Our panel of experts shared some of the key things that keep people from achieving financial wellness, and what they can do to better manage, save, and spend their money.
Hannah Moore, CFP®
Financial Planner, Guiding Wealth
What is your top advice for people attempting to improve their financial well-being?
Remove the taboo and the shame around money. Whether you think you are behind or on-track, there are far more people who can relate to your situation than you may realize. You are not “bad at money,” you likely just haven’t found a system that works the way you do yet.
Do you have any best practices for improving one’s financial literacy?
Start by changing the narrative. I’ve heard so many people say they are “bad at money,” but they really aren’t. They haven’t found a system and a way of thinking about money in a way that resonates with them. If you are reading blogs and getting information that just isn’t making sense, keep looking. It’s important for you to find a system and way of thinking about your money that makes sense to you, because once you do, it will be far easier to make lasting change.
What can people do today to begin planning for their retirement and long-term financial security?
Start by getting a clear picture of where you are today. This includes knowing what your income and expenses are, as well as looking at your net worth statement, or simply how much you own versus how much you owe. It’s hard to plan for the future when you aren’t sure where you are today.
What are the crucial conversations to have while setting a budget for one’s self, a couple, or family? How do your BudgetingBlocks help people have these conversations?
This is one of my favorite questions! So often, people start with the numbers on their budget and get frustrated when it doesn’t work, which makes sense. They are starting the conversation in the wrong place. I always encourage people to start the budget conversation with their values. What’s most important to you in life? What are the core values to your family? The people who are most content have a strong sense of this and align their spending to these core values in their life.
Using the BudgetingBlocks, we have everyone start with their values. We then visualize their spending with blocks, because we’ve found many people struggle looking at their budget on a spreadsheet or even apps. People learn very differently, and so many people have been told that they aren’t good with money or budgets, when in fact, they may not have found a system that works the way they do. Just like we wouldn’t expect all students to learn one way, why do we expect people to all budget the same way?
Having a visual way to look at your spending and budget allows for couples or families to have a different and more productive (and often more fun!) conversation around their family. With the BudgetingBlocks, we say every budget tells a story. Your budget should look different than others because our values and priorities are different.
How can someone prepare for unexpected financial struggles or strains?
The best way to prepare for unexpected financial struggles or strains is to plan for them. This is why emergency funds are so important. It’s also important to remember how you have overcome other struggles in the past. We are far more resilient than we give ourselves credit for, and often have the resources — financial or otherwise — we need to navigate difficult times.
Dr. Elizabeth Dunn
Chief Science Officer, Happy Money
What is your top advice for people attempting to improve their financial well-being?
My top advice is to focus less on how much money you have and more on what you do with it. You can be happy with even a modest income if you are choosing carefully and mindfully how you spend it, not racking up debt, and putting a little money away for savings. Financial well-being isn’t about making a certain amount of money — it’s about feeling like you have the money you need in order to do the things that are important to you.
Of course, there’s a tendency to focus on climbing the income ladder. However, research has revealed that while income matters for happiness, it’s far from the only thing that matters. So instead of focusing on getting more money, which can sometimes be outside your control, you can instead focus on doing the things that are important to you, and saving and spending in accordance with your values. You have control over that part of the equation, and you have control over it now.
For example, I’ve spoken to people who tell me they’re waiting until they get to a certain income level before giving to charity. But what we see in our research is that across the income spectrum and around the world, people are happier if they use their money to benefit others. And it doesn’t have to be a lot of money — changing how you spend as little as $5 can have an impact on your day-to-day well-being. Whatever amount of money you have, consider changing the way you spend a few dollars today to fit with the kind of life you want to live and the kind of person you want to be. You don’t need to wait to climb the income ladder to make that choice.
Of course, if you’re weighed down by debt, then getting out of debt is one of the first and best ways to start on a path to financial well-being and ultimately boost your happiness. From our research at Happy Money, we’ve found that people with no credit card debt experience 40 percent less financial stress than those with credit card debt. And going beyond paying off debt, saving a $400 emergency fund is associated with a 13.2 percent boost in life satisfaction, and maintaining $2,000 in savings is linked to 24 percent higher life satisfaction. That’s huge!
What are the best practices for educating oneself about ways to improve financial literacy?
Traditional financial literacy is shockingly ineffective. Many studies show that education alone isn’t enough. As an educator, I know that if my students cram for an exam, they’ll remember things for the test, but down the road, their minds will let go of the information they’re not using. The good news is if you have a financial decision to make this week and you do one hour of education today, it’s as good as having taken a 12-hour course a year ago. The best time for education is right at the time you need it.
For example, if you need to get a mortgage, take one hour and study your options and best practices. Get the information when you need it and when you have an opportunity to use it. That takes the burden off you to try to learn everything about personal finance all at once. It’s about learning what you need when you need it, and considering how your personal choices and money habits are contributing to your overall well-being.
