Financial wellbeing is a highly subjective concept which will mean different things to different people, often dependant on their socioeconomic status. For individuals who have faced poverty, financial wellbeing might mean being debt free and living above the poverty line. For others, financial wellbeing may mean having a secure financial future. Individuals with bold aspirations may have different ideas about financial wellbeing. For such people, actively nurturing their finances to cover the costs of future growth (through routes such as education and entrepreneurship) is the definition of financial wellbeing.
What does financial wellbeing mean to you?
Wonga’s recent study of financial wellbeing in South Africa clearly reveals these stark differences. The survey of 8,000 diverse South Africans found that individuals who aspire to earn more than R20,000 per month are more likely to have received higher education in 27% of cases. They are also 12% more likely to be men and 11% more likely to be adults vs. young people. In terms of financial priorities, the study also found that 46% of respondents were focused on saving money, while 52% wanted to pay off debts. A significant subsection of respondents (15%) claimed that they were struggling to buy food due to financial difficulties. 13% were struggling to buy clothing.
Evidently, financial concerns and goals vary substantially across populations; especially one as diverse as that of the Rainbow Nation. In fact, South Africa is now home to the greatest wealth divide in the world. According to the 2018 World Bank report on inequality in South Africa, the richest 10% of South Africans hold 71% of the country’s wealth. The poorest 60% own just 7% of the country’s wealth. In comparison, the OECD average is for the richest 10% to hold 50% of wealth, while the poorest 60% own 13%.
Evidently, financial concerns and goals vary substantially across populations; especially one as diverse as that of the Rainbow Nation. In fact, South Africa is now home to the greatest wealth divide in the world. According to the 2018 World Bank report on inequality in South Africa, the richest 10% of South Africans hold 71% of the country’s wealth. The poorest 60% own just 7% of the country’s wealth. In comparison, the OECD average is for the richest 10% to hold 50% of wealth, while the poorest 60% own 13%.
3 steps towards financial wellbeing
Whether your goal is to escape the poverty trap or invest in your education, there are some common principles which will help you enhance your financial wellbeing...
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Prioritise debt
If you have existing debts, prioritise repayments above savings and investments. Debts drain your finances - and they can snowball, so ensure you pay these off as quickly and efficiently as possible (but take care to avoid early repayment fees).
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Budget, budget, budget
Irrespective of your goals, budgeting is fundamental to your financial wellbeing. A clear budget ensures you are working towards your goals at all times. A good budget should ensure you spend less than you earn (if possible) each month. It should priorities debt repayments, bills, rent and essentials. If there is space left in your budget, ensure you are consistently saving a realistic amount each month.
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Study up
Financial literacy is a key aspect of financial wellbeing. The more you understand about finance, the more effectively you will be able to manage your finances. From enrolling in short courses, to watching YouTube videos on money management, there are lots of ways you can learn more about all aspects of finance, from budgeting and saving, to investing your money intelligently to facilitate future plans.
