We’ve all heard the saying: money doesn’t buy you happiness.
And in a basic sense, it’s true. Lots of money doesn’t automatically equate to a happy life.
But manage your money correctly, and you’ll end up with something perhaps more useful: financial wellbeing. It’s a concept that is becoming more widely adopted, particularly by financial planners, and it’s one that could prove extremely helpful for you when it comes to planning your future.
Financial wellbeing means more than simply having enough money to pay your bills
According to the Institute for Financial Wellbeing (IFW), there are a lot of misconceptions about this term. Some organisations even misuse it in an attempt to sell financial products that may not be necessary.
But financial wellbeing isn’t actually about how much money you have or the type of products or wrappers you’re using to invest that money. Instead, the IFW defines it as using your money to support other areas of wellbeing in your life.
This definition is based on extensive research by institutions across the world that has found that money by itself does not make you happy. In fact, the most important contributor to our overall happiness, according to this research, is the quality of our social relationships.
So, while money and financial protection products are important tools, they aren’t the sole measure of your happiness.
5 key components to financial wellbeing
The IFW has identified five key branches to financial wellbeing:
- A clear path to identifiable objectives
- Ability to cope with financial shocks
- Clarity and security for those we leave behind
- Control of daily finances
- Having financial options.
As you can see, financial wellbeing is composed of stability for today, planning and security for the future, and freedom to choose to spend your money on things that will bring you joy.
So, while money doesn’t buy you happiness, with these five branches in place in your life, you can certainly start to see how money and financial wellbeing are instrumental in helping you to feel secure and relieving the pressures that could be detrimental to your wellbeing over time.
5 practical ways to improve your financial wellbeing today
If you’ve read the five branches and are wondering how you can boost your own financial wellbeing today, here are five tips to get you started.
1. Review your budget
It seems like a very basic step to take but understanding what you have coming in and what’s going out each month is a fundamental part of financial wellbeing. It will also help you to identify any money leaks, such as subscriptions you no longer use, that could be draining your monthly income.
2. Speak to a financial planner
When it comes to financial wellbeing, your financial planner is a little bit like your coach. They can help you to look at the bigger picture, then zoom in on the details to make sure they all line up to produce those five branches you read about in the previous section.
3. Create an estate plan
One of the key pillars of financial wellbeing is the clarity and security of knowing that your loved ones will be OK even after you’ve passed away. While it’s not a nice subject to think about, spending some time making a plan can take a real weight off your shoulders.
Consult a financial planner to help you do this – not only is the emotional support very helpful for making good decisions, but they’ll also be able to point out areas that you might not have thought of that could help to strengthen the plan.
You can learn more about common estate planning mistakes to avoid on our website.
4. Address your own money blocks and biases
Money can be an emotive subject, and it’s something you may have formed beliefs about from as far back as childhood. These beliefs can lead to you making unsuitable decisions about how you manage your wealth.
Your financial planner will be able to help you to identify these blocks and biases so that you can overcome them and feel confident that you can manage your money in a healthy and successful way.
5. Upgrade your financial protection
Even though financial wellbeing isn’t about products, there is certainly a place for the right products in your financial plan.
By making sure you have protection in place, such as income protection and life insurance, as well as a healthy emergency fund, you can feel reassured that all the necessary measures are in place to support you and your family financially if anything were to happen to you or your income.
With this in place, you can enjoy your money by buying things that bring you joy without worrying about whether the money should be going elsewhere.
Get in touch
If you’d like some help understanding how to improve your own financial wellbeing, we can help. Either contact your financial planner directly, email us at email@example.com or fill in our online contact form to organise a meeting and we’ll get in touch.