Financial wellness is about your health and wealth. It’s about the overall quality of the life you’re living. Financial wellness takes into account how you think and feel about money. It’s not just about measuring your financial numbers and achieving financial goals but how those numbers impact your wellbeing and how those goals relate to improving your living situation.
As an executive, I’ve spent years championing the importance of financial education as part of my company’s workplace wellness program. After founding Phroogal, I’ve taken that purpose on the road and with a broader mission to get people to understand how financial knowledge is life changing. I’ve met thousands of people all across the country and our community has continued to grow to over 65,000 people who believe as we do about health and wealth.
After my road trip last year, I was wondering how we can help organizations and people get a bird’s eye view on how they are doing with their finances that took into account objective (numbers) and subjective (feelings) factors. When you take into account how people feel about their financial numbers, we find the areas to improve and then create a plan that will work.
This thought has been on my mind and wondered if we’d ever get to the point of developing a methodology.
Well about two weeks ago I was invited by Fidelity to learn about some new products and tools they developed. I flew to San Francisco and spent half a day with the Fidelity team. For transparency Fidelity paid for my flight and accommodations. Fidelity Investments created the Fidelity Wellness Score for “for people to measure their financial health, identify the areas where they need help and how they can improve.”
“To enhance our Financial Wellness program, Fidelity developed a way to measure Financial Wellness and offer a clear way to assess if a person is financially well. The score is based on what we believe are the four key domains of Financial Wellness: budget, debt, savings and protection, all of which are equally significant,” said Jeanne Thompson, senior vice president of Thought Leadership, Fidelity Investments. “The score is unique in that it accounts for objective criteria, such as how much savings a person has and how they manage expenses, and subjective criteria, like how they feel about their finances. We believe Financial Wellness means being well and feeling well.”
Fidelity’s Financial Wellness Score is based on a scale from 0 to 100, where 0 represents extreme financial distress and 100 indicates the maximum level of financial wellness.[iii]
I was fortunate to get a first hand and behind the scene look at the program. They conducted a survey of more than 6,000 people that looked at their retirement but also asked questions pertaining to daily financial activity. I think this is important because we all know the importance of planning for retirement but our daily financial situation may prevent us from doing so. When Fidelity came up with their methodology I applauded their effort in understanding people can’t think of the future if they are trying to figure out how to pay for rent or put food on the table.
Here are some additional interesting facts:
Applying the Fidelity Financial Wellness Score, the results reveal 14 percent of those surveyed are financially “excellent” (a score between 81 and 100), 37 percent are “good” (a score between 61 and 80), 33 percent “fair” (a score between 41 and 60) and 16 percent “need attention” (a score between 0 and 40). Here are the observed attributes of respondents in each category.
The survey also reveals:
- Generation X is the most financially stressed: More than half of GenXers[v] (52 percent) feel neutral or negative about their debt situation. By comparison, nearly two-thirds of Boomers[vi] (65 percent) feel like their debt is manageable.
- For many, money brings happiness: 57 percent of those surveyed said they could not be happy unless they are financially secure. Surprisingly, Millennials[vii] are more likely to feel this way than other generations with 66 percent agreeing with the statement.
- People are most concerned about debt: 30 percent agree strongly that their household has too much debt and 11 percent say they think about debt “all the time.”
- Financial stress hits home for women: Women are twice as likely to report feeling worried or sick about their financial situation as men.
“When the Financial Wellness Score is made available this summer as part of Fidelity’s Money Checkup, it will be a wake-up call for some employees and for others it will bring peace of mind. The score will bring clarity to where they stand financially and put a spotlight on next steps,” added Thompson. “We’ll be working with employers on how they can incorporate this Financial Wellness measure as part of their strategy to give employees the financial confidence and control they need.”
I can’t wait to continue to dive deeper into their score matrix and share this tool with others. I think this is a big step on the Road to Financial Wellness.