There’s been much buzz about the term financial literacy, but despite our money know-how, being financially savvy doesn’t always equate to great financial wellbeing.
To launch the new Bauer Media and Commonwealth Bank Financially Fit podcast series, Nicole Byers, editor-in-chief of The Australian Women’s Weekly sat down with finance commentator and author Effie Zahos, and Nathalie Spencer of the Commonwealth Bank’s Behavioural Economics team, to talk about what it takes to become financially fit, and the positive impact it can have on our overall wellbeing.
So, what is financial wellbeing?
“Financial wellbeing is about both objective outcomes and subjective thoughts and feelings,” Nathalie explains. “It is about meeting your obligations — paying for rent or your mortgage and all of your bills — but it’s also about having choices that help you to really enjoy life.
“In order to have those choices you need to have a sense of control and sense of freedom, as well. Financial wellbeing is also about having security.”
With only three months until 2020, it’s time to get real about our money issues once and for all so that we can minimise the stress and launch into the new decade feeling happier, healthier and better off.
Hit play to listen to the Financially Fit podcast, episode one.
1. Set realistic goals
“The most powerful goals are what I call ‘Goldilocks goals’. They have to be just the right level of difficulty,” Nathalie explains.
“If they’re way too difficult, there’s no way you’re going to be able to attain it and it’s going to be demoralising when you fall off-track. But if it’s too easy it becomes meaningless.”
Nicole suggests applying this way of thinking to physical fitness goals, too.
“If you say ‘I want to lose 10 kilograms in a month’ you’re probably not going to get there and then blow out and be disappointed. And if you make it too easy; what’s the gain?” says Nicole.
“You have to know your health before you start, and then have your goals.”
2. Stay motivated
Reaching goals often calls for a relentless level of determination.
To maintain motivation, Nathalie likes to ‘chunk’ her goals, breaking them down into smaller parts to help her stay on task, and also determine whether or not her end-game goal is achievable.
“You can reward yourself each time you meet one of those interim goals,” she shares. “That way you’re not waiting for just that fantastic goal at the end of the year, but you’re helping to keep yourself motivated throughout.”
The task of confronting your own financial situation can be daunting but Effie says you should approach organising your finances knowing there’s money to be gained.
“I get motivated by the fact that; ‘I’m going to find some savings here’. If I find some savings, maybe I’ll keep 30 per cent of it and save 70 per cent. Treat yourself. You put some time and effort in — pay yourself for that time.”
Where to find hidden savings?
According to Effie, the big ticket items are where most people will find savings. Look at your mortgage, utility bills and service providers. With just a few phone calls you could find a cheaper alternative or slash your rates. Competition is big for these companies so use this to your advantage.
“There are tools that make it easier as well,” Nathalie adds. “There is so much money that goes unclaimed in Australia. There are tools like CommBank’s Benefits Finder that if you use the app, you can go in and see if you’re eligible for a rebate or benefit.”
With just a few phone calls you could slash your phone and utility bills, as well as mortgage repayments.
(Credit: Getty)3. Aim for long-term commitment
FACT: financial literacy is different to financial wellbeing.
“Financial literacy, or knowledge about concepts, is useful for financial wellbeing but it’s not the whole picture,” says Nathalie. “Financial wellbeing is about getting to outcomes and having comfort and confidence in meeting those obligations.”
To help achieve financial wellbeing, Spencer recommends breaking down your funds into three categories:
The Everyday
making ends meet
paying bills
your everyday lifestyle (e.g. coffees)
The Rainy Day
- unexpected expenses
The One Day
retirement
long-term savings goals
“It’s hard to plan for the unexpected,” says Effie. “But if you take time out you can actually think what may come around the corner. In my industry there’s job volatility, so someone like myself should know that I may not have a job around the corner, so do I have that emergency fund?
“If I can pay my bills and have $1,000 in my emergency account, I feel better, I feel great, and that’s the wellbeing I’m looking for.”
Long-term savings (i.e. your ‘One Day’ cash) will help you to achieve greater financial security and alleviate a lot of built-up anxiety surrounding your future, that Nicole, Nathalie and Effie agree can take a detrimental toll on relationships and our greater quality of life.
“It can affect your happiness,” say Nicole. “You might not think that you’re worrying all the time about your finances but if you don’t have financial wellbeing, that cloud can permeate across your life in a lot of ways and relationships can suffer. It’s an important aspect of our overall wellbeing.”
Financial wellbeing is an important aspect of overall wellbeing.
(Credit: Getty)We all want to see instant results, but think of financial fitness as a long-term commitment. Effie says it’s never too late to get proactive with your savings.
“Get expert advice when you need it,” she says. “Keep things simple. It’s never too late to start saving, whether you’re 30 or 60. Automate your savings and the magic of compound interest will pop in.”
4. Learn to say ‘no’
New technologies such as UberEats and Netflix, that allow you to purchase things without physically handing over cash, makes spending money easier than it has ever been before.
“When we have notes and coins (something tangible) you can see the exchange happening,” says Nathalie. “But with all of this new technology, it makes a lot of the spending invisible.
She also stresses the importance of setting an example for children: “I think there are a lot of opportunities to talk about spending and exchange with children.”
A little shock-factor can go a long way. Effie suggests printing off your monthly statement and see what’s coming out, and look at apps that could be costing you money.
“Your digital footprint is quite powerful,” she says. “Now that we don’t have change and notes — have a look at your digital footprint and see if you’d feel comfortable sharing it with your friends.”
New technologies such as UberEats and Netflix makes spending money easier than it has ever been before.
(Credit: Getty)5. Own your financial status
One of the first steps in improving your financial wellbeing is acknowledging your poor money habits.
“You have to start at the beginning,” says Nicole. “You have to get your head out of the sand (which I am sometimes prone to do) and work out where you sit – what are my outgoings, what are my incomings, what debt do I have and just ripping off the band aid.”
Having spent much time studying people’s behaviours with money, Nathalie says that, as humans, we have a number of limitations that affect our decision-making ability.
“Regardless of who you are, we all have natural limitations when it comes to decision making. For instance, we have limited attention, memory and self-control. So it’s no wonder that we can forget to pay a bill or find it tempting to spend too much today without thinking about tomorrow,” she says.
“The upside is that once we understand more about ourselves and our behaviour, we can make changes to our lifestyle or financial systems that help us to manage our money better and move from financially flabby to financially fit.”
Scroll up to listen to this Financially Fit podcast episode in full.
This article has been written in partnership with Commonwealth Bank.
To help improve your financial wellbeing, please visit financiallyfitfemales.com.au.
Always consider your personal circumstances before acting on financial advice.
