Money coach Emma Maslin explains in a recent 'vlog' (or video blog) for WPA, we often stumble through life trying to find the right balance in managing the day-to-day finances and the longer-term financial planning. "The vast majority of us weren't taught this stuff at school. Yet the decisions around how we make money, what we spend it on, and how we manage our money can literally change our lives," she points out.
"Financial literacy is on the curriculum now, but our generation didn't learn anything about how to manage our finances, how credit cards work or the impact that having a good or bad credit score can have on so many areas of our adult life."
The link between financial wellbeing and mental, emotional and personal wellbeing is self-evident. Emma explains, "Our finances impact almost every aspect of our day to day. People haven't always tended to think of their finances as a major component of their overall wellbeing. But in a report out at the end of last year by Nudge Global, 18% of people said they worried about money every day and 52% at least once a week.
"Financial wellbeing, therefore, comes down to getting a really good handle on your personal finances and being clear on how they support your overall goals in life. It is about having a meaningful understanding of where you're at with your finances, and good management of that money, so that you can achieve your goals in a way that minimises stress," she adds.
Even if achieving this financial equilibrium may not be something that happens overnight, understanding the four 'pillars' of financial wellbeing can kickstart this 'journey'. It will enable you to take back control of your finances, become more savvy about your money and get you firmly on the path to better financial wellbeing. Here, then, are Emma's four pillars.
This first pillar is about understanding the emotional connection that we all have with money and our finances.
"Money is such an emotionally reactive subject. You only have to ask people how they feel about money and you get a whole range of answers: shame, guilt, fear, through to joy and freedom. All sorts of different emotions and feelings can come up," she explains.
"So many people say to me in the first ten seconds, 'I am really terrible with money, I can’t hold on to it', or 'I can never seem to stick to a budget'. What they're doing there is verbalising their belief around their own abilities with money."
The problem with this is that it can become a self-fulfilling prophecy. "Those people believe they are terrible with money, so they behave in a way where they spend too much or they don't pay enough attention to what they're doing with their money and then they justify the result by repeating those same phrases - 'I'm terrible with money'," Emma says.
"So, identifying any sub-conscious beliefs that you hold about money is key to this first pillar.
"If your beliefs are keeping you stuck in a bad relationship with money - maybe you're constantly in a cycle of overspending, or you shy away from any conversations with your partner about money, for example - then you need to do some work to change those beliefs.
"There is a lot of guidance out there on how to manage your money better in a practical way, but if you don't deal with that emotional connection, that emotional relationship, that you have with money, the practical stuff just never sticks. Good financial health begins with having a really positive mindset and beliefs around money and its ability to impact your life positively," Emma adds.
This second 'pillar' ought to be self-evident but needs spelling out because, while it will often be something we know we ought to be doing in life it simply doesn't happen in reality.
"We make goals for various things in life but how many of you have a financial life plan?" Emma points out. "We typically live for the day to day and just assume that 'at some point' we'll achieve all those things that we want to happen for us. Having a plan, however, gives you clarity; it enables you to pinpoint the actions that you need to take to make that plan come off," she adds.
The first mistake people make here, however, is mixing up 'financial planning' with 'budgeting', Emma highlights.
Where so many people go wrong is they tend to focus mostly on their needs right now, in the here and now; their standard monthly expenses. There's nothing wrong with that in itself - as we'll see in pillar three - but what is really needed is a much, much wider set of intentions for your money.
So, as well as keeping a handle on your immediate spending, you need to factor in what money you are going to need in the medium and the longer term now, so you will have it when you need it in the future.
"The starting point for strengthening this pillar is really getting clear on all the things that you want out of life. Do you want to buy a house? How frequently might you need to replace your car? How often do you want to go on holiday in the future? Are you planning to have children? Do you want to be able to help them with a car, or university fees or maybe on to the housing ladder?", Emma emphasises.
"Then there is that really big question of: what age do you want to stop working? When you do this planning exercise well and start to think about not just the here and now but also your future needs, you can begin to direct money intentionally to the things that matter to you, now and in the future," she adds.
Having established the important distinction between financial planning and day-to-day budgeting, it is nevertheless important also not to lose control over your day-to-day finances. After all, this third 'pillar' is the foundation upon which all the other pillars will be built.
"When people lose control of their spending, that's when their financial health begins to suffer," Emma explains. "The basic rule of effective personal finance is to spend less than you earn. It is so important to be aware of how much you're spending and to put systems and frameworks in place which enable you to live within your means.
"Now, it does sound really basic. Yet, how do we get good control over our finances and spend less than we earn? Well, first, we need to conquer the budgeting process," she advises.
"Financial wellness hinges on being really clear on your priorities and getting really intentional about where your money is going. The key with this pillar is to transform a budget into a spending and savings plan, giving every pound you earn a job to do, and aligning those jobs with things that really mean something to you.
"A good rule of thumb for managing how you should be spending and saving your money is the 50, 30, 20 rule. Created by US senator Elizabeth Warren, this says you should aim to spend 50% of your income on essential living expenses, 30% on non-essential luxuries - so money for the things that make life fun - and then 20% you put into savings for future use. This is things like your pension, your emergency fund for unexpected expenses in the future," Emma says.
"It is about being able to prioritise your needs, rein in how much you spend on your wants, and be disciplined enough to include saving for the future, they are the key to being a financial adult," she adds.
This final pillar leads on from pillar three and is very much focused on that third 20% - however small the actual amount in reality - that should be going into savings. Why this is important is that building up a 'pot' in this way will better enable you to weather financial storms and shocks, such as, for example, the sudden arrival of a global pandemic.
"This is hugely important in terms of financial resilience and wellbeing, and actually where we have seen a lot of people suffer as a result of the pandemic," explains Emma.
"What happens when the unexpected happens? Having the ability to cushion an unexpected financial event, such as redundancy, sickness so you cannot work, or even the death of a loved one, having that cushion can really mean the difference between anxiety and panic and being able to carry on without stress.
"If you have no savings buffer, if something unexpected happens it can be really hard to cope with. And that is why building an emergency fund of between three to six months of your essential spending is so important for your financial health and wellbeing. So that you can have some money to cushion the unexpected and remove that worry of 'what if?'," Emma adds.
The crucial thing to remember is that, when or if you have all four financial wellbeing pillars in place, you suddenly now have options; you are much more in control of your financial destiny rather than your finances buffeting you back and forth throughout your life.
As Emma explains: "It is about being in a place where you have the ability and the freedom to make financial choices that enable you to live and enjoy life. This is the ultimate goal for most of us, isn't it? Living a life that we want to live without worry."
To reiterate, achieving the four pillars may not be something that happens overnight, especially the process of building up a financial buffer. The key, however, is starting in the first place and then embedding this change process and change of mindset as a permanent life change.
"Financial wellbeing isn't a destination; it's not something to be achieved and ticked off; it isn't about being rich and having lots of material possessions and keeping up with other people. Really, it is an ongoing project of education and evolution for us all," emphasises Emma.
"For everyone it is about having that knowledge and the skills to make the most of your income, whatever that is, and enjoy your version of a happy life. It takes time, takes trial and error, especially if you've made mistakes in the past.
"It is possible to achieve financial fitness, even during financially challenging times, when you have got these four pillars in place," she concludes.
Nic Paton is one of the country's foremost journalists on workplace health, safety and wellbeing, and is editor of Occupational Health & Wellbeing magazine. He also regularly writes on the health and employee benefits and health insurance markets.