Why You Should Care About Financial Wellbeing
Financial wellbeing is a term that’s often misunderstood. It’s not about being incredibly wealthy or having unlimited resources. Instead, it’s about having a sense of control over your financial situation, understanding where you stand, and feeling secure enough to handle whatever life throws your way. Jase, Nick and Marty discussed this on a The Numbers Game podcast episode and we’ve taken that wisdom and shared it below because financial wellbeing is relevant to everyone. We’ve unpacked what financial wellbeing really means, why it’s important, and how you can work towards it.
Top Highlights
- Financial wellbeing is about control, not wealth: It means feeling confident with your finances, being able to cover needs, and making informed choices—regardless of how much money you have.
- Planning reduces stress and builds resilience: Budgeting, managing debt, saving for emergencies, and investing (like superannuation) help you stay prepared for life’s financial ups and downs.
- Support makes a difference: A financial advisor can guide you through smart decisions, helping you achieve financial freedom and peace of mind.
What is Financial Wellbeing?
What Does Financial Wellbeing Mean?
When we think of financial wellbeing, the first thing that often comes to mind is wealth. It’s important to understand that financial wellbeing is less about how much money you have and more about how you manage your personal finances. It’s about understanding your financial literacy, making informed decisions, and feeling comfortable with your situation—no matter what that looks like.
As Nick (Managing Director of Inovayt) pointed out, “Financial wellbeing isn’t necessarily linked to wealth. It’s about being okay with where your finances are at.” For some, this might mean having a sufficient emergency fund in case of an emergency or simply being on track for achieving a specific financial goal.
Jase added that the key to financial wellbeing is being comfortable with your financial decisions. “You’ve got to have an understanding of your finances, the ins and outs, and what factors are important,” he said. Feeling comfortable with your finances comes from having a clear understanding of your current situation and knowing how to make informed financial choices.
The MLC Financial Freedom Report 2024 revealed insightful perspectives on how Australians define financial wellbeing. According to the report, Australians prioritise fundamental quality-of-life aspects when evaluating their financial health: Australians tend to think of the more fundamental quality-of-life aspects when they think of financial wellbeing:
- 61% believe financial wellbeing means having enough money to meet their basic needs.
- 57% associate it with being free from financial stress or worries.
- 56% define it as having the financial freedom to make choices that align with their personal goals and values.
Dimensions of Financial Wellbeing
Financial wellbeing in Australia is a multifaceted concept, encompassing various dimensions that contribute to an individual’s overall financial health and satisfaction. While specific definitions and models may vary, several key dimensions are commonly recognised.
1. Financial Security and Stability
Financial security refers to the state of having stable income and assets to meet present and future needs. Key factors include income stability, debt reduction, and savings habits, which provide a safety net for unexpected expenses. Effective budget management ensures monetary stability, helping individuals manage finances with confidence.
2. Financial Freedom and Independence
Financial wellbeing also involves attaining financial independence through investment planning and retirement savings. It allows individuals to make choices without financial constraints. Tools like financial wellbeing programs and wealth management empower people to set and achieve goals, fostering a sense of financial freedom.
3. Financial Peace of Mind
This dimension focuses on reducing financial stress and promoting financial comfort. By practicing responsible money management and financial education, individuals can improve their economic resilience and enjoy a stress-free life, positively impacting their mental health and overall wellbeing.
Why Financial Wellbeing is Crucial
The importance of financial wellbeing goes beyond just feeling comfortable—it also plays a significant role in reducing stress and improving mental health. Financial worries are one of the leading causes of anxiety and poor mental health for Australians. Not being able to meet basic financial obligations, such as paying bills or managing debt, can lead to significant stress and even strain relationships.
Nick emphasized that financial wellbeing helps you maintain control over your finances. It’s about having an awareness of what’s coming in, what’s going out, and being prepared for regular payments, like bills, insurance, or even unexpected expenses like car repairs. “Having control over your finances releases stress,” Nick explained. “It’s knowing when things are due, understanding your income flow, and ensuring you have enough set aside for essential expenses.”
Having this control over your finances not only removes daily stress but also provides a sense of security. If something unexpected happens—whether it’s a job loss, medical emergency, or family crisis—you’re in a better position to absorb that shock. This brings us to one of the key aspects of financial wellbeing: preparing for the unexpected.
Preparing for Financial Shocks
Life doesn’t always go according to plan, and financial shocks can happen at any time. A sudden illness, a job loss, or a family emergency can quickly derail your financial stability. However, as Marty (Director of Business at Inovayt) pointed out, being prepared can make all the difference in how you navigate these challenges.
“A good financial plan provides relief and security when the unexpected happens,” he explained. “It’s about knowing that if something goes wrong, you’re covered.” Having an emergency fund or a safety net can make it easier to handle these difficult situations without sinking into financial chaos.
The key is to recognise potential financial shocks in your own life—whether it’s an illness, a sudden drop in income, or an unexpected large expense—and to plan ahead. Setting aside savings or establishing insurance for these situations can help you manage them when they arise.
Budgeting and Avoiding Chaotic Spending
One of the biggest obstacles to financial wellbeing is chaotic spending. As Marty mentioned, many people struggle with budgeting, often living day-to-day without a clear financial plan. This lack of discipline leads to impulsive purchases and unnecessary debt, creating stress instead of relief.
