If WellBeing is a body, then Financial WellBeing is a Leg.
If WellBeing is a Vehicle, then Financial WellBeing is the Fuel.
Bottom line, both are essential to reach your destinationWellBeing Toolkits
Content Covered Today:
What is the definition of Financial WellBeing
Financial Wellbeing is a state of being satisfied for having the financial freedom to do or have the things you want sensibly without worrying about your finance’s status.
To better understand what is financial wellbeing, let’s look at the keywords mentioned in the definition above
Financial Wellbeing keywords to remember
Financial wellbeing, just like all the wellbeing dimensions, is a state, a feeling that isn’t tangible in the overall sense.
Of course you can count money you have in your wallet, or bank or under your bed, but this is just an element that you’ll use to reach your financial wellbeing.
Having financial wellbeing is more than just the money you have, it’s about what you want to do with it, and the satisfaction results from it.
To understand it better, it’s like me asking you, how do you feel about your finances?
I’m not asking about how much do you have, I’m asking about your “feelings” towards the money you have and don’t have.
The answer to that is mostly along the lines of “I think I’m good” or “I’m not there yet” or “ I think I can do better”
That’s why, your assessment to your financial wellbeing is going to be subjective and this will serve us in the assessment section below.
You can have all the money you want and do or buy all the things you want but you still can be unsatisfied with the purchase or doing that thing.
That’s why I see that feeling the satisfaction with what you can do with your money is a key to having a financial wellbeing.
To me, not feeling that satisfaction with what I can do with my money means one of 2 things:
A- It’s not what I want, it is what I need:
Meaning it’s a necessity and if it’s a necessity then mostly it wouldn’t result in satisfaction, or maybe a little amount of it. But mostly it would feel normal because this is what I have to do like buying the medications I need for my illness or basic food, etc.
For me this should be the normal thing, or the financial health that we all must have before seeking financial wellbeing and I’ll get to that in the next point about the difference between financial wellbeing, wellness, and health.
B- I don’t know what I want:
What will you do or buy, if I gave you one million dollars today?
If you happen to answer that question with clear items to check or even better, if you already have a bucket list to check when you have the financial freedom, this is a sign of knowing what you want, and ultimately will serve you in having your financial wellbeing
If you happen to gaze at that question, not knowing what you’ll do or buy with that money, or even worse, if you started thinking about what others are dreaming of having if they have that kind of money, then this is a sign that you will have a hard time reaching your financial wellbeing.
For this point, I always remember the movie “Italian Job” starring Mark Wahlberg, Charlize Theron, and Edward Norton. When Norton stole the money from his friends after they all stole it, he disappeared and when the team found him again to take their money back, they found out that he bought everything his team dreamed of and not one thing he wanted.
He bought the car that Jason Statham wanted, the Stereo that another member wanted, etc. He had no clue what to do with the money except having it, so he was wealthy but didn’t have a financial wellbeing.
On the other hand, I think of the Fast and Furious movie, part 5, when they stole the money from the drug dealer, and all went on and had the things they dreamed of and shared earlier. Some bought the cars they wanted, opened the business they wanted, traveled, settled in another country, etc.
This is to me financial wellbeing not just being wealthy.
***Note: I don’t encourage heisting, stealing, or bank robbing. Both examples happened to be about stealing but just because I love those 2 movies 😀
Financial wellbeing is about doing the things that YOU want not others as stated in the above point, and it’s about what you want not need (necessity)
We have a saying where I live that says “Take from the hill, and it will get smaller”
Having a financial wellbeing isn’t just about spending, it’s about the balance between spending and saving and generating the money. You have to have all 3 skills in motion not to disturb your overall financial wellbeing hill
Financial Wellbeing vs Financial wellness vs Financial Health
I use financial wellbeing more often and it means the same for me as emotional wellness, so sometimes I use them interchangeably.
I find that Financial Health on the other side is a lower level than Financial WellBeing. It is the absence of Financial illness or problem.
I always see that financial health is what we all should, or must, have in place first before seeking financial wellbeing. Financial health is the ability to buy essential food, water, and shelter which are the basic physiological needs in Abraham Maslow’s hierarchy of needs.
You can’t get to the next level of (security) without having those basic physiological needs, and you can’t get passed the security level to the level of love and belonging without fulfilling the security level of covering your current or possible health problems and crisis.
So financial health is essential for both basic levels of Abraham Maslow’s hierarchy of needs, the physiological and security levels. Financial wellbeing is everything above.
