Written by Client Manager, Tom Desborough
When people hear the term financial wellbeing, they often think it’s simply about earning more money. While income certainly helps, research suggests financial wellbeing is about something much broader: feeling in control of your finances and confident that your money is supporting the life you want to live.
Financial wellbeing can be thought of as a state where your financial goals, motivations and day-to-day financial habits are aligned. It’s about being able to meet your current obligations, cope with unexpected challenges and maintain a sense of financial freedom. Importantly, this can be achieved at many different income levels.
To understand why financial wellbeing matters, it helps to look at wellbeing more broadly. Psychologist Carol Ryff developed a widely respected model of psychological wellbeing that moves beyond momentary happiness and focuses on long-term flourishing. Her model identifies six key dimensions: autonomy, environmental mastery, personal growth, positive relationships, purpose in life and self-acceptance.
Our finances influence all of these areas. When we feel organised and in control of our money, we develop greater environmental mastery, the sense that we can effectively manage the demands of everyday life. Financial security can also support autonomy by giving us more freedom to make choices based on our own values rather than external pressures. Unsurprisingly, research has consistently found that financial wellbeing and lower levels of financial stress are associated with higher life satisfaction and better mental wellbeing.
The encouraging news is that improving financial wellbeing doesn’t necessarily require a dramatic change in circumstances. More often, it starts with small behavioural changes that increase our sense of control.
Clarify What’s Important To You
Financial wellbeing improves when your financial decisions reflect your values. Take some time to consider what financial security and freedom actually mean to you. Are your spending and saving habits helping you move towards those goals?
Focus On The Basics
Maintaining an emergency fund, paying bills on time and regularly spending less than you earn can significantly improve your sense of financial capability. These simple habits help reduce uncertainty and create resilience when life doesn’t go to plan.
Track Your Spending Intentionally
Tracking your spending helps you understand exactly where your money is going. It also allows you to direct more of your resources towards the things that genuinely matter to you. Greater awareness often leads to a greater sense of control.
Many people know these habits are beneficial but struggle to find the time or mental energy to put them into practice, especially when money already feels stressful. The challenge is that financial stress itself consumes mental bandwidth. Research has shown that when people perceive resources such as time or money to be scarce, their cognitive capacity can become stretched, making decision-making more difficult.
The result is a vicious cycle: financial stress makes it harder to take action, yet taking action is often what reduces the stress. By overcoming the initial friction of getting organised, we can reduce uncertainty and free up valuable mental space.
Financial wellbeing isn’t about achieving a perfect financial position. It’s about building habits and systems that help you feel more in control, more resilient and more able to focus on what matters most.
What’s had the biggest positive impact on your own financial wellbeing? I’d be interested to hear the habits, behaviours or mindset shifts that have made the greatest difference for you.
Sources available on request: Brüggen et al. (2017), Ryff (1989), Netemeyer et al. (2018), Kempson et al. (2017), Mullainathan & Shafir (2013).
This article is provided for information and educational purposes only and should not be construed as personal financial advice. The views expressed are intended to be general in nature and do not take account of your individual circumstances, objectives or financial situation. Financial planning decisions should be based on your own circumstances and, where appropriate, you should seek professional advice before taking action.