Financial Wellbeing: Understanding Your Purpose, Priorities and Plan
Today’s global events are forcing us to rethink how we manage our lives; one of the biggest wakeups has been rethinking our wellbeing. If wellbeing is a three-legged stool, we often talk about the first two legs: physical and emotional. We understand the benefits of healthy eating, exercise, and sleep. We recognize the importance of emotional health, relationships, and community. Yet, for this metaphorical stool to be balanced, financial wellbeing, the third leg of the stool, must be given the same attention.
Speaking openly about money is still a social taboo in most societies, yet few things in life shape us more than our choices about how we think, feel, and behave around money. For example, Jason, a college professor, has done very well for himself, yet he can’t seem to save any of his income. He is overextended on his credit cards and stressed at the prospect of paying for routine household repairs. What is happening? From all accounts, Jason should be financially comfortable. Yet, his relationship with money is complicated. And he finds it extremely difficult to deal with. He’s embarrassed – and feels at a loss as to how to manage it. We can’t understand what we don’t intentionally reflect on and talk about. With each financial choice, we take a stand on who we are and what we care about. Wouldn’t it be better to be intentional about these choices? Jason struggled silently with this for a long time.
Financial wellbeing is a journey. The key ingredients are enabling a mindset where we feel in control of our future and creating processes to support this.
I grew up in a working-class family with little money around. I wore hand me down clothes and my mother cut my hair. My parents (emigrants who had primary school education) instilled in me the value of education. You could say that my first money script was a burning desire never to be poor. Jason had a similar experience. He too was the first in his family to go to college. Culturally, he was used to living in the moment. He was never socialized to think about saving or investing – it was never an option for his parents or grandparents.
Jason is socio-economically much better off than previous generations of his relatives. However, he wasn’t managing the money he had. A painful divorce and the need to save for his daughter’s education made this all too apparent. Jason realized he needed to change. He wanted a healthier way of dealing with his finances.
We all seek wellbeing and have different approaches to achieving this. The first step in this journey is understanding ourselves. As the legendary Pogo once mused. “We have met the enemy, and he is us.” Jason finally started to dig into his beliefs about money and wellbeing with the help of a coach.
Indeed, people are increasingly seeking more financial acumen, and stress may be a significant motivator. PwC’s 2018 survey found that financial challenges/money matters cause employees the most stress in their lives. Not having enough emergency savings is a top financial concern that crosses income levels and generations. In addition, 54 percent of employees surveyed want help with their finances. As a result, employers are increasingly offering financial coaching to support their employees. The payoffs of this kind of support result in reducing financial stressors and the ripple effect they cause, including absenteeism, lost productivity, health concerns, and workplace conflicts.
Undeniably, the financial headwinds facing us seem insurmountable and are often out of our control:
Enormous government deficits threaten the funding of future social security and pension benefits.
High inflation levels, rising costs of essential items (housing, education, transport), and a real risk of stagflation.
Lower levels of savings are causing people to work longer.
Lower future stock market returns in the decades ahead, requiring us to invest for longer.
A financial media environment that triggers our emotions - excites us and puts fear in us each time the stock markets go up or down.
The first eight months of 2022 brought the “perfect storm,” accentuating these headwinds.
While the headwinds make for doom and gloom, we have one superpower that can support us: our mindset. Unlike all other living creatures, we can reflect on our emotions and take positive action to achieve financial wellbeing. Over two thousand years ago, the Greek Stoic philosopher Epictetus made famous the concept of taking responsibility for our actions and letting go of external events that aren’t in our control.
What financial wellbeing looks like in practice
For Jason, this meant getting a handle on things within his sphere of influence, like his credit card spending. It wasn’t as simple as creating a budget. He needed to look beneath the surface at his feelings and beliefs about spending. He had been largely unconscious of the emotions and stories driving his compulsive spending. His splurging behaviors masked guilt about leaving his family home to pursue his education.
The environment we grew up in and the ripple effect of emotions play an incredibly formative role in our financial choices. The generation who lived through the Great Depression was more risk-averse than their children. Many investors who suffered from the Global Financial Crises never reinvested or became so risk-averse that they missed out on the subsequent growth in the decades leading up to today.
“We all have an identifiable, though largely unconscious, and unexamined, relationship with money. This shapes our experiences of life and the deepest feelings about ourselves and others.”
“Until you make the unconscious conscious, it will direct your life, and you will call it fate.”
These stories or scripts either support us or hold us back. If they hold us back, reframing them as unhelpful enables us to find new, more effective ways to move forward.
With a finance, consulting, and coaching background, I have spent much time thinking about, living, and supporting others in the behavioural psychology of financial matters. More importantly, I have gained knowledge the hard way – losing hard-earned capital. Inevitably, we all carry baggage when it comes to money. I am afflicted by the same fear and greed emotions as the next person (SPACs, crypto, commodities, anyone?). Humility is a hard taskmaster and an excellent teacher.
3 P’s Framework
To get beneath the surface of beliefs and emotions, I use the 3Ps framework, which enables you to gain clarity about your purpose and priorities to plan your finances consciously and wisely.
Purpose:
What does financial well-being mean to you? For many of us, it is feeling like we are in control of our future
Priorities
If money is the energy that fuels our lives, what do we need it for in the short, medium, and long term? How much is enough?
Plan
Once we understand our Purpose and Priorities, we can create a financial plan that supports this. Many of us may wish to work with a financial advisor or coach for this part of the journey
Ralph is a senior European executive who has travelled the world and spent much of his career in the US. He is well-versed with stocks and made (and lost) during the dot-com crash. Now in his fifties and living and working in a European city, he recently purchased his first property after working with me and reframing his priorities. For Ralph and his wife, financial wellbeing meant creating a home and memories for their family. It wasn’t just dollars and cents (or euros in their case).
Some of us avoid reflecting on financial wellbeing because we feel overwhelmed. Taking small steps like writing about your purpose and priorities can provide momentum. Working with a financial coach can also allow you to untangle the complexities holding you back.
Get in touch if you would like a consultation with Ronald or to learn more about financial wellbeing for yourself or your team/company.
