What do personal finances and personal physical health have in common? More than you might think.
According to a new study by the Association for Psychological Science, the two conditions may share the same root cause. Most notably, that those who have poor financial management skills are also more likely to have poor physical health.
The paper, Healthy, Wealthy and Wise: Retirement Planning Predicts Employee Health Improvements, appeared in the professional organization's journal. It was the product of research by Lamar Pierce, a professor at Washington University in St. Louis, and doctoral candidate Timothy Gubler.
“We find that existing retirement contribution patterns and future health improvements are highly correlated,” the researchers write. “Those who save for the future by contributing to a 401(k) improved abnormal health test results and poor health behaviors approximately 27 percent more than non-contributors.”
The researchers determined that having inadequate retirement savings and chronic health problems are both driven, at least in part, by a cognitive bias known as "time discounting," which can lead people to prefer small and immediately tangible rewards over larger future rewards.
"Are poor physical and financial health driven by the same underlying psychological factors? We found that the decision to contribute to a 401(k) retirement plan predicted whether an individual acted to correct poor physical-health indicators revealed during an employer-sponsored health examination. Using this examination as a quasi-exogenous shock to employees’ personal-health knowledge, we examined which employees were more likely to improve their health, controlling for differences in initial health, demographics, job type, and income.
"We found that existing retirement-contribution patterns and future health improvements were highly correlated. Employees who saved for the future by contributing to a 401(k) showed improvements in their abnormal blood-test results and health behaviors approximately 27% more often than non-contributors did. These findings are consistent with an underlying individual time-discounting trait that is both difficult to change and domain interdependent, and that predicts long-term individual behaviors in multiple dimensions."
The full article is available at the APS website.
After compiling health and financial data from workers at multiple companies in several states, and with controls for differences in initial health, demographics and job type, the researchers monitored the employees over a span of two years to see what differences changes to their health and their finances. They found that "retirement savings and health improvement behaviors were highly correlated."
In other words, as Gail Perry, CPA, put it, "People who take care of themselves physically are more likely to take care of themselves financially."