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| I rarely write in books - but this one called for my special multicolored pencil. |
So what is financial well-being? First, you must have enough money to address your basic needs of food, clothing, shelter and healthcare. Beyond that, money can make you comfortable and gives you control of your time. Financial well-being is intimately tied to your satisfaction of other areas of your life.
The more money you have, the more you can spend, but not all spending is equal. The book cites studies that show spending on others or giving to charity leads to greater satisfaction than spending on oneself. Spending on experiences is superior to spending on material purchases. Experiences lead to "decades of fond memories" while material items "lose their novelty" and "our satisfaction with material goods decreases over time."
Financial well-being is not measured by dollars saved or possessions gained. Financial well being isn't money in the bank, but the freedom and lack of worry that that money brings you. This is why "enough" is different for every client. While the money to satisfy their needs is different, the need for satisfaction is the same.
We get trapped by our own ideas of wealth. While having a higher income, more dollars in the bank, or bigger and better stuff than our neighbors can make us feel superior, this thinking only leads to a cycle of disappointment. We get trapped keeping up with the Joneses as they get a shinier car or fancier home remodel. If we focus on a dollar amount as the goal, we keep moving the goal posts. If you thought a million dollars would make you happy last year, now you won't be satisfied until it's two million.
The authors call this the "comparison dilemma." This is one place where your financial well-being overlaps with your career and social well-being. If you are comfortable and confident in your social relationships, and proud of your friends achievements, you are less likely to be jealous and judgmental of them. If Mr. and Mrs. Jones next door put in a new pool, hopefully you will bring over a pitcher of margaritas and share their joy - not waste money on your own pool. If you are fulfilled and engaged in your job, you will be less likely to be casting your resume elsewhere, fishing for a higher salary. Once your basic needs are met by your salary, your work can engage you on a deeper level.
How do we attain financial well-being? A great place to start is by automating your financial life. Regularly depositing money and investing for long-term growth is a powerful tool for building wealth. Working with a professional to answer your biggest financial questions eases the daily stress that money can bring and gives you confidence in your financial future.
So why doesn't winning the lottery make people happier? One possibility is that they spend the money down too quickly. If material possessions are not what that person truly valued, the effect would wear off. Lottery winners may get stuck in a cycle of comparing themselves to others or their own ideas of wealth. If you are not satisfied in other areas of your social, professional or physical well-being, money isn't going to fix all of your problems.
As the authors say:
People with thriving Financial Wellbeing are satisfied with their standard of living, don't worry about money in their everyday lives, and have confidence in their financial future. They give to others and don't just spend on themselves. As a result of managing their money wisely, they have the financial freedom to spend even more time with the people whose company they enjoy best.
Summary:
- Wealth is financial well-being: Having the money to be comfortable and being able to control your own time.
- Spending on others, charities and experiences can bring lasting satisfaction.
- Automating your finances and working with a professional grow your wealth while you enjoy your life.
- Anyone can be wealthy if what you have brings you satisfaction.
