How one can maintain Financial Well-being during COVID-19
Likewise mental, physical, and/or any other type of wellbeing, it’s imperative to maintain our Financial well-being too during COVID-19. We need to understand financial wellbeing and how to achieve and maintain it.
We have just welcomed the month of October which embarks our entry into the 10th month of the most eventful year – 2020. It’s been eleven months the whole world has been struggling with one of the deadliest and controversial viruses; the human race ever had a face-off with.
Yes… You guessed it RIGHT! I am talking about the Corona Virus, aka, COVID-19. The virus has brought the whole world to a standstill, shadowing over each and every aspect that human race has to do with; with its impact. The last few months have been exorbitantly challenging and it’s imperative to maintain our Financial Well-being during COVID-19 times…
With a unanimous step towards Work From Home; globally, we all need to focus first and foremost on our health and wellbeing during the Corona virus pandemic. Whilst doing so, some families may be worrying about potential impact on their personal finances than the wider impact of the lock-down.
Mercer, a leading consultancy firm, has provided us with access to free guides, mini-videos and other materials they have produced to help you and your families manage your finances during this period. There is a check-list as well as a number of hints and tips and useful practical steps we can all take. We would encourage you to visit the website from where you can view or download the available materials.
Whilst a lot is talked about a Buzzword called “Wellbeing” all over the internet and social media, with its various types such as Social, Physical, Emotional, Mental and it goes on and on. However, the most important types of wellbeing and seldom talked about is the Financial Wellbeing; sporadic though, talked about only when an unwelcomed even occurs, a current pandemic, likewise.
To understand the meaning of Financial Wellbeing, we need to first understand a great concept called “Wellbeing”. Wellbeing is a feeling that one posses about his/her esteem, achievements, life state, etc which keeps him/her in high spirits and make feel happy, satisfied. Having said that, if this concept is connoted with its types, then the Social Wellbeing could be interpreted as someone who is happy and/or feel satisfied about ones Social presence and/or image, Emotional Wellbeing would mean a feeling of Emotional satisfaction, etc.
Similarly, Financial Wellbeing would mean feeling satisfied about ones financial state/position. A feeling of being secured and satisfied about source of finances available to meet currently ongoing and future financial obligations.
The US Federal Consumer Financial Protection Bureau defines financial well-being as:
“A state of being in which a person can fully meet current and ongoing financial obligations feels secure in their financial future, and can make choices that allow enjoyment in life.”
Why Financial Wellbeing is important?
Financial wellbeing has a radical impact on all spheres of your life. You financial preparedness doesn’t mean having enormous money JUST today, but having ENOUGH money for today and tomorrow. It does interpret as having enough money to give feel yourself at liberty to make financial choices today and for future needs; which makes financial wellbeing so important.
Financial wellbeing shouldn’t be understood as living a debt free life or getting a handsome pension to spend your old age respectfully. These are of course important parameters; however, the financial wellbeing doesn’t limit itself to these two. It’s an important concept and an ingredient to a fulfilling life, as it helps you maintain the enough reserves for today and expected and unexpected milestones of your life till the life expectancy ends.
How is Financial Wellbeing measured?
Financial well-being is the ultimate goal of financial education. To help people improve their financial well-being, you first must be able to measure it.
Financial well-being describes a condition 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 them to enjoy life. It’s determined by the extent to which people feel that they:
- Have control over day-to-day, month-to-month finances
- Have the capacity to absorb a financial shock
- Are on track to meet his or her financial goals
- Have the financial freedom to make the choices that allow one to enjoy life
How Financial Wellbeing can be achieved?
Having been read all this far about financial wellbeing, bells must have started ringing in with an obvious question How Financial Wellbeing can be achieved? Well, the answer is.. it can be achieved with self-realization, sound knowledge, disciplined investment and financial management, and of course, sheer perseverance. To understand the mantra for achieving financial wellbeing; I have divided it into two parts:
- The 5 Pillars of Financial Wellbeing
- 7 Stages of Financial Wellbeing
The 5 Pillars of Financial Wellbeing
Financial experts across the industry define financial wellbeing in different ways. We think this summary from Claire Daily, a research associate with Corporate Insight, really captures the spirit of financial wellness.
Daily suggests that a person is said to achieve a state of financial wellbeing if they have:
- A manageable level of stress associated with current and future financial matters,
- A manageable level of debt—or no debt at all—that can be paid off without financial penalty or significant stress on an individual’s financial situation or lifestyle,
- Enough disposable income to maintain a desirable lifestyle that is within reason,
- An ample emergency savings fund that can sustain an individual’s lifestyle for a bare minimum of three months, and
- Financial acumen that will allow them to plan appropriately for future goals and respond to unforeseen financial obstacles.
