“It is the most devastating experience to one minute be owning a house in a fairly affluent suburb in Melbourne and feeling secure, and then suddenly know that you've got 85 cents to your name.”—Libby.
- Wellbeing isn't just about physical and mental health, your finances play a big role too.
- If we’re satisfied with our standard of living, we have a sense of security and control.
- Understanding how finances play a crucial role in our wellbeing can help to reduce the stress caused by financial instability.
When we think of wellbeing, we often have the image of a traditionally fit, healthy-looking person drinking a smoothie while doing yoga—or something equally one-dimensional. However, real wellbeing encompasses so much more than just our physical health.
A crucial part of our wellbeing involves our sense of financial control and our standard of living.
But what exactly does “standard of living” mean, and why is it important to our overall wellbeing? More specifically, how does financial control affect that standard of living? We examine how our finances affect our wellbeing.
Standard of living and financial wellbeing
So what is our standard of living? It’s what we consider to be our “lifestyle” and the financial circumstances that prop up that lifestyle, including the opportunities we have and how comfortable we feel in our environment. In regards to our financial wellbeing, it’s the expectation of how much money we need to afford the life we want to live.
If we’re satisfied with our standard of living, we have a sense of security and control, which is vital to our overall wellbeing. As a result, long-term research by Deakin University and Australian Unity has identified standard of living as being one of the seven key “domains”—or areas—of wellbeing, along with health, relationships, community connectedness, achieving in life (or sense of purpose), safety and future security.
We typically feel satisfied with our standard of living, and have good financial wellbeing, when we:
- Have the ability to meet our financial obligations.
- Feel secure in our financial future.
- Can make financial choices or purchases that allow us to enjoy life.
That’s not to say that the more money we earn, the less stressed we will be. Financial wellbeing relies on the control we have over our finances, not the amount of money we possess. People on higher salaries can have poor financial control and, as a result, have a much lower financial wellbeing and standard of living than people on lower incomes who have greater financial control.
How financial control impacts on our wellbeing
In partnership with Deakin University, Australian Unity has been tracking the wellbeing of Australians for more than 20 years through the Australian Unity Wellbeing Index. As part of this research, we’ve found that people with higher scores in the area of financial control tend to have higher overall wellbeing scores.
Why? When we’re in control of our finances or feel as though we’re “on top” of things, we dedicate time and energy in our lives to the things that make us happy. Think about your life: when you’re up-to-date with the rent or mortgage and have already paid off your bills, you feel much more relaxed about your spending and can allow yourself leeway to “treat yourself”.
However, if we feel like we’ve lost control of our financial situation or are behind on our financial obligations, we can become overwhelmed by expenses and debt. This creates stress and a sense that money controls us, not the other way around.
Overcoming poor financial control to build better wellbeing: Libby’s story
Libby has experienced both ends of the financial wellbeing spectrum and can attest to negative impact of poor financial control.
“It is the most devastating experience to one minute be owning a house in a fairly affluent suburb in Melbourne and feeling secure, and then suddenly know that you've got 85 cents to your name,” she says.
After a battle with a gambling addiction, Libby found herself down hundreds of thousands of dollars, losing grip not just on her finances but her sense of security. She says that the loss of financial control can happen rapidly, and without you realising it.
“My sense of loss was absolutely profound. It was absolutely starting again. First of all, it was having to train myself how to think again—that was hard enough because I was ill. But also having to try to stay focused enough knowing how much I’d lost without beating myself up. Really there comes a point where you’ve only got one way or another you can go, so the only way you can go is up… Luckily, I did have help. My father did not give up on me, and if he did give up on me, I don’t think I’d be here today.”
The damaging effects of a lack of financial control, or poor financial wellbeing, often sees people’s standard of living decline. That can mean not only an end to “frivolous” spending, but also the ability to meet basic needs.
“If you've got no money you can't protect yourself,” explains Libby.
But by taking an active role in managing our financial position, we can better protect ourselves from unexpected financial disasters and take a longer-term view of our happiness.
They say that money can’t buy happiness, but understanding its crucial role in our wellbeing can help to protect us from life’s changes and reduce the stress caused by financial instability.
Disclaimer: Information provided in this article is of a general nature. Australian Unity accepts no responsibility for the accuracy of any of the opinions, advice, representations or information contained in this publication. Readers should rely on their own advice and enquiries in making decisions affecting their own health, wellbeing or interest.