In this blog I present research on the factors influencing our feeling of financial wellbeing and what we can do about it. This research forms part of Milford’s recently published whitepaper for Financial Advisers titled ‘Financial Advice Reimagined’, in which we explore how implementing better financial behaviours can lead to improved lifelong money relationships.

It is no great surprise that our emotional relationship with money is both complex and confounding.

Driven by beliefs shaped in our childhood and largely subconscious, our attitudes to money and our associated behaviours are possibly the single biggest determinant of our financial – and mental – wellbeing.

Whilst there are many definitions of financial wellbeing, they typically all include some reference to the following components:

  • Able to meet financial commitments
  • Have resources to enjoy life; and
  • Have an ability to cope with unexpected financial shocks.

Extensive research has shown that behavioural and psychological factors are the biggest drivers of financial wellbeing, and collectively explain around 60% of variations in financial wellbeing between individuals, whereas knowledge explained only 9% of variations1.

Whilst being aware of these factors is helpful, it is equally important to understand what we can do to improve them.

UK researcher Elaine Kempson2, whose work fed into the long running ANZ Financial Wellness survey, identified the key behaviours positively correlated with financial wellbeing as:

  • Planning expenditure against income
  • Prioritising spending on essentials
  • Disciplined spending
  • Living within means/not borrowing for essentials
  • Keeping track of money available for spending
  • Active saving
  • Planning for unexpected expenses or an income fall
  • Planning for retirement
  • Proactively seeking information and checking product features before buying a product
  • Gathering information before making a financial decision

According to experts, our relationship with money is driven by a complex array of beliefs, attitudes, and behaviours, many of which were shaped early in our lives by the interplay between familial, ethnic, and cultural influences, and then further refined by our exposure to media messages.

Understanding the factors and behaviours that influence financial well-being is an important part to improving our relationship with money.

If you’re an adviser and would like to explore ways to better help coach clients to improve their relationship with money you can download the Financial Advice Reimagined whitepaper here

1. Financial Wellbeing, A Survey of Adults in Australia, April 2018, ANZ Banking Group.
2. Financial Wellbeing, a conceptual model and preliminary analysis, E. Kempson, A. Finney & C. Poppe, Consumption Research Norway – SIFO, 2017.