It’s also important to note that the emphasis on financial education has put the burden on the individual. There’s a sense that people just need to educate themselves to get out of tough financial situations. In reality, companies and institutions should be making this process a lot easier for people. It can feel like financial agreements are intentionally confusing, so that people end up spending more and owing more interest.
At Happy Money, we’re doing the opposite. By providing information in clear and simple language, we’re helping people make sense of their financial situations. Our Member Experience team also keeps things real — approaching people with empathy and compassion, and helping them understand how to get out of the cycle of debt, and start saving and investing in what matters most to them.
How can you begin to build a happier relationship between yourself and your money?
Happiness and financial well-being don’t just happen. So just like with physical wellness, it’s important to be mindful and proactive about financial wellness. At Happy Money, we aim to help people take a step back, consider their values, and be more mindful about their choices. It’s really about a behavioral shift in terms of how people think about their relationship with money. It’s not about quick fixes, but more about lifestyle changes.
One way to build a happier relationship between yourself and your money is to transform decisions about money into decisions about time. Time and money are intimately connected, Most decisions we make about money have implications for our time, and it turns out people who prioritize time over money are happier than those who prioritize money over time. When I’m facing a financial decision, I try to ask myself, “How does this decision impact my time?”
For example, when evaluating where you want to live, you might be considering investing in a bigger home. But if the bigger home means commuting further or working more hours to pay for it, you’ll want to factor that time investment into the equation. Our inclination is to think, “Can I afford it?” But instead, we would do well to turn it into a decision about our time.
Time is incredibly valuable. The way we spend the minutes and days of our lives is really what shapes our happiness. If living in a less glamorous place allows you to spend more time doing what you love — like getting together with friends or practicing jiu-jitsu ‚ then that’s a good happiness-promoting decision.
Finding enjoyment in a simpler lifestyle can also help keep people out of debt. And when people don’t have debt, we’ve found they’re more than four times as likely to report having plenty of leisure time (“time affluence”) than those with $5K or more in debt. So making values-based time and money choices really pays off.
How can your financial decisions today impact your financial standings in the future?
There are a few universal principles that can help set you up for greater financial well-being, happiness, and peace in the future. First of all, avoid overspending. We know that debt is toxic for happiness. People with more debt are more vulnerable to a variety of mental health problems. Secondly, gradually building up savings is important for ensuring that your happiness doesn’t take a nose dive when things don’t go as planned. And finally, it matters how you spend your money. The choices you make have a substantial impact on your well-being.
As you look at your financial choices today, consider the small, seemingly trivial decisions you’re making. These decisions can make a difference over time if they become habits. When we’re spending without thinking, it adds up, and we can easily lose track of how much we’re spending.
In fact, when researchers asked 30 people to guess the amount on their credit card bills, every single one of them underestimated how much they had spent. The little choices we make every day, such as charging things to our credit cards without thinking about it, accumulate in a way that’s hard to appreciate and recognize in the moment. Ultimately, changing our small habitual behaviors can make a big difference, and at Happy Money, that’s one of the key things we’re aiming to help consumers do — shift their behaviors and find peace of mind over money.
At the same time, we also want to help people get more joy out of their hard-earned money. Spending on something special that gives you a little jolt of joy on an average Wednesday is a worthwhile use of money. The problem is that when spending becomes habitual, we don’t even think about it or derive joy from it anymore. That kind of spending is the best place to cut.
I encourage people to look for one habitual purchase they started buying because it made them happy. If it no longer brings them much joy, then try giving it up for two weeks. At the end of that time, consider giving it up entirely or simply making it an occasional treat instead. This small behavioral shift in the present is one way people can help set themselves up for better financial standing in the future.
Can you elaborate on the idea that “money is a means, not an end” and how that can allow readers to improve their finances?
Financial well-being is not a dollar figure, it’s a subjective feeling. It’s about feeling content with the amount of money you have and what you’re able to do with it. So, you can get to financial well-being through the choices you make about what you do with your money, rather than just by increasing the amount that you have.
Even on a macro scale, we often rank countries by their GDP. But there’s a growing recognition that although GDP is related to the well-being of its citizens, it is certainly not the only factor. That’s true at the societal level and also at the individual level. We can start to mistake how much money we’re making for our financial or overall well-being, and they’re not the same thing.
I think of money as a tool, and it’s up to us what we do with it. At Happy Money, we’re here to help people be more proactive about their relationship with money and become more mindful about their spending and saving. While income does matter and money is related to happiness, more money does not automatically produce more happiness.
What really matters is how you use your money. You have to figure out how to leverage your money — whether you have a little or a lot of it — to maximize your happiness. And Happy Money’s aim is to help people do exactly that in order to improve the true endpoint that matters — their financial well-being and overall happiness.