Financial wellbeing. You’ve probably heard or seen this term used by pretty much every bank and finance firm. But what does it really mean and why has it become such a critical element to financial advice?
At Tribeca, we’ve always seen the enormous value financial wellbeing can bring to our Tribe and clients. It’s why we’ve been talking about it from our early beginnings in 2010, well before other organisations could see its true worth. For us, it’s not just a throw away catchphrase. It sits at the heart of what we do, providing holistic advice that focuses on the person, not the product. Where results are not measured by numbers on a page, but by seeing people live their best life.
What we call their “Good Life”.
But financial wellbeing – which essentially comes down to having a healthy relationship with money – is not always that easy to obtain, especially when faced with economic uncertainty and cost of living pressures.
So how do you manage your level of financial wellbeing during both good and challenging times?
It starts with understanding exactly what the term financial wellbeing means (in simple language), and then looking at the tools you can use to help integrate it into your life in an effective and meaningful way.
Want to see how financial wellbeing sits at the heart of Tribeca’s financial advice? See here for more information.
What is financial wellbeing?
Let’s start with what the research says. Financial wellbeing is defined as a state of being wherein you:
When these four factors are in alignment, you then arrive at two very strong emotional responses:
Financial wellbeing is what we all crave, to know we have everything in place to feel secure about our present and future, and we are in control of our own choices, lives and destiny. But we also know that life events often impact our level of financial wellbeing and test our resilience; along with our own financial behaviours, financial knowledge and personal traits.
For example, there’s the person through circumstance or design who is just living from one pay to another with very little security or choices due to no extra money or heavy debt. Or there’s the other extreme where someone is on a high income but the money they are accumulating slips away. They feel uncertain about the future as they don’t have a firm plan or structure in place, so rather than moving ahead they continue to fall behind.
This is the spectrum of financial wellbeing. It’s why understanding how you relate to money (are you a saver or a spender, do you compare yourself to others, how do you make financial decisions) is so incredibly healthy for your overall state-of-mind, as it allows you to adapt your thinking and approach to suit your personality, habits, needs and goals.
And achieve a level of financial wellbeing to live your life to the full.
How do you think about money? Take this quiz to see how your money script shapes your attitude and behaviours towards your finances.
Why is financial wellbeing important?
It’s a fact that many people worry about money, savings and their financial obligations more than their own health. This was reflected in studies conducted by the Australian Psychological Society which revealed that personal finances (49%) was the main source of stress for Australians. Health was third in the list.
The link between finances and wellbeing is undeniable. An unhelpful financial situation can have a negative impact on your mental health. Conversely, mental health struggles can result in neglecting your financial responsibilities altogether. Being aware and open to the fact that both are connected is incredibly important.
Our advice embraces financial wellbeing for this very reason. The more you work on building a healthy relationship with your money, and the ability to understand how you can mindfully spend and save, the better your overall state-of-mind will be.
By feeling financially secure, it allows you to enjoy the genuine freedom of making choices you want to make – not have to make.
At Tribeca, our purpose is to help our clients live their Good Life.
As life events occur and personal circumstances change, so will the level of your financial wellbeing. It’s going to have its ups and downs. What we can help control is giving you the support, hands-on assistance and tools to respond to this change – and most importantly – the confidence and peace of mind that comes from knowing that we’re on this journey with you.
our 5 Minute Guide to Financial Wellbeing
How do you measure your financial wellbeing?
This is the million dollar question. You can always try to do it yourself, but that takes a fair degree of self discipline and accountability. The other alternative is to seek the support of a financial advisor you can trust and can guide you along the way.
We’ve spent a lot of time working out a simple method to measure financial wellbeing so it’s easy to see what elements are healthy and the gaps that need improvement with your personal finance. We call it our Financial Wellbeing Matrix.
Securityas relating to your feelings towards control over your finances (now), and capacity to absorb a financial shock (in the future).
Freedom of Choice, that’s looking at your financial freedom to make choices (today), and whether you feel you’re on track to meet your goals (for tomorrow). To rate how you’re feeling in each quadrant, we get you to ask yourself a series of questions. Here’s some examples:
- Do you struggle to make ends meet each month?
- Are you aware of your spending habits?
- Do you know where your money is going?
- Are you an active participant in managing your finances?
- Do you have a system in place for managing your finances, such as multiple bank accounts?
- How well are you following your budget, and do you adjust your budget as needed?
- Do you have a plan in place for unexpected events, such as illness or job loss
- Have you set up powers of attorney to be activated if needed?
- Are you prepared for the worst-case scenario, such as death?
- Do you have insurance coverage for unexpected events?
- Are you clear on which types of insurance you have and whether they are enough?
- Have you discussed potential sacrifices with your loved ones?
- Are you making decisions based on your values and priorities?
- Do you feel pressure to spend more money to keep up with the spending habits of others around you?
- Do you have a habit of buying things in impulse, without doing research beforehand, or things you don’t really need?
- Do you desire more flexibility in your work schedule or location?
- Are you willing to forgo financial benefits to achieve greater flexibility?
- How easy is it to prioritise important purchases, such as experiences, travel or material possessions?
- Have you thought about the type of lifestyle you want to live in the future?
- Do you have an idea of what you’d need to achieve that?
- Do you have a clear understanding of your long-term financial goals?
- Are you comfortable with your level of debt and do you have a proper plan in place to pay it off?
- Have you considered the potential trade-off of prioritising your personal goals?
Our financial wellbeing matrix is just one of the many tools we use to help you live your Good Life. Click here to read more.
How do you enhance your financial wellbeing?
Now that we know how you rate yourself in each quadrant, we can get started on working on the aspects of your financial life we need to enhance.
Here’s how this can look like, tailored to your specific circumstances:
If you would like to talk to us about how we can guide and support you with your financial wellbeing, we’re always ready to chat. You can talk to one of our financial advisers by calling 1300 388 285 or booking a free 15-min phone consultation here.