Financial wellness is best viewed as a tiered pyramid, with each layer building on the one below, analogous to Maslow’s hierarchy of needs. What many regard as "financial wellness" is really just the bottom "organizational" layer of the pyramid. Comprehensive financial wellness encompasses so much more, including adequate preparation for the inevitable challenges associated with longevity.
The pandemic has reinforced the reality that it is impossible to separate financial “health” from physical and behavioral well-being. Our financial decisions are not made in a vacuum. Choices about what we buy, how we invest, and to whom we give money are built on a foundation of complex emotions, personal histories, and individual behaviors.
Moreover, as we get older, the biggest threat to our financial security is not a stock market correction or rampant inflation. It is us. Diminished decision-making capacity stemming from cognitive impairment, impulsivity, loneliness, memory loss, anxiety, medication side-effects, or physical discomfort can wreak havoc on personal finances and torpedo even the most well-balanced portfolio.
At the top of the pyramid lies holistic wellness. Holistic financial wellness involves the successful management of all of the stages that lie below it. While achieving holistic wellness may seem like a tall order, there are manageable steps your client can take over time that will move them closer to the ultimate goal. In addition to being well-organized, holistic wellness also requires being prepared, staying connected, and demonstrating self-awareness.
Read more about this interesting concept in a Financial Planning Association Journal article by Chris Heye, PhD. Chris is the founder of the age-focused financial planning tool WhealthCare Planning that we have introduced to clients as a way to anticipate and prepare for the inevitable challenges of aging.