You may have heard the buzzwords “financial wellness” thrown around your organization, but what do those words actually mean?
Is “financial wellness” just a fancy term for being really wealthy?
Not even close.
You can have lots of money and still not be financially “well.” Money alone cannot improve your health or make you happy. Studies show that once basic needs, like having enough food to eat, clothes to wear and a roof over your head have been met, increased disposable income has little effect on your overall sense of well-being.
Wait. I know a lot about budgeting and retirement, so that must make me financially well, right?
Though knowledge is part of the process of becoming financial well, simply being educated about subjects related to money management like debt elimination, retirement planning or credit repair does not create financial wellness.
Increased awareness of possessing financial skills and knowledge is important but alone, it won’t change your financial behaviors.
Knowing you should have an emergency savings fund is one thing, actually socking the money away may be a different reality (in fact, only 39% of Americans have enough savings to cover an emergency expense).
Knowing isn’t enough, you need to pair that knowledge with actionable steps and goals to bridge the gap between knowing and doing.
Since behavior (the doing part) is formed by the thoughts, beliefs and assumptions we have developed over our lifetime, these are also components of financial wellness. A lot of the “scripts” that run through our heads around money effect our actions.
When you know what to do and your actions align with that knowledge, your financial esteem increases and financial stress goes down. When your actions and your knowledge do not match, stress goes up.
According to the 2017 Stress In America Survey, 62% of Americans reported money was a significant source of stress in their lives.
So, our answer to the question “What Is Financial Wellness” is:
A combination of knowledge, action and desire to make healthy financial decisions that creates a positive sense of well-being.
Ideally, it is about reaching a satisfied state of well-being where you reduce or eliminate financial stress, establish a strong financial foundation of habits around money, create the ability to weather economic challenges and design a plan for reaching future financial goals.
You don’t need a lot of money to do this.
You (yes, YOU) have the power to:
- Learn about healthy financial behaviors.
- Engage in positive financial behaviors like budgeting, reducing debt and saving.
- Create satisfaction with your current finances.
Simply put, you can create the ability to live a happy, satisfied life within your financial means.
You got this.