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Forecasting Your Quality of Life- How Tracking 3 Leading Indicators Can Guide You to Greater Well-being (Part 2 of 4)

Since my last post, there has been some big news from Pennsylvania. First, Punxsutawney Phil saw his shadow and then the Philadelphia Eagles won the Super Bowl. I am hoping that at least one of these events has made you happier or richer! But either way, I doubt you were banking on those outcomes to rescue you from true winter blues or financial woes. Rather I am hopeful that you see how the state of your finances, your energy levels and the health of your relationships interact and influence your ability to handle what life throws at you. The stronger the safety net you build for yourself, the softer the landing you experience in times of trouble. Anticipating and planning for the future are powerful tools to build well-being, especially financial well-being which is today’s topic.

The Consumer Financial Protection Bureau (CFPB) defines financial well-being as a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life (https://files.consumerfinance.gov/f/201501_cfpb_report_financial-well-being.pdf). Not surprisingly, they report that higher levels of financial well-being are associated with tendencies to “Ask, Plan and Act”. Sticking with a plan is often the hardest part of achieving financial goals, and keeping work and other life activities in alignment, because behavior is governed by both thoughts and feelings. There are behavioral controls that are critical for success in almost all endeavors—discipline and willpower. I think of discipline as the capacity to do what you need to do when you don’t feel like doing it (e.g. saving money) and willpower as the capacity to resist doing what you want to do (e.g. spending money) when you need to do something else (e.g. invest in your future). What experience has taught me is that I am really lacking in both capacities.

It can be a struggle for me to head out to the grocery store on a gorgeous spring Saturday afternoon to do the weekly food shopping when I would rather sit outside and read for a couple of hours. However, our budget for restaurants, my commitment to preparing healthy meals and the time I have built into the rest of the week for doing my own things, are all built on having enough food in the house to sustain us through the week. If I don’t go shopping on Saturday, I can do it on Sunday but that cuts into time my husband and I reserve for ourselves. But it can be very easy for me to give in to the urge to relax and go out for dinner when that is what I feel like doing. And every now and again, it is the right thing to do. Being disciplined and having structure does not mean being inflexible and rigid, or depriving yourself of the occasional splurge. It does mean facing your financial reality and learning to enjoy the benefits of delayed gratification. There is another form of behavioral control I use to help stick to my plans on a regular basis so that I can afford to give in to my temptations once in a while without feeling guilty.

I try to separate the time of the decision to do something from the time that I need to act on it. I make decisions about money (as well as other things like exercise and eating) far in advance so that how I feel at the time actions are required, is irrelevant. I have discovered that habit and routine take it one level higher. When applicable, I try to make the same decision every time so that even the decision itself becomes a default that is devoid of emotion. To help stick to a budget, I use automatic deductions for retirement savings and I have set up an automatic transfer from a checking to other types of account for investing and emergency fund savings. Without seeing the money, there is less temptation to think about spending it. As with all aspects of well-being, it also helps to focus first on what matters most. In financial terms, that means thinking about major future expenses and aligning your quality of life priorities with your financial plans.

I will end this post with a checklist. If you can answer “true” for every statement, you are in great shape financially speaking. Keep on doing what you are doing! If not, go down the list and focus on the first “false” statement you encounter. Identify the first step you can take towards creating greater financial well-being. At the very least, recognize that you need to do something. The CFPB report and the American Institute for CPAs website (https://www.feedthepig.org/get-started#.Woy972aZM_U) could be a good place to start.

  • I have control over my current financial obligations
  • I have the capacity to absorb financial shock such as a job loss or unexpected expense
  • I have financial goals
  • I have a plan to achieve my financial goals
  • I am on track to meet my financial goals
  • I feel comfortable spending money and making choices to enjoy life