By the way it can get relative, specially in the security level. For some having a car is a luxury at that level so won’t pursue having it, and for some having a car due to job or personal situations could be considered a necessity to have.
Let’s remember the WellBeing Spectrum
The Wellbeing Spectrum
There are 4 different levels to your life in terms “Being” which are illbeing, Abnormal, Normal, and wellbeing
Let’s start with Normal to better understand this. Normal here translates to having good financial health. This is you having normal financial abilities like buying food, paying rent for your apartment, buying a car if it’s a necessity to you, etc
This is when you have a financial breakdown due to an imbalance to the following equation:
Saving (expense) + Generating (income) – Spending (expense) = + number
It could be a huge expense due to a major disease or loss of your car or house, etc (increased expense). Or it can be due to loss of your job (loss of income).
For some, this could be a temporary situation and they get up from it to the financial health level, and for some, it could be major enough that they might sink deeper to the illbeing level.
This is the worsening of your abnormal stage. This is where your financial situation affects your life and you start thinking of wrong solutions to your problem, like stealing money.
This is the upgrade of the normal stage. This is where you have your financial freedom to do or have what you want sensibly without worrying about your finance’s status.
How can you tell in which level are you?
That’s an interesting question and I’ll be talking about that later in detail so stay around and join me in wellbeing toolkits.
To give you something till we discuss that in detail, I would say that having all your essential finances covered + having an emergency fund means you have financial health.
Anything above that is considered financial wellbeing, and anything below that is financial illness, and if you’re starting to think about illegitimate solutions then you’re in the financial illbeing level and you need help in both.
Who should care about financial wellbeing/target audience
For me, I would argue that there are 2 categories of people to take care of their financial wellness
All individuals above 20 years old. That include adults, parents, and employees of all kinds. This group should be knowing all about financial wellbeing and the tools to achieve it in terms of saving money, spending money, and generating money. Not only that, but they should start working on achieving that to a certain level.
All individuals between 10 and 20 years old in the form of teaching mainly. Parents, teachers, and schools should teach their children about the importance of having a solid financial wellbeing and the mechanism of achieving that by developing the needed skills of saving money, spending money, and generating money
What are the Financial WellBeing Toolkit Tools?
In this toolkit, you have 3 tools that you can utilizie to achieve finanical freedom and improve your finanical wellbeing. Those tools are:
1- Saving Money
It goes without saying that saving money, is a necessity in the early stages of your journey to enhance your finances.
This is a defense tool in this toolkit.
Level of your control over this tool: you have total or high levels of control over it. You can decide how much to spare each month based on your income and expenses and you can improve along the way.
The saving amount varies from one person to another and best practices is saving 10-20% of your monthly income constantly. So, if you decided to go for 10%, then each month you have to save that amount under any circumstances.
Of course emergencies happen, and that’s why I find and I do recommend the Dave Ramsey strategy in his book, the Total Money Makeover, to save $1000 immediately as an emergency fund.
Once you have that initial emergency fund covered, then you can go for the 10% monthly saving at a later stage.
2- Spending Money
This tool is about having your spending money habit under control and constant evaluation. This is another defense tool in your belt.
Regarding your control over it: you have total or high level of control on the outcomes just like the saving tool, cause you’re the one making the decisions about what to spend your money on.
Some might think, that saving money, and putting a leach on spending the money is the same thing. In my opinion it’s not totally accurate.
See, controlling how you spend is one way of saving money. You can save the 10% you agreed to, and in the same time, have more than enough to spend irresponsibly or non strategically on the things you want, and not need for the time being.
This is what I see in the majority of cases including myself. I can commit to the % I decided to save each month, and still find myself spending money on things that didn’t add value and could have been either spent on other more strategic things, or saved at the very least to increase my saving that month.
What could be more important to spend on?
You can still use the money to buy stuff, but the ones that matter. If you’re starting a blog to earn more money, then maybe you can use it to buy the hosting service or the domain name, or a tool or a service that you’ll need for that project.
Aside from buying stuff, you can get rid of small debts you have. For example you can pay your credit card debt and close it so you’re free. Or you can payback the money you borrowed from your friend, and so on.
This is another trick I learnt form Dave Ramsey that he calls “the debt snowball”, when you start getting rid of all the small sized debts you have.
Another way to think about this, is maybe you pay an annual subscription for a service that you’re using instead of a monthly subscription, saving you some money.
All of these could be another ways to spend your money strategically to help you get rid of some extra payments in the form of interests or fines along the way.
3- Generating Money
This tool is about improving your monthly income. This is the offense tool in this toolkit.
