9 March 2022
What is financial wellbeing?
Financial wellbeing, put simply, is all about having a good relationship with money. It’s about feeling secure and in control of your finances, both now and in the future. And for people who experience financial wellbeing, there are many other benefits. If you feel good about how you are handling your money, then you generally feel good about your overall mental, social and physical health.
So, it makes sense to understand our financial wellbeing a little more. A great deal of research has been done on this area of wellbeing. The results reveal some fascinating truths about financial wellbeing.
Firstly, money on its own is not the source of happiness. Tim Kasser, Emeritus Professor of Psychology at Know College, USA, found that when people believe materialistic values are important, they report less happiness and more distress.
Secondly, the most significant contributor to our overall wellbeing is the quality of our social relationships. A Harvard Study of Adult Development that studied over 700 men found a strong association between happiness and close relationships like spouses, family, friends and social circles. So, in many ways, financial wellbeing can be seen to be an enabler to support other areas of our wellbeing.
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And that certainly makes sense. If you are feeling empowered with your financial situation, it is likely to lift your confidence in other areas where you might have been feeling less capable and more vulnerable.
A recent Te Ara Ahunga Ora Retirement Commission survey into New Zealand’s Financial Capability (2021) revealed that the behaviours that have the most significant impact on financial wellbeing are active saving, spending restraint, not borrowing for everyday expenses, informed financial product choice and financial inclusion. While we seem to be good at the basics of financial capability, New Zealanders generally perform worse on more advanced financial capabilities. Women are, on average, better than men at dealing with day-to-day money management and psychological factors such as impulsivity control or attitudes to saving. Still, they achieve worse outcomes than men overall, and there is an area of need for women relating to understanding risk and comparing and choosing financial products.
One of the best things we can do to influence our financial wellbeing is to focus on what we can influence and put a plan in place to address those areas we can control. For example, we can start to have clear objectives about how we will cope with those unexpected financial shocks, such as needing urgent medical care or caring for a family member after an accident. Having a robust Will in place for those we leave behind and having control of our daily finances are also crucial elements to ensure our financial wellbeing.
In creating a meaningful retirement, a financial plan can provide you with options. Spending time working out what you want from your retirement and then creating a plan around your financial wellbeing can bring a great deal of satisfaction. It might be as simple as setting a budget, cutting costs or educating yourself about staying safe from online scammers. Before making any significant financial decisions, it’s a good idea to consider getting financial advice. While money worries may not be the only thing you’re dealing with right now, it’s good to know support is out there.
Financial stress – and its knock-on effects for mental health, relationship breakdown and physical health – can have severe consequences for individuals, communities, businesses and the overall economy. The more we can do to meet our day-to-day financial commitments, feel comfortable with our financial position and create resilience for the future – the better!