Today, we will cover the 3rd dimension of wellbeing – Financial.
Our financial wellbeing is tied tightly to our occupational wellbeing.
The status of our finances can also impact all the other dimensions positively or negatively.
The goal is to reach a sustainable level where you can maintain the life you want to lead.
When our finances are sustainable, we have less stress, more flexibility, improved health and more.
Below are 5 elements that impact our financial wellbeing.
5 Elements of Financial Wellbeing
Vision & Planning: Financial wellbeing isn’t just about the present; it’s about preparing for the future. This includes building an emergency fund, saving for major life events like education, home purchase, or retirement, and ensuring we have adequate insurance. Often, we are driven by the financial aspirations of others (keeping up with the Jones’). Setting our own course is the first step to financial freedom.
Budgeting & Tracking: Striking the right balance between spending and saving makes or breaks our financial wellbeing. We want to enjoy the money we earn, but it’s equally important to save for the future and for a “rainy day”. Tracking our spending and budgeting where our income goes is important to make conscious decisions and prioritize long-term financial goals. This file needs to be reviewed regularly to adjust as circumstances change.
Income & Investments: There are two sides to our finances – money in and money out. Money in is a combination of our current income and future planning by investing. On the income side, we can look at our “Income Portfolio” and develop multiple streams of income, so we don’t become overly reliant on one source. When investing, we can also look to diversify to reduce risk. Our investments can be physical assets, investment funds, rental properties, and more. We can even invest in ourselves.
Spending & Debt Management: The flipside of our income is our spending and debt management. We want to plan not only for our monthly spending, but to pay down any high-interest debts, build emergency funds for unexpected events, and make sure our insurance costs cover our risk. Being proactive about our expenses beyond the day-to-day spending can have a positive impact on our financial wellbeing over time.
Education: The final component of our financial wellbeing is education. We need to stay informed about always changing investment strategies, tax implications, and economic trends. Financial literacy empowers us to make informed decisions and adapt to changing financial landscapes.
My Perspective
I have learned a lot about financial wellbeing over the years and much of it was never formally taught. I believe that is true for many of us – we grow up, get a job, take some tips from our parents, and “wing it” from there.
Looking back over the years, there are purchases I wish I wouldn’t have made, career decisions that helped or hurt the income portfolio, and investment strategies that paid off while others failed.
Along the way, I developed an approach for tracking and budgeting that is currently serving us well.
Your Turn
How are you feeling about your financial wellbeing? Is it sustainable?
What of the five activities are your strengths and your weaknesses?
Do your finances overwhelm you? If so, what is one area you could focus on next year?