Financial Wellness

Question: What is financial wellness? I am a human resources professional and financial wellness is a hot topic among my peers. The idea is that if we provide financial wellness training for our employees, they can be more stable and productive for their employers. That sounds good, but I’m not even sure how to define the term, much less offer training for it.

Answer: I think it would be helpful to think of financial wellness in much the same way we think of physical wellness. It isn’t so much a destination as a state of being.

On the negative side of physical wellness is (obviously) illness. At the extreme, one might be terminally ill, chronically ill or simply not healthy enough to sustain work effort for any significant period of time. An obese person who smokes and drinks a fifth of whiskey for lunch would be considered living an unhealthy lifestyle, even if they showed no immediate signs of distress. Think Winston Churchill. 

On the positive side of wellness, at a minimum, one is free of illness. But surely there is more, right? Moving in the positive direction, a well person has increasing amounts of energy and alertness. Perhaps their physical fitness can be constantly improved. And their overall sense of wellbeing can be so positive that they can share utilize their wellness to serve others. Think soldiers and first responders (some, anyway!).

So perhaps it would be helpful to think of financial wellness as an ongoing journey of moving from one level of financial wellness (or lack thereof) to the next, more positive level. Here are some potential stages by which we might measure our progress towards financial wellness. 

Survival. We start at a level many in the world will never reach. Yet we will hardly ever meet a person in our country incapable of surviving. By surviving, I mean their most basic needs for food, clothing and shelter are being met, but by someone else. This is someone living at or near the poverty level and being sustained by the government or a relative.

Safe. The safe stage is reached when one has a job producing an income capable of sustaining their most basic needs. Obviously the safety only lasts as long as the job does. 

Stable. Here is where most middle class Americans at least have an opportunity to be. Stability is reached when sufficient income is matched with habits of wise planning, thoughtful spending and systematic saving. Stability is less an indication of a certain level of affluence and more likely caused by financial maturity and careful decision making.

Strong. The strong level is the inevitable consequence of stability over time. Financial strength occurs when sufficient levels of legal and insurance protection are in place, and savings are equal to three to six months of expenses.

Satisfied. The road to financial wellness begins with getting a job so you can work for money. The finish line is reached when you have a sufficient amount of money to work for you, so you don’t have to. The satisfaction level is true financial independence and usually takes a lifetime of work to achieve.

Significant. There’s a big difference between being physically well and being fit enough to win the Boston Marathon. That elite level of fitness is only reached by a tiny fraction of the population. 

That is perhaps how we should think about the significance stage of wellness – only a tiny fraction will ever reach it. Good for them, but don’t make it your goal.

For this tiny fraction, their financial wellness will become significant wealth. Either through their entrepreneurial efforts, or through philanthropic causes, their wealth will have an opportunity to impact others outside their nuclear family. 

Such opportunities may be seen as a burden or a blessing, mostly based on that individual’s attitude toward herself, others and her wealth. 

It would be a mistake to hold up the “significant” level, or even the “satisfied” level as the model for everyone’s financial life now. If you are still struggling to get to “stable,” you simply may not have vision for that.

So if I was designing a program to promote financial wellness among a group of workers, I would find ways to help them make progress to the next step. And then the next. 

You’ll find that daily, weekly and monthly financial habits result in lifetime financial results.

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