Financial Wellness > Financial Literacy
Financial Wellness:
How Money And Mental Health Connect
Financial literacy is not enough. If you are currently consuming a lot of information and learning a lot about money, reading books, listening to podcasts, attending a ton of webinars, and consuming content with an emphasis on focusing solely on financial literacy, you're missing a huge part of taking care of yourself.
The term “financial wellness” has been thrown around often, but what is it?
If we back up, let’s look at financial literacy. Financial literacy is the ability to understand and apply knowledge to personal finance concepts.
It’s where most financial educators hang out: talking about budgets, retirement, interest rates, credit scores, compound interest, risk tolerance, and things like life insurance.
It’s not that those things don’t matter–they absolutely do–but when we exclusively focus on financial literacy – or teaching knowledge – we miss out on the emotions and behaviors that actually move the needle.
A 2019 meta-analysis of over 200 studies found that educational interventions explained only 0.1% of the financial behaviors studied.
Financial wellness goes deeper than financial literacy.
Financial wellness is the ability to not only understand money concepts, but to put meaning to them in a way that feels good for the individual. Financial wellness means understanding your financial picture, creating financial plans in alignment with your values, and ensuring your emotions are balanced when you engage with money.
In other words, financial wellness is understanding your financial picture, having enough financial literacy to create financial plans, and ensuring that your emotions are balanced when you engage with money
Nurturing a healthy relationship with money is so important.
Upwards of 90% of our decisions are driven by our EMOTIONS! And when we ignore emotions, we miss out on a key component of financial wellness that leads to lasting behavior change.
Financial stress is one of the leading causes of stress. What usually happens is a person deep dives into learning about money. And then you know what happens then?
Overwhelm
Avoidance
Embarrassment
Shame
Anxiety
And on and on.
When personal finance education leads with “you are behind, and it’s your fault?”
That’s a recipe for avoidance. Because it’s easier to avoid discomfort than to face it.
As a financial therapist, I know firsthand how important it is to address the emotional side of money to help cultivate financial wellness. Here are 5 financial wellness tips.
Financial Wellness Tip 1: Get Curious About Your Money Story
Most of what we think about money is imprinted on us by the age of 8! When we think about it this way, it makes so much sense why we do what we do with our money. Go back to your childhood or elementary school-aged years so you can start to piece together your money story.
What messages did you pick up about money directly or indirectly?
Did your caregivers easily hand you money for field trips, or did you have to fundraise to go on them?
Was it common for neighborhood friends take vacations over school breaks, or did everyone stick around and hang out with one another?
Did you have a bank account to put money in, or did you hide your money in shoeboxes or under the mattress?
Was money tense in your household, or did you have a sense that you’d be taken care of and things would sort themselves out?
Was it expected you’d get a job as soon as you reached legal employment age?
What was the discussion–if any–about higher education and who would pay for it?
Understanding your money story can help you see where your financial patterns come from, and help you decide whether your money story is helping you financially or not.
Financial Wellness Tip 2: Set Money Goals That Matter
Setting money goals is a great tip: but setting values-based money goals takes this tip even further. When setting money goals, first brainstorm all the financial goals you’d like to achieve. Do you want to pay off your credit card debt? Purchase a car outright? Save up for a vacation? Great!
Then think about whether or not they are in alignment with your values. I wrote an entire piece about values-based goal setting for Self magazine that you can read here if you’d like to learn more about how to set financial goals that stick.
Financial Wellness Tip 3: Feel Good About Money
To feel good about money, you first have to understand how you currently feel about it. Do you think money is the root of all evil? Does money talk make you anxious? Are you more likely to schedule a colonoscopy than an appointment with your tax preparer (I kid–sort of. Colonoscopies are important!)?
Once you know how you currently feel about money (e.g. anxious, avoidant, fearful), ask yourself how you want to feel about money. Many of my financial wellness coaching clients, they say they want to feel calm, confident, or relaxed when they engage with their money.
A great way to elicit neutral or positive associations with money is to ask yourself, “What’s something I spent money on recently that gave me joy?” or “what’s something i spent money on recently that I’m thankful I purchased?” Asking these questions will help you see what types of things matter to you. Maybe you dropped a pretty penny on a 5-course meal at a farm-to-table restaurant with some of your besties. You might be able to see that there are some values there that align with this type of spending such as: community, connection, and curiosity.
From there, you can ask yourself, “what would it be like if I felt connected and curious about my money?”
Financial Wellness Tip 4: Understand Your Financial Situation
Learning about money is great, but understanding your financial landscape helps to put that financial knowledge into action. Understanding your financial situation helps you feel better about money. For many of my financial wellness coaching clients, they are anxious about their finances so they avoid them altogether. Once they look at their financial landscape, they can start creating a plan that works for them to manage their money.
In my opinion, the three main pillars of personal finance contribute to knowing your overall financial landscape. 1) what’s happening now, 2) what’s happening in the near future, and 3) what’s happening in your long-term future?
The three financial pillars of personal finance:
Spending Plan. What’s happening right now? How much money do I earn and spend each month, and do I earn more than I spend? If not, how can I increase my income or decrease my expenses? This is often known as a budget, or my preferred term, spending plan. Starting here is a great place to learn how to manage your money.
Short Term Goals. Having short-term goals with a plan such as an emergency fund, vacation, or a down payment for a new car. This next pillar of personal finance helps you take a spending plan and make it more intentional, by adding in financial goals you’re interested in.
Planning for Your Future Self. This pillar is broad–but it encompasses everything from having a will and trust, to paying off student loans, and investing in retirement.
Financial Wellness Tip 5: Find Similar People
Who you surround yourself with matters–especially when you are working on improving your financial wellness. Contrary to America’s “do it yourself” belief, 64% of employed folks endorse wanting additional help with their personal finances.
Most of my clients and audience members are craving validation–the knowledge that they aren’t alone in their financial struggles or in pursuing their financial wellness goals. I love turning to the internet to find groups of people who are working on a similar financial goal. Groups on Facebook, hashtags on Twitter, subreddits, and accounts on TikTok and Instagram have different financial wellness focuses. You also have full permission to turn away from personal finance accounts that blame you, evoke shame, or don’t include the systems that we live in and only focus on individual matters.
Financial Wellness Speaker
If you’ve loved these financial wellness tips and want to bring financial self care to your conference or organization, you can hire me! I’m a certified financial therapist and financial wellness speaker and can cover topics about financial self-care, cultivating financial wellness, and dialing down money shame. To learn more about the audiences I speak to and topics I cover, visit my speaking page here.
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