We go about our lives making multiple financial decisions each day, without giving much thought to how they all add up. We spend most of our day working hard to earn money. As we progress with our careers and start making more money, we realise that our spending has grown to match, or even exceed, our earnings! The pursuit of financial wellness can ultimately help you find long-term stability through reflecting on, understanding and appreciating your relationship with money.
What is Financial Wellness?
Financial wellness is the process of learning how to successfully manage your finances to reach a sense of security and financial freedom, through combining four main pillars which are: financial awareness, financial literacy, financial behaviour, and financial satisfaction.
These 4 pillars are the basic foundation of financial wellness. Together they form a strong base on which your overall financial wellness and stability stand.
1. Financial Awareness can simply be defined as being fully conscious about your current financial state. Financial awareness involves both emotional and practical aspects. Financial emotional awareness is a relatively subjective measure that involves self-reflection and evaluation of how your spending habits effect your emotional state. While financial practical awareness is more objective and involves being aware of your current income versus your fixed and variable expenses.
2. Financial Literacy is the ability to acquire knowledge and skills to make well-informed decisions to effectively manage your personal finances. Unfortunately, financial literacy is not taught in most schools, but you are very capable of learning about personal finance, regardless of your age! The most common and easiest way to become financially literate is to find simple resources such as books, websites, or even videos that explain the key areas of financial literacy. In our next article, we will further discuss while explaining in details the key areas for financial literacy, so stay tuned!
3. Financial Behaviour is the way you feel, act, and carry yourself when making a personal financial decision. Financial literacy allows you to know the right thing to do for you when making a decision about money. Nevertheless, as humans, knowing what we should do, doesn’t necessarily mean that we will actually do it.
According to Dushyant Choudhary, Business Developer and Strategist as well as Financial Wellness blogger:
“Our financial behaviour sits between the knowledge we gain from financial literacy and what we actually do when making decisions”
The on-going conflict between rational, calculated financial decisions and impulsive decisions is the key identifier of financial behaviour. The 3rd pillar of financial wellness is about both recognising and implementing decisions that allows you to prosper financially.
4. Financial Satisfaction is feeling content about the financial choices we make every day and the outcomes those choices lead us to. We face endless choices every single day compared to our limited personal resources. The trick is to always chose what works for you, while completely disregarding what makes sense for someone else. Always stay true to your own needs, limitations, and values when it comes to making a decision about money!
Financial wellness needs willingness to learn and work on your financial awareness, literacy, behaviour, and satisfaction, through which you will find a great opportunity to improve your financial life!
If you’ve missed last month’s article, check out 5 Tips to Managing your Finances
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