When you are in a good place financially you feel good about your finances. This does not mean you are rich. Although that would be nice. It means you do not worry about paying your bills and providing for your family. You do not have to stress about how you are going to make everything work. According to Consumer Financial Protection Bureau, “financial well-being can be defined as a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life” (Consumer Financial Protection Bureau, 2015).
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Another aspect of financial wellbeing is feeling like you have your finances under control. You should not have to know where every dollar is going but you should have a basic understanding of your spending. When you keep track of your spending or set financial goals (no matter how small) you will feel like you have some control over your money. Things are not so out of hand.
When you feel like you are able to provide for yourself and your family you have better financial wellbeing. If you have a steady income that can provide for your basic needs you free up brain space to think about other things. If you do not have that you may find yourself unable to focus on anything other than money. You might feel anxious or stressed out and not be able to relax or enjoy thoughts of the future.
Speaking of the future. Thinking about your future finances is part of financial wellbeing. Maybe putting away a little something each month for your retirement account or planning for large costs years in advance can help you feel better about your financial situation.
Finally, there is an emotional factor to financial wellbeing. When you feel like you are being paid what you are worth at your job you will feel better about yourself. You will feel confident and driven to improve yourself. Once you feel like you are where you want to be with your finances you can put that energy into other areas of your life that are not money related.
References and find out more!
Brüggen, E. C., Hogreve, J., Holmlund, M., Kabadayi, S., & Löfgren, M. (2017). Financial well-being: A conceptualization and research agenda. Journal of Business Research, 79, 228-237. https://doi.org/10.1016/j.jbusres.2017.03.013
Consumer Financial Protection Bureau. (2015). Financial well-being: The goal of financial education.
https://files.consumerfinance.gov/f/201501_cfpb_report_financial-well-being.pdf
Organisation for Economic Co-operation and Development. (2024). G20 Policy Note on Financial Well-being. https://www.oecd.org/en/publications/g20-policy-note-on-financial-well-being_7332c99d-en.html
Organisation for Economic Co-operation and Development. Financial education and literacy. https://www.oecd.org/en/topics/financial-education.html