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The secret to improving your financial wellbeing

How to improve your financial wellbeing

Healthy habits can lead to healthy finances, but we’re often reluctant to engage with our spending and saving behaviours.

New industry-leading research* conducted by Commonwealth Bank and the Melbourne Institute: Applied Economic and Social Research at the University of Melbourne found one in four Australians struggle with every day money management, with almost a third stating that their lives are "often or always" controlled by their finances.

Many Aussies are feeling the pinch, with cost of living on the rise, making bills for every day essentials more expensive.

Wages growth continues to remain sluggish and the result is putting pressure on many people’s ability to manage their spending and saving habits effectively - potentially leaving them exposed, or feeling a sense of stress or anxiety when it comes to money matters.

Almost 40 per cent of Australians surveyed said they would struggle to handle a major unexpected expense, suggesting our ability to save is suffering.

Why is our financial health low?

Financial wellbeing means different things to different people and there's no “one-size-fits-all” for helping improve a situation. As a result, shifting a behaviour can be challenging.

We’re often reluctant to engage with our finances, claiming it’s boring, confusing, too difficult, too time consuming or stressful - or perhaps all of the above.

But when it comes to our finances, we shouldn't be complacent.

The good news

The research reveals a promising note for anyone wanting to improve their financial wellbeing: good financial outcomes are possible for all Australians.

Improving your financial wellbeing might seem daunting, but habits can be changed, capabilities improved, and knowledge bolstered. No matter your situation or financial literacy, there are ways to make a difference.

Tips on how to improve your financial wellbeing:

  • Actions can speak louder than income and assets: how people behave with their finances has an even stronger effect on their financial wellbeing than how much they earn. The research showed there is a much higher gap in financial wellbeing between people who have disciplined saving and spending habits and those who don’t.
  • Budgeting, mind over matter: having a budget can help people better manage their finances. Does that mean hauling out the spreadsheets? Not necessarily. Our findings show that it doesn’t matter if the budget is a ‘mental’ one or a ‘formal’ one. Each one is equally associated with higher financial wellbeing.
  • A good understanding is enough: there is a strong association between higher financial wellbeing and an understanding of finances. However, once people reach a ‘good’ rather than ‘very good’ level of understanding, wellbeing levels out. Encouragingly, this suggests that a firm grasp of the basics rather than highly specialised knowledge is enough to make a significant positive difference to your finances.
  • The importance of staying social: social contact has a strong influence on financial wellbeing. Financial wellbeing rose steadily the more social contact a person had. Conversely, people who were socially isolated had extremely low financial wellbeing.

Learn more about financial wellbeing

The first step to improving your finances is to understand your current situation.

To help you assess your financial wellbeing, CBA has developed a quick, 3-minute questionnaire. Answer 10 simple questions to find out your Financial Wellbeing Score. In addition, you’ll see steps you can take that might improve your financial wellbeing, whether it’s taking control of your finances, handling an unexpected expense, or reaching your future goals.

You can access the questionnaire regularly to see how you’re tracking and reset your goals accordingly.

*About the research

The research was conducted by Commonwealth Bank and the Melbourne Institute: Applied Economic & Social Research at the University of Melbourne. Titled, CBA-MI Financial Wellbeing Scales (Scales), it sought to provide a new measure of financial wellbeing to better understand the financial health of Australians. Uniquely, it combines people’s own perceptions about financial outcomes alongside banking data to show the drivers, barriers and behaviours linked to positive financial wellbeing across both "self-reported" and "observed" scales.

The research underpinning the Scales is based on findings drawn from an online survey of 5,682 CBA customers in August 2017, and analysis of financial record data that were linked to the customers’ responses. For further information on the research and its findings, you can read the report: Improving the Financial Wellbeing of Australians.

The Financial Wellbeing survey was developed in partnership with the Melbourne Institute: Applied Economic & Social Research.