When it comes to discussing your finances, it can sometimes feel like a complex math problem. There’s a bottom line that you’re trying to make add up, and the way to get there is by exploring facts and figures.
And, there’s no way around it, the numbers are important. When we meet with our clients, we discuss retirement vehicles, market performance and safe money versus at-risk money, to name a few. But there’s something else that’s important to discuss: feelings about finances. One term we like to use to approach this topic is financial well-being.
Often, people can confuse having wealth with having financial well-being, but let us explain how they are different. You could measure the wealth of your co-workers, friends and family by reviewing the accumulation of money or positions that they have and comparing it with your own. But financial well-being is different. It’s a sense of financial security that comes from being confident that you have enough resources to cover your financial needs — and it is unique to everyone.
Let’s take a moment to break that down a bit further and examine characteristics of someone who exhibits financial well-being. Here are a few signs that we believe show this.
For one, they have control over their daily, monthly and even annual expenses. They typically have a budget that they refer to frequently. They dedicate time to plan out their financial life and allocate money to different expenses, even before the expense might arise. They are also able to meet and overcome a financial shock that may land in their lap.
Another characteristic is that they are typically on track to meet their financial goals. Maybe they are saving for a down payment on a house, or simply squirreling away for retirement, but they have planned their work and are now working their plan.
Finally, those with financial well-being often possess a certain amount of financial freedom that allows them to make decisions to help them enjoy their desired quality of life. Whether that is taking a family vacation or splurging on a new boat, people with financial well-being have control over their finances.
They can make choices to spend their money how they want to, not always how they have to.
Even though there are some common characteristics, at American Financial Security, LLC we realize this isn’t a one-size-fits-all model. In order to get to a place of financial well-being, you may have to think about what you envision for your life, how you want to live and the choices that you need to make now in order to land there in the future.
For some people, it is natural to measure their financial well-being, but if you don’t fall into that category, it might be useful to get into the habit of what we will call “taking your financial emotional temperature.”
Maybe you need to be reminded to do it at an annual visit with your financial services professional, or maybe it is during tax season when you are meeting with your accountant —either way, it can be helpful to find a time to stop and reflect once every year or so and analyze how you feel about your financial situation.
We make sure to remind all our clients to take the time to take their financial emotional temperature each year, because we know how valuable it is. Not only can it help you understand what financial well-being is, but you’ll be able to evaluate if you are on a path to get to your own financial well-being.
At the end of the day, that’s where we all want to be. QCBN
By Ronald Stevenson and Barbara Clark Stevenson
Ronald F. Stevenson & Barbara Clark Stevenson own American Financial Security, LLC. They specialize in Retirement Income Planning, Social Security Maximization, Tax Free Income Design, Personal & Corporate Tax Preparation and Planning. For more information, call 928-771-8368 or visit AFSprescott.com, 3112 Clearwater Dr., Suite B, Prescott, AZ 86305.
Ronald F. Stevenson offers Advisory services through American Financial Investments LLC a Registered Investment Advisor in Arizona. Insurance products and services are offered through American Financial Security, LLC. American Financial Investments LLC and American Financial Security, LLC are affiliated companies.