x Abu Dhabi, UAEFriday 21 July 2017

Maintain health and gain wealth

It's a correlation tested by the ages. Taking care, while rewarding in itself, will inevitably improve your financial future.

Staying healthy can be a shot in the arm for you investment portfolio.
Staying healthy can be a shot in the arm for you investment portfolio.

Virtually since the dawn of civilisation, health has been called an end in itself - a pursuit that needs no further justification. Aristotle and Plato both called health a basic condition without which no other kind of prosperity is possible. Aristotle in one of his treatises even cites a much older Delian saying: "most noble is that which is most just, but best is health". Health may be its own reward, but much evidence has accumulated over the years to suggest that it's also a means to other ends, including wealth. Academics have been piecing together the links between health and wealth since at least the 1960s, and unsurprisingly, the research so far has revealed a strong correlation between the two. Wealthy people tend to be healthy, perhaps in part because they can spend more on drugs, medical treatments and preventive care. Healthy people also may stand to become wealthier, as they can work longer and harder than the sick.

"People of lower socioeconomic status consistently appear to have much worse health outcomes," as James P Smith, a senior economist at the RAND Corporation in the US, bluntly described the link in a 2005 paper. "No matter which measures of socioeconomic status are used or how health is measured, the evidence that this association is large and pervasive across time and space is abundant." Indeed, statistics from the US, where the most comprehensive data on health and wealth are available, show that people in the top quartile of incomes report being significantly healthier throughout their working lives than those in the second, third and fourth quartiles. Once people start to get past age 80, however, wealth appears to be a weaker determinant of health. The percentage of people reporting very good or excellent health converges at roughly 35 per cent.

The moral, according to the research - as long as you are working and making money, staying healthy preserves your ability to do so. And by extending your moneymaking lifespan, you are in effect ensuring you have a better chance at getting wealthy. You also improve your odds of avoiding disability, which could seriously hamper your ability to grow wealthier over time. And by not spending lots of money on maintaining and treating an unhealthy lifestyle, you free up capital you could save, invest or do anything you like with.

The numbers back up that notion. Drawing on a large survey of US households, researchers have estimated that the full cost of a major health shock - something unexpected but possibly related to smoking, obesity or poor general health - soars to an average of Dh135,000 after eight years, taking into account both lost income and treatment costs not covered by insurance. Moreover, people who had a big health scare actually saw their average household incomes reduced below where they were before. For many families in the survey, it took years of persistence to recover financially.

What's especially daunting about the link between ill health and lack of wealth is that it can devolve into a vicious cycle of lower income and declining health. Research shows that there is not only a casual link between bad health and less wealth, but also between lower levels of wealth and declining health. As Peter Muennig, a professor at Columbia University, put it in a paper published last year, "low income can damage health, and sickness can lead to the loss of income".

If you get sick, in other words, you stand to make less money, yet once you make less money, you are likelier to get even sicker. One way in which people can break the cycle of poor health and low income appears to be cutting out bad habits like smoking, which take a toll both on your finances and your health. Weight loss has also been shown to increase income and net worth over time. According to a 2005 study by Jay Zagorsky at Ohio State University in the US, large weight loss resulted in a significant increase in net worth, especially for women. White women who lost lots of weight - a 10-point decrease in their body mass indexes (BMIs) - were rewarded with an average increase in wealth of about Dh44,000, the study found.

That is ample reason both to avoid getting sick and to make sure you keep up on savings and investing (and maybe drop a few pounds). In the end, though, the wealth-health cycle may not be quite so simple. While researchers have worked out that wealth and health are correlated and that health causes wealth and vice versa, it remains unclear where the strongest chain of causality lies - whether it is more crucial to be healthy in order to gain and preserve wealth or whether it is better to be wealthy in order to maintain health.

The wealth side of the equation may play a more important role than once thought, according to recent research. Mr Muennig, for example, concluded in his paper last year, "Health Selection vs. Causation in the Income Gradient", that "income predominantly produces health", and not the other way around. That conclusion, if proven correct by further data-gathering and research, means that performing well at work and getting raises while sticking to a strict budget may be more than the key to putting your kids through college or living well in retirement. It may also be crucial to staying in good health, living longer and enjoying life more. afitch@thenational.ae