Part One: Is pursuing financial independence harming your well-being?

From as early as I can remember, my ultimate goal has been to achieve financial independence. At the age of six, I wrote my first poem - the poem was about money.

As soon as I started earning an allowance, I would pride myself on how much money I could save.

Once I started working -first as a babysitter and eventually as a “grown-up” in the professional world- I was thrilled to dive into the world of investing and officially begin the process of becoming financially independent.

Maybe it was because my father started taking me to networking events at the age of eleven, or the Independent Woman song by Destiny’s Child, or my mother’s inspiring yet terrifying essence, but I have always wanted to be financially independent.

I viewed it as the ultimate badge of honor. The highest achievement. The gold star. My everything.

I still do. AND, I believe that my definition can expand to include additional goals.

The original definition of financial independence from Wikipedia is is the status of having enough income to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others.

While this definition is aspirational, it does not address the motivating factors for achieving financial independence.

As I’ve grown in my journey as a woman, and entrepreneur, I’ve come to understand that there is a holistic approach to life and finances that moves beyond financial literacy and independence.

Essentially, how I FEEL matters as much as the amount of money I have in my bank and investment accounts.

And apparently, I’m not alone in this belief. In fact, the Consumer Financial Protection Bureau (CFPB) is all also all about this.

According to the bureau’s 2015 report, “a growing consensus is emerging that the ultimate measure of success for financial literacy efforts should be improvement in individual financial well-being.”

Note that they do not mention financial independence.

According to the CFPB the 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.

The operative word that stood out to me is “feel”. Feelings are challenging to measure, which the CFPB acknowledges in this report.

According to the report, a growing consensus is emerging that the ultimate measure of success for financial literacy efforts should be improvement in individual financial well-being. 

The definition of financial well-being that they propose is based on the consumer perspective revealed by nearly 60 hours of open-ended interviews their research team conducted. Their research suggests financial well-being can be defined as a state of being wherein you that includes: having control over day-to-day, month-to-month finances; having the capacity to absorb a financial shock; tracking if you are able to meet your financial goals; having the financial freedom to make the choices that allow you to enjoy life.

The report states that because individuals value different things, traditional measures such as income or net worth, while important, do not necessarily or fully capture the essence of financial well-being.

So what drives or contributes to financial well-being?

According to the report, it includes:

  1. financial behaviors - shameless plug, like your weekly Money & Mimosas date

  2. financial knowledge

  3. personal traits

As you can imagine, this is very much an individual experience and challenging to measure.

 According to a 2011 Government Accountability Office (GAO) report on financial literacy, “[r]elatively few evidence-based evaluations of financial literacy programs have been conducted, limiting what is known about which specific methods and strategies are most effective.

And while this concept has not been explicitly defined, nor does a standard way to measure it exist in the financial literacy field, the vision for the U.S. National Strategy for Financial Literacy is “[s]ustained financial well-being for U.S. individuals and families”.

This is Part One of a several part dive into the pursuit of financial well-being in conjunction with financial independence.

 About Money & Mimosas: Money & Mimosas was started as a passion project by Danetha, a former NFL cheerleader turned entrepreneur and financial journalist. After a brunch conversation with girlfriends, Danetha was inspired to launch a resource to explore her journey of achieving financial independence and maintaining financial well-being.

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