Financial wellness goes beyond traditional concepts of physical and mental health. According to the Global Wellness Institute, it involves making choices that foster happiness, health, and financial security for the present and future. Despite this, many, especially those aged 30 to 44, feel they are falling behind financially. A 2023 study underscored this concern, while Experian revealed that over half of adults rarely discuss finances at home, leading to a lack of financial management skills and credit understanding—issues that may persist across generations.
It’s important to distinguish between ‘financial wellness’—the ability to meet financial obligations today while feeling secure about tomorrow—and ‘financial literacy,’ the skill set required to manage personal finances effectively. While literacy can support wellness, it doesn’t guarantee it. Join us as we explore the intricacies of financial health in celebration of Financial Wellness Month.
Okay, but what exactly is financial wellness?
The U.S. Consumer Financial Protection Bureau defines financial wellness as “a state of being wherein a person can fully meet current and ongoing financial obligations, feel secure in their financial future, and make choices that allow them to enjoy life.”
There are 4 main elements to fiscal wellness, as seen below:
These 4 elements of fiscal wellness can be seen in the following hypothetical examples for those in academia:
Dr. Duncan, a research scientist, has structured his finances to allocate a portion for leisure. By saving each month, he can attend academic conferences in exotic locations, turning them into mini vacations. This balance of work and pleasure, supported by financial planning, enhances both his professional and personal life, reflecting financial freedom.
Dr. Jordan-Gaetes, a department head, consistently contributes to his retirement plan, with part of his salary directed into a diversified investment portfolio. He’s also saving for a sabbatical to write a book. His proactive approach to retirement and personal goals ensures he is on track to achieving long-term aspirations.
The examples demonstrate that overall wellness relies on several factors, including mental, physical, and financial health. Additionally, external factors can significantly impact fiscal well-being, much like the elements that shape one’s personality and worldview. Let’s look at how decision context influences wellness.
After her divorce, Professor Gupta reevaluated her finances with the help of a financial advisor, adjusting her budget to align with her single income while still increasing her retirement contributions by 10% annually. Professor Ramirez, on the other hand, struggled with the financial strain of single parenthood after her divorce. Without proper guidance, she hastily liquidated her retirement savings, resulting in penalties and taxes.
Even with the right attitudes, skills, and behaviors, obstacles or life events can limit financial progress. Despite his PhD, Professor Clarke faces a saturated job market with few promotions or raises, stalling his financial growth. In contrast, Dr. Badenhorst, an associate professor, uses his sabbatical for research and consulting with industry partners, which enhances both his income and investment portfolio.
From these examples, we can draw several key insights about financial wellness:
- Decision Context is Critical
- Guidance Makes a Difference
- Opportunity is Unpredictable (but you can prepare for it)
- Strategically Leveraging Opportunities is Key
In our industry, wellness is a multifaceted pursuit, shaped by personal characteristics, informed decision-making, and the ability to navigate one’s socioeconomic landscape. The good news is that financial wellness, like health, can be learned and improved. Even when finances feel confusing or daunting, there are always ways to get better at managing them.
But why is it important to care about financial wellness now?
Financial wellness is key to not just a stable life but a healthy one too. A survey by the American Psychological Association found that 73% of people listed money as a major source of stress. When you’re financially well, your stress levels drop, which benefits your physical and mental health. For example, someone with a solid financial plan is less likely to face anxiety-related health issues, which, according to the Journal of Financial Therapy, are often linked to money worries. Simply put, when you improve your financial health, you also improve your overall well-being.
Financial wellness affects more than just health; it impacts other areas of life. The National Endowment for Financial Education found that people with good financial health are twice as likely to succeed in personal relationships. This might be because there’s less conflict over money, a common source of relationship stress. By securing your financial health, you’re not just saving for a rainy day—you’re investing in your happiness and harmony.
Financial wellness also helps you achieve major life goals. Whether it’s pursuing education, buying a home, or starting a business, these milestones are easier to reach when you have financial security. Financial wellness isn’t just another part of life—it’s the foundation for personal achievements, strong relationships, and overall health. It’s not a luxury; it’s a necessity that touches every aspect of our lives. Everyone’s journey to financial wellness is different, but its importance is universal. Managing money, seizing opportunities, and making smart choices leads to lasting financial stability that supports your life goals.
The need for financial wellness goes far beyond academia. Financial stress isn’t just about numbers—it affects relationships, health, and personal growth. By embracing financial wellness like we do other forms of well-being, we can unlock the potential for a better life. So, let’s talk about money, learn about it, and make peace with it. Doing so opens the door to a more prosperous and fulfilling life.
Note: The individuals and their situations presented was a hypothetical example provided for educational purposes only and is not intended as financial, legal, or tax advice. It’s always recommended that you speak with your financial, legal, or tax professional regarding your specific situation.