Level of your control over this tool: Moderate control cause there are a lot of external variables that determine the success of your strategies and actions.
With this tool, you simply can work your way up in the career you already have to be promoted or transitioned to another department and have more income as a result.
Or you can use it to add one or more sources of income to the current source you already have. This is what I call the “Horizontal Growth”.
It means climbing the ladder of your career isn’t the only option to improve your finances. Creating multiple sources or careers is another option you can have to achieve your financial freedom.
This has been proved by world known high achievers and business leaders where they have 7 different sources of income, on average.
Unlike the “saving” and “spending” tools, the “generating” tool is the hardest one of them to harness since it requires more learning, more patience, more practice, and stronger mindset.
A big portion of the outcome is going to be determined by external variables like economy, budget, prices, timing, policies, etc.
You are ready to be promoted, then the company changes its structure and it affects your promotion or even your job.
You think about starting a youtube channel for kids, then all of a sudden the policy changes and now you can’t monetize it.
You think about starting a business in your country, then a pandemic happens decreasing or shifting population interests entirely to a different market.
With that being said, I’m always an advocate of playing with the circle of control-things I can control, instead of the circle of concerns- things I can’t control. This means that you and I will do our due diligence to control as many factors as we can to maximize our control and shift the outcome for our benefits.
After all, the goal is to achieve financial freedom and improve your financial freedom, so our strategy will be to diversify and multiply the “what” we’re doing to achieve that goal as much as we can
We’ll keep our current job, we can start blogging, and we can add a youtube channel, and why not to sell our services and or create a product to sell based on our experience.
Then when that gets stable and under cruise control, why not to replicate it or add to it.
Like I said, it needs more learning and that’s why I recommend 5 books that you need to learn to achieve financial freedom and improve financial wellbeing, and 4 of those books are just about the “generating” money tool.
What are financial wellbeing challenges
Let’s find out the factors affecting your financial wellbeing improvement
It all starts with how much you know about financial wellbeing, and I’m pretty sure this article is more than enough for you to have this point covered.
My point is that you need to understand as much as you can about financial wellbeing before you start taking that road and while driving in it cause things change.
So, read, watch, and listen to experts around this topic to make the right choices. And I recommend 5 books that you can start with now, to work your way up to financial freedom and wellbeing
This is crucial for any improvement in your life. Your mindset is your operating system, and the powerful and sustainable mindset you have, the more likely you’ll achieve what you want.
When seeking financial freedom, and wealth, you’ll come across many obstacles, and some of them can be so hard that it might knock you down and make you lose interest.
Having a growth or Explorer Mindset will enable you to push through and achieve your goals. This is how high achievers in this area and others do it, and you can too.
3- Skills & Education
To master the financial tools of saving, spending and generating money, you’ll need to have set of skills and relevant education to acquire.
You can’t generate money without giving value in the form of a service or a product, and that value requires that you have specific education and skills. It’s that simple.
If that value you’re trying to give is treating people by becoming a physician then you need to have your medical education in place along with the skills needed.
If you want to build houses for people as an engineer then you’ll need to have your education in place, and so on.
To spend money sensibly, you’ll need to improve your judgment skills and being well informed about the value of things you spend your money at.
To save money, you’ll need to improve your skills and learning about deciding the right amount to save and how will you save your money, is it cash, stock, gold, etc
Note that the education I’m referring to is having the minimum amount needed to be able to perform your job and improve along the way. This could be in school, or in collage, or through self learning.
Many of the high achievers who have their financial wellbeing and enjoy their financial freedom didn’t go to school or collage or even dropped out of collage, yet they taught themselves and looked for mentors in their fields to be successful.
4- EQ and IQ
As we mentioned in the Emotional Wellbeing article, 90% of top performers have Emotional Intelligence (EQ), so improving your emotional wellbeing is a factor to consider here.
Also when it comes to making smart choices, your IQ will play a role in that.
In my opinion, you can hire someone with high IQ to do the smart choices for you, but you have to have the EQ skill yourself.
A worker in a takeaway shop will not generate as much as a physician. Even in the same hospital, an interna will not generate as much as the attending or the chief of surgery. An owner to 1 takeaway shop will not make as much as an owner to 3.
Type your of job, your level at it, and number of jobs you have all play a role in determining your financial wellbeing.
The solution is not boosting all elements like choosing high paying job, and waiting till you have high ranks and multiplying it.
The key is to know which job and how many do you need to have to achieve your financial wellbeing and how to do that in a wellbeing friendly way not in a stress friendly way.
I’ll be sharing my strategy the “horizontal growth” later, so stick around.
