“Motivation is what gets you started. Habit is what keeps you going” (Jim Ryun)

How would you answer someone who asked you whether you were physically fit?

To start with, fitness is not something you can necessarily think of in absolute terms. Surely an 80-year old and a 20-year old wouldn’t have the same expectations.

You can also be fit in different ways. Being flexible is one kind of fitness. Having muscle strength is another. Do you need to have both to be fully fit, or is one or the other good enough?

Fitness also depends on what you need to do. Maybe you aren’t fit enough to run a marathon, for example, but does that matter if you have no interest in running a marathon?

How do you feel?

That is why the way you answer this question will probably come down to how you feel. Are you generally vigorous and healthy? Or do you get out of breath walking up the stairs? Do you manage your daily tasks easily, or do you need help lifting your groceries out of the car?

A good way to think about fitness is whether you are confident about your physical well-being, and that you are physically able to choose the activities you want to do. If you aren’t limited by a lack of stamina, or flexibility or strength, then you could think of yourself as fit.

Financial wellbeing is much the same. It’s not necessarily an absolute thing.

There may be some things you can measure strictly – such as whether you have an emergency fund that could cover three months of expenses, or how many days of work you miss because you are under financial stress.

It is important to have these markers. But really, financial wellbeing is about how you feel about your financial situation.

The four elements of financial wellbeing

The Consumer Financial Protection Bureau (CFPB) in the US has done a lot of work on understanding and defining financial wellbeing. They believe that it is really made up of four things:

  1. Having control over your finances: These are the day-to-day concerns. Is your debt manageable? Are your monthly expenses lower than your income?
  2. Having the capacity to absorb a financial shock: This is the need to have a financial cushion to protect you against large, unexpected expenses. Will you be able to do this without having to take on debt or require help from family and friends?
  3. Being on track to meet your financial goals: Here, the question is about your financial plan and how you are meeting it. This includes both short-term goals, such as paying off a student loan, or a mortgage, as well as longer-term goals such as building your wealth.
  4. Feeling that you are able to make choices: This is perhaps the most important of all. Financial success, when it comes down to it, means that you have options. When your finances are in a healthy state, that means that you have at least some choice in how to spend your time.

All of this can be put into a single sentence, according to the CFPB: “financial wellbeing implies having financial security and financial freedom of choice, in the present and in the future”.

Take the financial wellbeing survey!

These are all relative measures. For example, an 80-year old doesn’t need to be thinking so much about building their wealth for the future. A 25-year old may not need to worry about paying off a mortgage.

Just like physical fitness, much of your financial wellbeing therefore comes down to how you feel.

The CFPB has also developed a free and publicly-available tool to measure this.  Anyone can take a simple survey of just 10 questions to get a sense of their own financial wellbeing.

Helpfully, the CFPB gives a score at the end, which can be compared against the averages for different age groups, income brackets and employment status.

The survey is therefore a very useful way to get a simple picture of your financial wellbeing. It will also raise areas that you need to think about. This makes it a great way to get a sense of just how financially healthy you are.

To take the CFPB financial wellbeing survey, click here and feel free to get in touch if you have any queries.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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