It’s time we have “the talk”.
No, not the one about birds, bees, or defining the relationship with your significant other.
I’m talking about your financial health.
In our society we love to believe that simply having more money will solve everything, but that’s just not true.
More money can certainly help knock out debt and experience more of life, but unless you strengthen your relationship with money, you can still end up broke and unhappy.
Don’t believe me? Just Google celebrity and lottery winner bankruptcies.
Money is a powerful tool. One that can be yielded in a way to enrich the lives of many.
On the other hand, the lack of, and/or mismanagement of money can be detrimental.
Evidence of that is the fact that money is a leading cause of stress among Americans.
The reasons behind that stat are many, but it doesn’t help that most Americans don’t have a solid grasp of financial literacy.
More money won’t decrease your stress if you don’t know what to do with it, or what it takes to keep and grow more of it.
Even if you know what to do with it, you can still blow it if your mind is not in the right place.
That’s where prioritizing your financial well-being comes in.
So, What Is Financial Well-Being?
Like most things, you can find various interpretations of what it is, and how to achieve it.
For me, I like to lean towards a simplified interpretation of well-being and say it’s being comfortable, healthy, and happy in your finances.
This happens when you can regularly pay your bills—and on time, strive towards future goals, absorb financial shocks, and make choices that allow you to spend on what matters to you most without going deeper into a financial hole.
My favorite part about financial well-being is that it’s not just a number. It’s a holistic state of your financial health that includes both objective and subjective measures.
Like general well-being, your financial health exists on a continuum and interfaces with the other four essential elements of well-being: career, social, physical, and community.
The intersection with other elements is why you just can’t have money, ignore the other areas, and expect to be holistically happy in life. You need balance.
Basically, there’s levels to this, and you need to be committed to the journey.
What Financial Well-Being is NOT
I need to be clear that financial well-being is NOT tied to your salary.
You can make six-figures and still be unhappy, or living paycheck to paycheck.
It’s NOT about only buying generic brand cereal, being forced to stop buying coffee, or having to cut the (cable) cord. Rejoice, satellite TV lovers.
Oh, and it’s definitely NOT about just hiring someone to manage your money while you look the other way.
High level of Financial Well-Being
As mentioned earlier, financial well-being is about being comfortable, healthy, and happy in your finances. It’s a mix of both numbers and feelings.
There is no one-size-fits all approach to achieving and experiencing financial well-being, and the continuum can range from extreme financial stress to being in great financial shape.
So, let’s take a look at what it means to be higher on the continuum of financial well-being, and how to get there.
Financial behaviors don’t happen in isolation.
There is always a “why” behind each financial decision; each linked to a value, thought, motivation, and feeling.
Your values influence the thoughts you have about money, which lead to feelings. Those feelings impact your behaviors—what you do with your money—which directly create your results.
That’s right, cognitive-behavioral psychology and the self-coaching model absolutely applies to money.
When you are financially healthy you take time to evaluate your values, observe your thinking, and become aware of your feelings around money.
You also focus on the areas of life that bring you the most satisfaction.
You will no longer carelessly spend; each behavior is intentional and aligned with your values, what brings you joy, and your future desired results.
If you struggle with this, start by examining your values, beliefs, and thoughts around money.
Take the time to understand how these elements impact how you approach finances and whether or not they are hurting or helping your relationship with money.
Knowing yourself is the foundation for financial well-being.
Exercising control over your money
A major element of financial well-being is being in control of your dollars, to include month-to-month necessary expenses, wants, and savings.
Instead of each month flying by without knowing where your money went, you are telling it where to go.
You are in control of your money.
This means having a thorough understanding of your current cash flow, looking ahead, having a monthly money plan, and staying on track with the plan.
That “plan” can be in the form of a written spending plan, budgeting app, bill calendar, or whatever method(s) you choose. It just needs to be something that works for you.
Related reading: Creating a budget you can be happy with
When you are in control, you will have confidence in each decision and how it fits within your overall financial objectives.
