The first thing to know about financial well-being is that there is no single definition. It can be thought of objectively or subjectively. Some objective measures of financial well-being include financial ratios like debt-to-income or a person’s net worth. You can also measure financial well-being more subjectively by considering how a person feels about their money, such as their satisfaction with their financial life or their perception of their ability to manage their financial responsibilities. Financial worry or anxiety is another major component often considered when discussing financial well-being. Financial anxiety lowers a person’s sense of financial well-being, so if a person is regularly stressed about money, they are likely not fully satisfied with their financial life and are likely experiencing lower financial well-being.

In 2015, the United States Consumer Financial Protection Bureau proposed a more comprehensive definition of financial well-being based on research of current literature on the topic as well as extensive interviews with both consumers and financial experts. This research led to their definition of financial well-being: “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.” I love this definition because it is multi-dimensional and covers four key elements to financial well-being: having a sense of control, having the ability to navigate financial emergencies or life transitions, being on track to meet your financial goals, and having the freedom to enjoy your life.

The second important thing to understand about financial well-being is that it is not black and white. You do not simply have financial well-being or don’t have financial well-being. It does not have a specific dollar limit or income level associated with it. It is also not static. Just because a person currently has a high sense of financial well-being does not mean it will always be this way, or if a person is not currently experiencing financial well-being, it does not mean that they never will. Financial well-being is a spectrum, and various factors increase and decrease a person’s financial well-being, such as financial knowledge, financial behavior, goal setting, and phase of life.

Financial well-being is the ultimate goal of financial education and management, and I think that working to build a financial life that allows me peace of mind and joy is a worthy investment.