giving can improve your spending habits. Frivolous or impulsive spending has been linked to feelings of loneliness, hopelessness, and other negative feelings. We sometimes spend money to boost our mood and feel the “buyer’s high.” Unfortunately, spending money on products is not linked to long-term improvements to mood. Rather, spending money in this manner can eventually lead to guilt and continued feelings of hopelessness. However, spending time and money on people and causes we value has been linked to long-term improvements in mental and physical health. With sustained improvements to your mood as a result of generosity, you may be less likely to spend out of a desire to escape challenging emotions.

3. Generosity can improve your ability to make prudent financial decisions. In a study that looked at the brains of people who gave to others out of a sense of gratitude, researchers found such giving increased brain activity in the learning and decision-making portions of the brain. Such effects were even observed three months later, suggesting that gratitude-based giving could have a lasting impact on your brain’s wellbeing. With giving potentially improving your decision-making abilities, you may find that your personal financial situation improves as you make more considered, thoughtful decisions moving forward.

4. Giving improves your mental health, making it easier to achieve other financial goals. As mentioned, gratitude and giving both increase our mental wellbeing. It’s important to remember that doing so only occurs when we are giving to people or organizations for whom we feel genuine gratitude. Giving out of a sense of obligation tends to not have the same positive impact on our mental health. However, giving to causes that we value and to people we cherish can help relieve sadness and depression in favor of greater mental stability. With a healthier, positive attitude, it is easier to set and work towards goals that could improve our financial health.

5. Giving can save you money. Beyond the tax deduction for charitable giving, giving could also reduce your medical bills. Giving has been shown to improve your immune system, lower blood pressure, reduce stress and inflammation, and improve your health in other ways. One study even found that giving lowered participants’ blood pressure to a similar extent as would exercise. So if you’re a little tired of hopping on your treadmill, consider writing a gratitude letter to a friend or donating your time to a local mutual aid organization. Your doctor may thank you!

During this season, the Elm3 team also wants to acknowledge the generosity, love, and compassion of all of our clients. We are endlessly grateful to be included in your journeys and look forward to working together for years to come.