It’s spending and saving with a purpose.
Being prepared for the unexpected
Anything can happen, and eventually it will.
A car or home repair can be needed at any moment.
Or, a temporary job loss or Government shutdown can leave you without a steady paycheck for weeks, or even months.
Your protection against challenging situations is an emergency fund, and when you don’t have one in place, you are asking for Murphy’s law to show up and make your life miserable.
Working towards having 3 to 6 months’ worth of expenses is the standard, but I would encourage you to shoot for 9 months.
It may seem excessive, but financial security should be a priority and having a strong emergency fund is the difference between a situation being a financial burden and just an inconvenience.
Actively working to get out of debt
Debt has been normalized in our society so much that it’s becoming uncommon to not have debt.
While having available credit can provide access, debt can slow you down from reaching your financial goals and objectives. Not to mention it can compound the issue of financial stress.
Those who are on the higher scale of financial well-being actively manage, and eliminate debt.
They do so while pursuing intermediate and long-term savings to lower the dependence of debt in the future.
To accelerate your debt-elimination journey, take an inventory of your non-mortgage debt, and then use the snowball method to attack it.
Your overall financial health and comfort depends on not being handcuffed to your debt.
Being at peace with how you earn money
One upon a time, I hated my career.
I was making great money, but was absolute miserable with how I was earning it.
While the career lined up with my strengths, I couldn’t connect with the mission.
If I had to rate my job satisfaction on a scale of 1 to 10, I was around a 2.
I was out of balance in two of the essential elements of well-being; I put too much weight on the element of financial and not enough on career.
Those who have a strong level of financial well-being are at peace with the way they earn their money and feel a sense of connection to their careers.
To get there, you may need to re-evaluate what would give you energy in a profession and actively pursue opportunities to inch you closer to being in alignment.
Making good money isn’t enough if the way you earn it makes you miserable.
Having and enjoying options
We have all been in the situation where your favorite band comes to town, or a vacation opportunity arises that you were unprepared for.
When you are financially healthy, you can take these opportunities without going deeper into credit card debt, or feeling an ounce of guilt.
Financial well-being gives you flexibility and allows you to enjoy living life how you want to because you have chosen to be intentional with your money.
The combination of having options and being in control of your money puts you in position to splurge on occasion, give extra to your community, or even work less while still staying on track with your other goals.
Consider this the “freedom” aspect of financial well-being. You get there by staying on top of your finances, creating wiggle room in your cash flow, and knowing how and when to make sacrifices.
This freedom allows you to spend on the things that make you happy.
Pursuing future goals
If you think about it, five years ago wasn’t that long ago, and before you know it another five will fly by.
A key element of financial well-being is keeping an eye on, and planning for the future.
Whether it’s an intermediate goal like buying a house, or long-term like retirement, there has to be a vision and plan.
Spending time to determine the type of life you want down the road, and working backwards to establish the roadmap (i.e. savings, and investment goals) is time well spent.
Related reading: How To Create Goals You Believe in
Feeling satisfied in your finances
Financial security can bring satisfaction.
When you are content in your finances, you won’t be spending so much energy being worried about making ends meet, and you can focus on what matters most in your life.
For example, you can enjoy a night out with friends without worrying about the damage its causing to your finances.
You can fully connect and engage with your value of friendship without stress or worry.
This is how prioritizing financial well-being can help you to find balance in other areas of your life.
Less financial stress and more engagement with your values will lead to a happier you.
I really love this subject!
To be honest, I’m barely scratching the surface on financial well-being.
There’re so many angles to this, but I hope this is at least provides a solid foundation.
What’s important to remember is that this is your unique journey; requiring intentionality in both thought, and behavior.
In other words, there’s no “magic pill” approach to reaching a high level of financial well-being.
The trick is committing the journey.
Committing to the journey of aligning your thoughts, strengthening your relationship with money, implementing healthy changes, and trusting time.
If you do, the result will be the financial comfort, health, and happiness you desire and deserve.