This is one of the unfair advantages that Ash Ali and Hasan Kubba talked about in their book “The Unfair Advantage“.
Your family can play a role in determining your financial wellbeing, or at least part of it. You can be a son to a wealthy parents, so the money part isn’t an issue for you in the first place, and all you need to figure out is what you need and still maintain that hill of money you have.
Or you can be a son to a poor family, which struggles to get by the day, so you’ll have to work your way up to the top of that financial wellbeing spectrum.
Environment can play a role too in determining your financial freedom as per the following:
Living in the developing countries means it’s more difficult (not impossible) to secure your financial health without having the support of your government. You’ll have to work harder to cover it or even pursue specific jobs to have that coverage even if it means seeking jobs you hate.
Some cultures can impose restrictions on you seeking specific jobs because of your family’s name or the surrounding culture in the community you live.
Number of opportunities around you play a role in your financial freedom journey. This is the major source of internal immigration in all countries.
People leave their small hometowns to the big cities where more opportunities exist.
Of course, this shouldn’t be the case, at least not nowadays, with many businesses shifting to online platforms and transitioning into virtual atmosphere.
How to assess/measure financial wellbeing
It would be both subjective and objective. Let me explain.
As I mentioned in the definition, the overall financial wellbeing can be assessed subjectively by you using the simple following question from time to time:
On a scale from 0-10, 0 being low, and 10 being highest, how would you rank your financial wellbeing today?
Then you do the following:
- Identify your current level
- Choose a target level or number to aim for
- Come up with corrective actions, implement them
- Track in a week or a month by answering the same question again.
- Redo steps 1-4.
You can objectively assess the 3 tools or elements for your financial wellbeing which are money saved, money spent, and money generated.
This one you can assess objectively in exact numbers each month and compare against your goals.
Each time you do that, you come up with what needs to be done, if any, and work on it the next month and so on.
I’ll be talking about that in detail later on.
What can you do next?
The informing part is done, let’s get to the transforming part
Next Actions you can do today to begin your financial wellbeing improvement is as follows:
1- Identify Your Level
Before you can begin your journey, you need to know where you are right now, and for that you can use the general assessment question mentioned before to identify your current level:
On a scale from 0-10, 0 being low, and 10 being highest, how would you rank your financial wellbeing today?
2- Create a Goal
Perfect!! Your current level is identified, and now you have to set a destination for your journey.
Your current level could be 7 and the level you want to aim for is 8. If this is the case then you can create the following goal
Improving my overall financial wellbeing to 8 by 2021.
So head over to your goals list in your system and add a goal for your financial wellbeing
3- Create Projects
For each goal to happen you need one or more projects. So now it’s time for you to plan how will you achieve your goal above, and what are the projects needed for you to achieve that goal
Examples may include:
- Save $5000 by end of 2021
- Limit monthly expenses to $2000
- Generate $3500 in 3 months
4- Next Actions
Amazing job so far! Now you have your goal, and projects. Next is to drill further down to the simple actions that you can start acting on now.
- @Laptop: Check the 5 powerful books to achieve financial freedom
- @Laptop: Buy F.U. Money book
- @Laptop: Check the WellBeing Coaching service in WellBeing Toolkits to have a plan
- @Home: Read the Mindset book
- @Phone: Call my broker to choose where to invest
- @Errands: deposit money in the saving account
- @Laptop: Use one of the expense/income trackers below to monitor my expenses
Couple of resources that you can use are:
1- The WellBeing Coaching
We can interact with each other 1 on 1 using the WellBeing Coaching, and come up with a specific plan just for you and tack it down till its completion
2- The WellBeing Toolkits Community
You can join the WellBeing Toolkits Community to ask questions, seek support from myself and others, or give support to myself and others.
- Financial Wellbeing is a state of being satisfied for having the financial freedom to do or have the things you want sensibly without worrying about your finance’s status.
- There are 4 keywords to know about financial wellbeing; state, satisfaction, wants, and sensible.
- Financial health is an earlier step to financial wellbeing, and you have to secure that first as proven in Abraham Maslow’s hierarchy of needs.
- There are 4 stages to financial wellbeing starting from bottom with financial illbeing, then financial illness, then financial health, then financial wellbeing
- Everyone should care about financial wellbeing starting with adults, parents, and all kinds of employees. Then old enough children and young adults should learn about it from the earlier group.
- There are 7 factors affecting your progress in achieving your financial freedom: knowledge, mindset, skills and education, EQ and IQ, job, family, environment
- Financial wellbeing can be rated or measured both subjectively and objectively.