WHAT IS FINANCIAL WELLBEING?

On the surface, money and wellbeing don’t seem to have much in common, do they? But that hasn’t always been true. The word ‘wealth’ comes from the old English ‘weal’, which means ‘wealth, welfare, and wellbeing’. Weal is in turn related to an even older word ‘wel’, which meant ‘in a state of good fortune, welfare, or happiness’. At some point in our more recent history, we lost the more holistic perspective and money/wealth became detached — viewed more as cold, hard cash or at the least, with mildly negative connotations. The reason I bring this up is because many of us unconsciously view money as an end rather than a means. We all form most of our important beliefs as children including about money. But as adults we often lose touch with these emotional connections, leaving us prey to deep feelings we don’t understand. Fortunately, things have begun to change in recent years as the search for life balance and meaning has become mainstream. Learning what really brings us life satisfaction, and the true role of money in that endeavor, is an important step in achieving the holistic sense of wellbeing we all intrinsically desire. Let’s start by exploring wellbeing, especially financial wellbeing, and why it is so important.

What is wellbeing and is wellness the same thing?
First things first. The words wellness and wellbeing are often used interchangeably – but are they? While the concept of wellness, or the opposite of illness, traces back centuries, the movement really picked up steam in the 1950’s after the World Health Organization (WHO) used the term “wellbeing” in their constitution. There is no universal agreement, but wellness is often used to describe the health of the physical body. Wellbeing encompasses a broader perspective and constitutes the combined state of the body, mind and spirit. Not a totally new idea, as this trifecta was used to symbolize the YMCA as early as the late 1800’s.

What do we mean by “financial” wellbeing?
Wellbeing in an even broader sense, refers to what is intrinsically good for us. The word itself has Italian origins and from as early as the 1600’s it indicated an on-going positive state of health and welfare. Financial wellbeing defines “what is good for us” as how people feel about the control they have over their financial situation. Based on a research study of consumers around the country, the federal agency Consumer Financial Protection Bureau (CFPB) defines the term “financial wellbeing” as having an acceptable level of financial security and freedom of choice. They determined the factors that lead to a sense of financial wellbeing are one’s environment, personality and knowledge.

Is there a relationship between money and happiness?
Your next question might be, are happiness and wellbeing the same thing? Spoiler – the answer is kind of! A significant evidence-based study – The Australian Wellbeing Index – theorizes there are three key contributors to a strong sense of wellbeing: close personal relationships, financial control and a sense of purpose. They called this key to high life satisfaction “The Golden Triangle of Happiness”. Catchy title but even the study points out that while most of us also use these words interchangeably, happiness tends to come and go while wellbeing is a more stable state.

What is financial control and how does it relate to wellbeing?
So, what do they mean by “financial control” and why is it thought to be fundamental to happiness? The Australian Wellbeing Index showed that one’s sense of wellbeing rose with household income – to a point. After $100,000 money wasn’t much of a factor. Participants in the study indicated the power of money was mostly related to alleviating stress. That meant even people with lower levels of income could have a sense of happiness and wellbeing if they felt in control of how they spent their money. Key components are an awareness of month-to-month finances, maintaining an emergency fund, tracking long-term financial goals and having the freedom to make desirable choices in life.

Surprisingly while close relationships, financial control and a sense of purpose were the drivers of happiness and wellbeing, physical health was relatively unrelated. To put it another way, people are happiest when they are living a meaningful life. When you eliminate the worry of a lack of money, that life becomes golden!

Wrapping it up – to find your Golden Triangle of Happiness do some work on your own attitudes about money and make sure you are spending time on both your short-term and long-term financial future. Then money becomes the worthy means to an end it is meant to be!

Resources…

Rawson Gulick Interview
https://lady-money.simplecast.com/episodes/why-financial-wellbeing-matters-an-interview-with-advisor-rawson-gulick