Unleashing The True Power Of Financial Wellbeing

Over the last few years, the concept of financial wellbeing has grown in popularity. Companies have understood that helping employees to be better with money makes them happier, both in their lives but also in their jobs. 

The cost of living crisis has brought an even sharper spotlight onto this issue.  

Financial wellbeing is a term that describes how we deal with money. For many, this means better budgeting and managing debt – something that I would prefer to call Financial Resilience. 

The Why Of Money

My reason for this is subtle, but really important if we are going to genuinely improve people’s relationship with money and therefore wellbeing. It’s about the importance of understanding the ‘Why’ before the ‘How’.

If we teach people techniques for better budgeting, then they may well become better at budgeting. Chances are, however, that many will either not get around to putting the ideas into practice, or will lapse back into bad habits. 

This is because those habits are easier. Being better with money often involves sacrificing the enjoyment available now for advantages later – and this is not something we are very good at doing.

The impact of this financial resilience version of financial wellbeing is therefore limited.

I Wouldn’t Start From Here

We will have much greater impact if we start at a different place, which is to teach people the principles of what makes us happy. 

Our relationship with money is one that can help us to find wellbeing, but it can also get in the way. Understanding these positive money attitudes and barriers can change behaviour at a much deeper level – meaning the financial resilience message is more likely to take hold. 

When I wrote The Financial Wellbeing Book in 2015, this is what I intended. 

That’s not to say that budgeting isn’t important. Control of daily finances is one of my five pillars of financial wellbeing. It is not, however, the beginning of the story.

Does Money Make You Happy?

The answer to whether money makes us happy is simple: yes – and no!

To someone without a home, the money to rent a room will clearly increase their wellbeing. As we get more money, however, the increases in our wellbeing, get smaller and smaller. If I were to give Bill Gates a million dollars, it would not increase his wellbeing. 

However, to ask this question at all is to miss the point in the same way as above. We should not start by asking if more money makes us happier. This is like asking ‘Which car would you like to buy, the red one or the blue one’, when actually you want to ride a bike.

Instead, we should be asking what makes us happy, and only then consider the role of money. 

Spending Our Way To Wellbeing

Decades of research (and, indeed, millennia of religious and philosophical teaching) have taught us that happiness does not come from the accumulation of wealth. If our wellbeing lives the other side of a purchase then there is always another purchase needed. If our wellbeing comes from achieving a certain status, then we will continually be seeking admiring glances or comments. 

Buying things to give us short-term hits of wellbeing means we are forever having to buy things to make us happy. If we teach that retail therapy is actually a negative thing, and then help people to learn the sources of longer-term wellbeing, we can have a much greater impact on their financial resilience. 

Sources Of Wellbeing

So what are the longer-term sources of wellbeing? Religions such as Buddhism tell us that it comes from internal self-worth, which is a fancy way of saying living a life of meaning and purpose. Studies such as the longitudinal Harvard study on happiness tell us that the quality of our social relationships is the biggest factor. 

Biology shows that the happy chemicals in our brains are triggered by simple acts such as a hug or exercise; nutrition; and enjoying art or a film. 

Recent developments in neuroscience have revealed that we are terrible at connecting with our future selves, which is why we so often act to enjoy now at the sacrifice of enjoying the future. 

The development of behavioural finance tells us the many barriers our biases and beliefs bring to our own wellbeing. 

These teachings combine to give us the four cornerstones of financial wellbeing:

• What will bring wellbeing to everyone
• What will bring wellbeing to you
• The barriers to wellbeing that are true of us all
• The barriers to wellbeing that are true of you

If we broaden the focus of financial wellbeing from just looking at financial resilience, and instead understand the sources of wellbeing and how money can help or hinder, you can have a much greater impact on the wellbeing of your employees.

Written by Chris Budd.

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