Financial Wellbeing. What is it? How can we tell if we have it?
It’s relatively easy to see the behaviors and beliefs around money that are the opposite of financial wellbeing. In fact, financial therapy focuses on helping people resolve these behaviors and move toward financial wellbeing. But how do we recognize when we’ve achieved it?
First, financial wellbeing is not necessarily tied to income or to any sociodemographic category. People can have huge incomes and not have financial wellbeing or have a modest income and enjoy financial wellbeing. I would say that employment status, income, and educational attainment do have a strong relationship with financial wellbeing but none of them alone define or determine it.
The Consumer Financial Protection Bureau defines financial wellbeing as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life.”
I like that definition as a starting point. I would also add that, for financial wellbeing, a person’s money and the way they use it support their quest for meaning. Money does not give us meaning in life, but it is often a valuable resource to help us find that meaning. This, of course, ties into emotional wellbeing. I think the two are strongly linked.
Can we have emotional wellbeing without money? To some degree, perhaps. But to a larger degree, I think it’s hard to have emotional wellbeing without enough money for basic needs and comfort, freedom from financial worry, and the pursuits that add joy to life.
To make it a bit more complicated, can someone with sufficient income and financial security lack financial wellbeing? Yes. I have seen this in working with financial planning and financial therapy clients. Someone with ample financial resources may still struggle with harmful money behaviors, stress and worry over money, and relationship issues that block both their financial and emotional wellbeing. Emotional health and financial health are tied together.
Then there is physical wellbeing. It is certainly possible to have emotional and financial wellbeing in spite of poor health and physical limitations. Yet in many cases, lack of physical wellbeing can also block financial wellbeing—for example, if someone is unable to work. There is also the issue of having enough money to take care of one’s physical health. So all three aspects of wellbeing are interrelated and locked together.
Another question that comes up: Is financial wellbeing a chronic state or is it momentary? I see it as a snapshot in time, somewhat like a financial statement. Once you have attained financial wellbeing, it is not necessarily guaranteed to last. In part, this is because it is so tied to emotional and physical wellbeing as well as financial resources, all of which may change over time.
This is where both financial planning and therapy may come in. You are more likely to maintain financial wellness if you have both financial resources and emotional resources. By this I mean building financial security in the form of long-term, diversified investments, as well as building emotional health by exploring and resolving issues around traumatic life experiences. Having the capacity to absorb and recover from both financial and emotional shocks and setbacks is crucial for maintaining wellness through the inevitable challenges that are part of the human experience.
Check out The Financial Therapy Podcast by Rick Kahler concerning this topic.