What is Financial Wellbeing?

Happy mother showing young boy how to save money with piggy bank

Financial wellbeing is more than just having money in the bank or earning more.  Financial wellbeing is about having a healthy relationship with money, feeling secure, in control, and confident about your financial situation, both now and in the future.

Financial wellbeing is critical for overall happiness, impacting all aspects of life, including physical and mental health, and personal relationships.

The four key components of financial wellbeing are:

  1. Having control over day-to-day finances
    Understanding and managing your money well on a daily basis. Knowing how much you earn and spend, creating a budget, and sticking to it. When you’re in control, you pay bills on time, avoid unnecessary debt, and make smart choices about spending. This control helps reduce stress about money and lets you focus on other parts of your life.
  2. Having the ability to absorb financial shocks
    Being ready for unexpected money problems by having savings and insurance to cover surprise expenses or a loss of income. Being prepared this way helps you feel more secure and less worried about sudden money troubles.
  3. Having clear financial goals
    Knowing what you want to achieve with your money in the future. It could be saving for a house, planning for retirement, or setting aside money for your children’s education. Clear goals help you make better decisions about how to use your money, give you something to work towards, and help you stay motivated to save and spend wisely.
  4. Having financial freedom
    Having enough money to do things you enjoy, not just cover basic needs. Choosing how you spend your time and money, whether that’s going on holidays, pursuing hobbies, or helping causes you care about. This freedom comes from good planning and finding a balance between saving for the future and enjoying life now.

Achieving financial wellbeing isn’t a quick fix, it’s an ongoing process that requires regular attention and adjustments as your life and financial situations change. Core to this is developing your financial literacy, so you are equipped with the knowledge and skills to make informed decisions about your money.

To find out how to achieve financial wellbeing, read the next blog in this series Achieving Financial Wellbeing.

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