Back in 2015, I invented the expression ‘financial wellbeing’. Trouble was, when I googled the expression, I discovered two other people had invented it before me!*

Since writing The Financial Wellbeing Book and producing some 50 podcasts on the subject, financial wellbeing is everywhere. More books have appeared on the subject, and wellbeing the workplace is on the agenda of all self-respecting employees. This is all extremely positive, as the idea that financial planning needs to make us happier not just wealthier becomes part of the mainstream.

Having written and researched the subject extensively, and, as we reach the 50th edition of the podcast, I feel in a reflective mood. What have I learnt in that time?

Is it possible to summarise the wide variety of knowledge on financial wellbeing into a simple equation?

This blog is an attempt to do just that. We’ll look at some theory, and then provide the equation at the end.

The Headline

The simplest way to achieve financial wellbeing can be summed up with a phrase that has become a catchphrase on the Financial Wellbeing Podcast:

Financial planning is really very simple. Work out what

you want from life, then spend your money on that.

The trouble is, working out what you want from life is actually not that simple at all.

We therefore need to delve deeper into what makes us happy, and what is the enemy of happiness.

What Makes Us Happy

The biggest contributor towards overall wellbeing is the quality of our social relationships. Our first rule should therefore be to point our money in that direction.

In philosophical terms, there are two particular things that make us happy:



There is a great deal of research that shows striving for change is an agent of unhappiness – indeed, this is a basic tenet of mindfulness. If we can be more mindful of our circumstances, enjoy who and what we are and what surrounds us, then wellbeing results. If what we find does not make us happy, then we have to go through a period of unhappiness while we seek change, but only until we find that new point of happiness.

During that period of change, unhappiness can be reduced if what we are seeking is aligned with our purpose. Meaning and purpose in one’s life is therefore a significant contributor to wellbeing.

So what provides purpose?

In my decades of financial planning, one consistent truth has revealed itself. On many occasions I have worked with somebody who has reached the marvellous point where they have ‘enough’ money (i.e. reached their ‘How much is enough’ figure). Faced with options, most people choose to help other people. They might become a mentor, or work for a charity, for example.

Note: there are, of course, many people who, having reach the point where they have ‘enough’ simply continue to accumulate money. I avoid such people.

Financial wellbeing interacts with the other types of wellbeing (social, physical, community, career). Purpose therefore comes when each of these are both optimised and balanced with each other. We gain social interaction by helping others, resulting in ‘what we do’ and ‘what we believe’ becoming aligned.

Practical Wellbeing

Much of the advice on financial wellbeing – particularly in the workplace – focuses on the negative aspects, such as debt and budgeting. I chose to research how we can use money to make us happier.

Just a few of the ways we can use money in a positive way include:

  • Buy experiences not stuff
  • Spending on others
  • To create options
  • Bringing a desired future closer
  • Having a clear path to identifiable objectives

This is just a flavour. We could summarise all the ways of spending money to increase wellbeing by having a financial plan – but, to repeat, one that is based on making you happier, not just wealthier.

Another way of looking at this is to focus on intrinsic motivations, in other words those values that relate to ourselves, and what will make us happy.

The Enemies of Wellbeing

If acceptance, alignment of purpose and helping others of the cornerstones of well-being, then surely anything that hinders these ideals will reduce well-being.

Lots of research and studies have provided many of the answers. See The Financial Wellbeing Book and podcasts for evidence, for example interviews with people such as Neil Bage (episodes 21 and 36) and Professor Tim Kasser (ep 42 and 46). These answers include:

  • Materialism (the value of wanting to accrue ‘stuff’ is in direct contradiction with wellbeing)
  • Comparing yourself with others
  • Advertising which tells you that you are not good enough unless you buy product X
  • Using money as a measure of success
  • Not having control over your finances (uncertainty is a big enemy of well-being)

So negative wellbeing comes from focussing on extrinsic values, which are those values which relate to others and how they react to us.

The Final Ingredient

In podcast number 38, Greg Davies explained how we are programmed, through our various behaviours and biases, to make bad decisions about money. So it might be helpful to remember this: it’s not your fault!

When I gave up smoking, understanding that it was not my fault, but instead due to the substance in my body, helped give me the fortitude to stop. If it’s not your fault, you don’t need to feel bad, and you can instead focus on making real changes.

The Equation

So, let’s put all this together. If someone understands what makes them happy and works towards a purpose, and have the right approach to money, then wellbeing from wealth will result:

(Know thyself + Purpose + financial plan)


(seeing money as the objective + comparing yourself with others)


Financial wellbeing

It’s a little simplistic, but I’d suggest someone following that equation would find themselves in a position of significant wellbeing!

*One of these was a report from Barclays, who (in my view) set the whole concept off in the wrong direction by choosing to apply the expression only to daily finance issues such as debt and budgeting. The other was in the excellent book Wellbeing by Rath & Harter, published by Gallup Press.

By | 2020-02-13T08:26:38+01:00 May 24th, 2019|Uncategorised|Comments Off on The Financial Wellbeing Equation

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