Money is a topic that impacts almost everyone. Money is necessary for basic needs, such as food, shelter, clothing, etc. Once basic needs are met, purchases may be made based on personal desire, or money may be saved/invested for future use. Learning what you value and how to balance your individual wants and needs with your available financial resources can impact your overall personal financial well-being.
Money Attitudes
Many people are not feeling comfortable with their finances at the present time as we are experiencing such high levels of inflation. Take this time of discomfort to investigate your finances and see where changes may benefit your current and future circumstances. Some steps to start this journey may be to self-assess your attitude toward money. Knowing your personal inclinations when managing your money may give you some insight on how to move forward.
Money is commonly associated with four emotions: Security, Power, Love, and Freedom (Goldberg & Lewis, 1979). The way a person views money may be dependent on many individual factors. Knowing how you view money may help you understand why you make certain financial decisions and see if your choices can provide the value you seek to attain.
Recent studies have been researching the link between money and happiness. According to a study conducted by Cebr with Barclays (2019), a culture of “living lagom” (lagom, a Swedish term meaning moderately) that includes finding the right balance of enjoying life today while saving for the future may be able to improve life satisfaction. Saving money can increase financial security, which is linked to higher well-being. The study found that increasing savings by 10% was able to make a significant impact on reported life satisfaction. This impact on life satisfaction was even greater for those in lower income categories.
Financial Goals
The goal of financial well-being looks different to everyone. Start thinking about your financial goals to decide what is most important to you and those in your life. Illinois Extension has resources on setting SMART goals. Setting SMART goals assists with this process. A tip for setting financial goals is to make SMART goals:
- Specific
- Measurable
- Assignable
- Relevant
- Time-related
Once you have set your financial goals, it may be time to create a budget. A fundamental way to view your finances is to see if you are balanced. Does your income equal your expenses and savings? A simple equation may be a helpful way to visualize a basic budgeting framework typically referred to as zero-balance budgeting.
Income = Expenses + Savings
Planning savings or debt repayment as a part of your regular “expenses” may help keep you on track with your financial goals. Assigning all your income to expenses (including debt repayment) and savings is an excellent place to start with creating a budget.
Creating a financial consciousness or awareness is a great place to start finding your financial balance. Money management is a significant predictor of financial well-being, and conscientiousness is the most important trait associated with money management (Donnell et al., 2012). Increasing your financial awareness may improve your money management and financial well-being. Understanding your inclinations toward money and spending may provide insight into making behavioral changes to avoid falling into spending habits that do not provide the expected value.
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References
Donnelly, G., Iyer, R., & Howell, R. T. (2012). The Big Five personality traits, material values, and financial well-being of self-described money managers. Journal of Economic Psychology
Doran, G. T. (1981). There's a S.M.A.R.T. way to write management's goals and objectives. Management Review. 70 (11): 35–36.
Goldberg, H., & Lewis, R. T. (1979). Money madness: The psychology of saving, spending, loving, and hating money. Springwood.
Living Lagom - challenging perceptions of wealth. (2019, June). A report by Cebr with Barclays.
Meet the Author
Jamie Mahlandt is a Financial Educator for Bond, Clinton, Jefferson, Marion, and Washington counties in Southern Illinois. She provides financial education to the local community with an emphasis on financial literacy and financial well-being.