Budgeting isn’t just about restricting spending; it’s about making smarter financial decisions. When you have a plan in place, you can make informed choices about where your money goes. For example, instead of mindlessly spending on takeaway food, you might choose to save that money for a special experience, like dining out at a favorite restaurant.
The idea is to strike a balance. With a clear financial plan, you can enjoy your life while still making progress toward your goals. Rather than making purchases out of emotion or impulse, you can prioritise what truly matters and save for those things.
Managing Debt
Managing debt is a critical aspect of maintaining financial wellbeing. Debt can be overwhelming and, if left unchecked, can significantly affect financial health. As discussed, many people fall into the trap of accumulating debt through impulsive spending or living beyond their means. However, the key to managing debt is creating a strategy that includes debt reduction techniques and a clear payment plan.
The first step in managing debt is understanding its impact on your financial comfort and economic security. By prioritising high-interest debts and making regular payments, you can gradually reduce your overall debt burden. Consolidating debts or negotiating better terms with creditors are also effective ways to regain control over your finances. A strategic approach to debt management ensures that you maintain monetary stability while working toward financial freedom.
Investing and Superannuation
Investing is a powerful tool for securing long-term economic resilience and financial security. As part of a comprehensive financial plan, investments can provide a steady stream of income, build wealth, and prepare you for retirement. Diversifying your investment portfolio, including options such as stocks, bonds, and real estate, helps to spread risk and increase the potential for growth.
In Australia, superannuation plays a crucial role in retirement planning. Superannuation allows individuals to save for retirement while benefiting from tax advantages. Regularly contributing to your super ensures that you are financially prepared for retirement, reducing reliance on government pensions. By understanding how superannuation funds work, you can tailor your contributions and investment choices to maximise returns, ensuring a comfortable and secure retirement.
The Role of a Financial Advisor
A strong support system, such as a financial advisor and accountant, can help guide you on your journey to financial wellbeing. A financial advisor (like Nick or Marty) acts offers guidance on how to budget, invest, and plan for the future. They help you navigate the complexities of finance while providing reassurance that you’re on the right track.
“Having a financial advisor along for the journey makes a huge difference,” Marty said. “It’s a win-win situation for the whole family when everyone is involved in the plan.”
An advisor can also help you step back from impulsive decisions and keep your goals in sight. Whether it’s managing business finances, budgeting for personal expenses, or making long-term investments, having someone to provide objective advice can make it easier to make better choices.
Moving Towards Financial Freedom
Ultimately, the goal of financial wellbeing is financial freedom—the ability to make choices without the constant worry of money. Nick highlighted that when you have control over your finances and a solid plan, you can make purchases that bring you joy, without feeling guilty about the cost. Whether it’s a handbag, a car, or a luxury vacation, when you’re managing your finances well, these purchases no longer feel like spontaneous splurges.
Financial wellbeing isn’t just about having a lot of money. It’s about being in control of your financial situation, planning for the future, and making informed choices that reduce stress and enhance your quality of life. With the right strategies and mindset, anyone can work towards financial wellbeing and create a more secure, fulfilling future.
Financial Healthcheck
We’ve teamed up with Inovayt to provide the Future Fam with a quick and free financial wellbeing health check. Once you’ve answered these questions, you’ll get a call to discuss your needs. What are you waiting for?
FAQ
What does poor financial wellbeing look like?
Here are some red flags that might suggest your finances aren’t in the best shape.
- Chronic financial stress and constant worry about money
- Impulsive spending and difficulty controlling day-to-day expenses
- Living paycheck to paycheck with little or no savings
- Struggling with debt management and accumulating high-interest debt
- Poor decision-making, such as not saving for future goals or emergencies
- Lack of emergency savings and preparedness for unexpected expenses
- Inability to invest or build wealth
- Limited access to financial tools that can enhance economic resilience
Can You Secure Financial Wellbeing for the Long Term?
Yes, securing long-term financial wellbeing is achievable, but it requires a clear plan and consistent action. By developing smart money management strategies, such as creating a realistic budget, building savings, reducing debt, and investing for the future, individuals can create a foundation for long-term financial stability. The key is to be proactive, regularly assess financial goals, and adjust your strategies as circumstances change. By focusing on both immediate needs and future aspirations, it’s possible to maintain financial fitness over the long term.
Is Financial Wellbeing Only for the Wealthy?
Absolutely no, financial wellbeing is not exclusive to the wealthy. While having more resources can make financial management easier, anyone can work toward achieving monetary stability and improving their financial situation. Financial wellbeing is about making informed decisions, adopting smart savings habits, and using available financial tools to build economic security. People of all income levels can take steps, like reducing financial stress, setting financial goals, and investing in financial education, to improve their financial future and work toward economic resilience.
How can I improve my financial wellbeing?
Improving your financial wellbeing begins with creating a solid financial plan that prioritises budgeting and planning, debt reduction, and consistent savings. Future Advisory can help guide you through this process by offering tailored financial planning services that focus on your specific needs and goals. Whether you’re saving for retirement, paying off debt, or planning for future financial shocks, their expert advice can help you build a financial strategy that aligns with your aspirations. By using financial tools and implementing smart money management techniques, you can take control of your finances and work toward long-term financial comfort.
