What is financial wellbeing?
- 14 August 2020
- 10 minute read
In January 2019 REBA reported how stress about our financial situation can trigger serious mental health conditions like anxiety, and depression and in February 2019 the Money and Mental Health Policy Institute said it can even lead to suicide.
Talking about our financial worries and seeking assistance can help us understand our situation better.
Taking the first steps to creating a plan can help us gain some peace of mind.
Recent years have seen an increase in the awareness and debate around mental health. Many businesses are placing mental health at the top of their wellbeing agendas, and according to the Business in the Community’s Mental 2019 Health Report, Time to take ownership, 51% of employees are comfortable talking about mental health.
The current Covid-19 pandemic has also shone a light on the different emotional triggers that can affect our mental ill health. In particular the effects of isolation and anxiety. And anxiety about our finances – particularly debt – can be a significant contributor to mental ill health.
According to Money and mental health, almost half (46%) of people in problem debt also have a mental health problem, while people experiencing mental health problems are three and a half times more likely to be in problem debt than people without mental health problems.
If you feel your debts are controlling your life, the Money and Pensions Service offers free debt advice.
What do we mean by wellbeing?
In 1946, in the preamble to its constitution, the World Health Organisation stated that “Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.”
Today, wellbeing is generally defined as having seven dimensions. These have been defined by the University of Wisconsin’s School of Health Promotion and Human Development as:
To this we would add an eighth dimension: financial wellbeing.
The Money Advice Service (MAS) recently launched the UK Strategy for Financial Wellbeing. This is a government-funded project that aims to achieve the vision of everyone making the most of their money and pensions over the next ten years.
Can financial wellbeing be looked at in isolation?
We don’t believe so. Having a good level of financial wellbeing, and feeling confident about your finances, can underpin all the other aspects. For example, how can you have good mental health without good financial health? Or have the freedom to make good choices without the money to support those decisions?
Is financial wellbeing the lost strand of mental health?
According to the Employers Guide to Financial Wellbeing from Salary Finance, only 14% of employees felt comfortable talking openly about money with their work colleagues, whilst 36% of UK adults say they worry about money ahead of relationships, career and health, all of which can be affected by financial distress.
If you looked around at your family members, friends, and colleagues would you be able to tell which third of them was worrying about money? The answer is likely to be no because as a nation we do not like talking about our personal finances whether that be from fear of boasting, all the way through to a fear of exposing ourselves to ridicule. It is vital that we address this problem and there is clearly much to be done.
What is good financial wellbeing?
One thing to make clear is financial wellbeing isn’t about having the most money. It’s about having enough money to enjoy the things in life that make you happy. It’s also about being in control, having financial freedom, and prioritising what’s important to you.
How can I improve my financial wellbeing?
By de-mystifying the subject of finance. The journey to financial wellbeing has different stages involving ever-increasing levels of understanding and awareness, knowledge and engagement. But the first step should be to acknowledge that we have financial concerns and admit this to ourselves rather than avoid looking them in the eye.
From there we can start engaging with the issues and creating a financial plan. As with many issues that cause us anxiety, this might seem overwhelming to start with. And it may be that you need help from a professional adviser if you don’t know where to start.
What are my next steps?
Once you have awareness of your financial position you should be able to identify any areas where you feel like change is needed and who you may need to seek support and guidance from. This could be as simple as realising you’ve been with the same energy provider for a number of years and that you need to shop around for a better deal. The key aspect here is that engaging with your finances and making even simple changes can relieve pressure incrementally and start to improve your overall wellbeing.
Once you’ve assessed your finances and started to make a plan you may start to feel a sense of financial stability. And as you gradually take control of more and more of your finances you might even find it easier to start facing up to those issues that seemed complex. Moving towards good financial wellbeing
Engaging with your finances can help you prepare for the unexpected in life and help you make the most of your money. The process starts to help you prioritise the things that are most important to you, things like helping your family or spending money on experiences rather than material possessions.
Financial wellbeing is ultimately achieved when you feel confident in your current situation and have a clear understanding of your financial priorities. You should feel comfortable engaging regularly with your finances and have systems in place to plan for the things that are most important to you.
Financial wellbeing is something we believe everyone can achieve. Whether you engage with your finances on your own or seek support from a professional, the underlying process should follow the same path.
Understanding what’s important to you – together with your current situation – should form the cornerstones for creating a financial plan. Money can help with this but it isn’t everything.
Your end goal should be to identify the things that will bring you happiness and to put a plan together that aims to achieve them. Focus on what is personal and important to you, and what will bring you a feeling of ease and wellbeing.
Any views expressed are our in-house views as at the time of publishing.
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