A few years ago, the Consumer Financial Protection Bureau (CFPB) developed the definition of financial wellbeing. They define it as: “A state of being wherein you: have control over day-to-day, month-to-month finances; have the capacity to absorb a financial shock; are on track to meet your financial goals, and have the financial freedom to make the choices that allow you to enjoy life.”
When you reach financial wellbeing, it means you have a certain level of security and enough money to meet your needs, whatever those needs may be. When you are financially well, you have enough money to make the choices that will allow you to live an enjoyable life.
Do you notice something missing from this definition? Nowhere in it are any numbers mentioned. That’s because financial wellbeing is not about the numbers. Your version of financial wellbeing will be different from everyone else’s.
For example, a person who has a low income might also have a relatively frugal lifestyle, and thus a positive net worth. They have the freedom to make choices and pay for their expenses and wants, and their financial wellbeing is high. On the other hand, someone who has a very high salary, but also lives an extravagant lifestyle might have a large amount of debt. Just because they make more money than the other person, doesn’t mean their financial wellbeing is higher.