Source: World of Work
7 Stages of Financial Well-Being
A Canadian Advice-only financial planning company has devised a framework for Canadians. However, I strongly believe that this innovative framework could be used by anyone across the world to achieve Financial Wellness. Here how the framework is:
1) Financial Chaos
In Financial Chaos, you’re having a very tough time financially despite earning a good income. Perhaps you were never taught about money or you’ve experienced a difficult life situation or health issue that has affected your finances.
- Emotions: Fear, guilt, shame
- Behaviours: Avoiding, abdicating, overspending, family conflicts
- Financial Status: No savings, taxes not done, bills unpaid, mail unopened, abdicating financial management to parent or spouse
2) Financial Avoidance
In Financial Avoidance, you recognize there are problems with your finances but are avoiding taking action. Despite being a well-paid professional, you feel worried, overwhelmed and stuck, and likely need the help of an expert to make sense of your situation.
- Emotions: Overwhelmed, confusion, insecurity, frustration
- Behaviours: Paralysis, not sure where to turn, head in the sand
- Financial Status: Random savings, no advisor, disorganized finances, accounts at various banks, little financial control/knowledge
3) Financial Awareness
In Financial Awareness, you are ready to take charge and start thinking more proactively about your finances and your future. It’s now time to start creating cash flow and debt management plans to move you closer to your goals.
- Emotions: Curiosity, trepidation, willingness
- Behaviours: Ready to take control and change habits
- Financial Status: Conscious of need for a plan, often prompted by debt or life event (job, divorce, retirement), ready to learn and take charge
4) Financial Stability
In Financial Stability, you have a lot of the basics in place and financial security is in your sights but you don’t have it all together. Now is the time to evaluate threats to your financial well-being and put crucial safeguards in place to ensure unexpected life events don’t blindside you.
- Emotions: Relief, sense of accomplishment, cautiously optimistic
- Behaviours: Looking for reassurance, seeking information, getting organized
- Financial Status: Have advisor or savings plan, debt under control, living within means, building assets (RSPs, home equity), good daily money management skills
5) Financial Security
In Financial Security, you have a plan and it appears to be working. You’ve made good decisions, prepared for the unexpected in life, and are moving towards achieving financial independence. It’s time to make sure that you are making the most of your money and taking advantage of available investment, estate and tax planning strategies.
- Emotions: Confidence, control, openness, concern or worry about future
- Behaviours: Planning for the future, considering life choices and assessing options
- Financial Status: Providing for the unexpected: estate plan, insurance up-to-date, kids’ education saved for, savings plan maximized, minimal & controlled debt
6) Financial Freedom
In Financial Freedom, you have enough money to live the life you want but may find yourself concerned that future events outside of your control (personal, economic or societal) may throw you a curve ball. Be sure to have regular check-ins with your financial planner or Money Coach so that you can ‘course correct’ as required.
- Emotions: Sense of achievement, what’s next, life purpose issues, fear of loss, do I really have enough
- Behaviours: Retirement, downsizing, volunteer work, living elsewhere, travel
- Financial Status: Achieved financial independence, focus on personal enjoyment
7) Financial Fulfilment
If you’ve achieved Financial Fulfilment, you are confident that you have enough and that money is no object. You spend and give money in alignment with your values and you never worry that your financial security is at risk even when life events intervene.
- Emotions: I have enough, generosity, peace of mind
- Behaviours: Charitable giving, setting up foundations, involved in humanitarian projects, giving back (time and money)
- Financial Status: Money is no object and a non-issue, “I have everything I need and more”, share knowledge, wealth allocation
How to maintain your financial wellbeing?
Thanks for reading till here! Whilst having came down reading to this junction, you would’ve understood that Financial Wellbeing is a state of being, feeling. Since, it has more to do with how one feels about his/her state of being, I wouldn’t hesitate in calling it a psychology. And now, since it has more to do with self-realisation of current state of being and self-assessment for being better prepared and become certain for the future uncertainties, I have a few ideas as how one can maintain his/her financial wellbeing:
Write down your budget
Knowing your income, expenditure and disposable income once your day-to-day expenses are covered, will give you confidence in your decisions. If your partner or spouse usually looks after the finances, be sure to talk the budget through with them, so that you both understand your financial situation.
Avoid income comparisons
Research shows that comparing ourselves to our friends and/or peers reduces life satisfaction. Keep in mind that we all have different priorities and find pleasure or enjoyment in different things, which makes everyone of us unique. For example, you may love to travel and invest in experiences, rather than having a big car or house. Hence, to have a higher state of life satisfaction, avoid making income comparisons even with your own siblings and that’
Look for the positives
Research in the field of neuroscience has shown that practicing gratitude regularly can help to rewire your brain structure. Feeling grateful stimulates the production of natural ‘antidepressants’ such as serotonin and dopamine, giving you a feeling of contentment and wellbeing. Try writing down 3 things you’re grateful for each day.