Entrepreneurship is an exciting journey, but the path can be full of uncertainties and mental burdens, especially when thinking about managing finances.
In the communities where we work, entrepreneurs participating in the Women’s Empowerment Project (WEP) face unique financial challenges as they struggle to build a better future for themselves and their families; which is undoubtedly challenging for their mental health.
In this article, we will explore how financial planning can be a powerful tool to reduce financial anxiety and balance your mental health. Entrepreneurs have discovered and put into practice financial planning thanks to economic empowerment workshops and individual consultations about their finances with staff.
Money-Related Anxiety: A Global Challenge
Internationally, studies have highlighted the connection between mental health and financial concerns. A report by the Organisation for Economic Co-operation and Development (OECD) found that people with financial difficulty are more than twice as likely to experience mental health problems compared to those in a stronger financial situation (OECD Health Outlook 2021 INDICATORS, n.d.).
Similarly, the survey ‘Impact of COVID-19 pandemic on mental health: An international study’, in which more than 9,000 people from 78 countries participated, revealed that the finances of 33% of respondents had worsened as a result of the pandemic (BBVA, 2021). The study indicates that deterioration of personal and family economic situations has been one of the major reasons for stress and anxiety in people around the world.
Regarding the reality of our participants, safety and gender inequality are at the forefront and are added to the worries about money and what they and their family will eat the next day. It goes without saying that this predicament slowly deteriorates their mental health, making it difficult to act with clarity and make informed decisions, especially financial ones.
Mental Health and Financial Context in El Salvador
Financial problems affect mental health in different ways. The source of their employment – in the formal or informal economy makes a big difference on people’s mental health and mental load. For example, in the informal sector, on top of not earning a very high salary, workers also do not have access to health care as those who work in the formal sector. This lack of access is a cause for concern for many.
In El Salvador, 55% of women are the sole breadwinners of their households. Of women who work outside the home, 48% are in the informal sector (Basic Guide to Gender Indicators: EL SALVADOR Gender Mainstreaming Process in the EUROsociAL Program, 2021). A few years earlier in 2017, 71.4% of women who worked outside the home (and in non-agricultural fields) worked in the informal economy–where they experienced wage fluctuation, nonexistent health or mental healthcare, and minimal opportunities to gain leadership or business skills–compared to 56.9% of men. According to the World Bank, poverty in El Salvador increased by 4.6% from 2019-2020. Most recent data indicates that 29% of Salvadoran households live below the poverty line; and among this, women are hit hardest.
According to a study by the World Health Organization (WHO), approximately 18% of the Salvadoran population suffers from anxiety disorders, which indicates the relevance of the issue.
Carlos Molina, technical director of processes of the Pro Education Foundation in El Salvador (FUNPRES for its initials in Spanish), points out that one out of two people consider that their economic situation is worse than before the pandemic. This is more marked in women and people who do not work; also those who reported that their income was insufficient.
Added to this are the high levels of uncertainty, given that 90.2 % of those interviewed, especially women, at the time of the interview were worried about the economic future of their families. The same percentage showed concern about the increase in household expenses.
According to Funpres, there is a relationship between the actual economic situation, the perception of the economic crisis and people’s mental health problems, especially anxiety and insomnia.
While these disorders are not limited to financial worries, it is important to recognize that women entrepreneurs may be especially vulnerable to money-related anxiety due to the additional pressures they face such as social violence, discrimination based on gender, and threats of forced migration.
Financial Planning as a Tool to Reduce Anxiety
In the WEP’s Economic Empowerment workshops, financial planning is one of the first tools that entrepreneurs are encouraged to utilize in their day-to-day household and business budgeting. This activity is a huge challenge for most of these women because in the past they have not had the opportunity to learn the intricacies. Once they put financial planning skills into practice, they see the benefits and importance of it, both in their pocketbook and in their peace of mind.
Here are some lessons that entrepreneurs in our WEP have put into action to lead a more peaceful life around their finances and mental health:
1. Setting Clear Goals: Financial planning begins with setting clear financial goals. This provides a sense of direction and purpose, which can reduce uncertainty and anxiety.
2. Budgeting and Expense Management: A well-structured budget helps control expenses and ensures that resources are used effectively. Knowing exactly where every dollar goes can reduce worry about money.
3. Savings and Emergency Funds: Building an emergency fund provides financial security in case of unexpected expenses. Knowing you have a financial cushion, even a small one, can relieve stress.
4. Investment and Diversification: Careful investment and asset diversification can generate sustainable financial growth and reduce uncertainty about the financial future.
5. Financial Education: Learning about personal and business finance can increase confidence in financial decision making, which reduces money-related anxiety.
Psychological and Emotional Support
In addition to financial planning, it is essential to recognize the importance of psychological and emotional support in managing money-related anxiety. Women entrepreneurs can benefit in both areas: financially, through financial empowerment workshops and one-on-one business consultation sessions; and emotionally, through personal empowerment workshops, counseling sessions, and/or psychosocial accompaniment, and the support network they have built with their fellow entrepreneurs. Open conversation about mental health in the entrepreneurial community can also help reduce the stigma associated with this issue and foster a supportive environment.
At Programa Velasco, we are committed to providing resources and support, both financial and emotional, to Salvadoran women entrepreneurs so they can empower themselves to move toward a more secure and healthy financial future. With your support, we can together overcome financial concerns and build a path to success and emotional stability for more women in El Salvador.
