The Holistic Approach of Financial Health in Human Services

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In our history at the Financial Health Institute, we have noticed that personal finance in human services has usually been relegated to the realm of “financial literacy” as the method to help people improve their financial management. Typically, financial literacy is a field that is somewhat limited in its scope, built primarily on neoclassical economics and middle-class assumptions—and it has proven mostly unsuccessful. Personal finance and economics has been mostly focused on budgeting and it most definitely has not been a priority in most programs.

Fortunately, we have started to hear from more organizations and departments within the state, who are recognizing that financial literacy isn’t really what they are looking for or serving their purposes as they had thought it might. They are recognizing that a person’s economic situation is interconnected with the rest of their life, so it is not as simple as teaching someone about how to write a check, open a bank account or create a budget (these are all important, but not solutions in and of themselves).

These organizations are trying to incorporate a more holistic approach to economic well-being, and this is very exciting. Concepts like “social determinants of health,” “dimensions of wellness (or well-being),” or domains for economic stability and pillars of self-sufficiency are making their way into developing models of care. There appears to be a growing interest in getting at the heart of issues, doing a root cause analysis, to understand situations that are larger than the silos we try to squish them into. And in this model, financial health (which includes financial literacy) is beginning to be included as a central issue to be considered.

That being said, it might be a good time to understand why developing strong financial health is a critically important element in our effort to help people stabilize and grow economically.

So: What the heck is financial health anyway? And why is it important? Ask those questions in a room full of people and you will get an interesting array of answers! Typically, when people respond to this question, they think of better financial plans, having some savings, having little or no debt and the ability to meet needs while having some wants met. Usually, there is consensus that good financial health means less worries and stress.

These are good descriptions of what having “good financial health” might look like, but they don’t really define the term. The Financial Health Institute, as our name would indicate, is very interested in the definition of financial health, probably because it is the cornerstone to everything that we do and hope to accomplish. And so, we spent a lot of time working on a definition that takes into account the full scope of what we think “financial health” means.

From our perspective, Financial Health is:

The dynamic relationship of one’s financial and economic resources as they are applied to or impact the state of physical, mental and social well-being.

Here’s why we define it this way.

The World Health Organization defines “health” as: “A state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.” While in this definition, a person’s financial situation is, at best, implied, the World Health Organization does further elaborate on this concept in their explanation of Health Promotion. Health Promotion is described as:  “The process of enabling people to increase control over, and to improve, their health. To reach a state of complete physical, mental and social well-being (their definition of health), an individual or group must be able to identify and to realize aspirations, to satisfy needs, and to change or cope with the environment. Health is, therefore, seen as a resource for everyday life, not the objective of living. Health is a positive concept emphasizing social and personal resources, as well as physical capacities. Therefore, health promotion is not just the responsibility of the health sector, but goes beyond healthy life-styles to well-being.”

This is very interesting. “Health is seen as a resource for everyday life…Health is a positive concept emphasizing social and personal resources, as well as physical capacities.” I like this definition as it would support what everyone I’ve ever discussed this concept with already knows: that is, health is an invaluable, intangible asset closely aligned with the ability of a person to maintain or grow financially and/or economically.

In the traditional sense of the term, Investopedia defines financial health as: “A term used to describe the state of one’s personal financial situation. There are many dimensions to financial health, including the amount of savings you have, how much you are setting away for retirement and how much of your income you are spending on fixed or non-discretionary expenses.” You will note that “health” in this definition refers to one’s financial situation, and not to the soundness of one’s body or mind. And when I bring up financial health, in almost all contexts, this is what people think about. But I think this definition is too narrow. I think there is a tendency to put our finances into one silo, our health into another. Yet, your personal finances and all of your financial decisions impact so many other areas of your life and we want to begin to draw attention to these intersections.

Health and finances are dynamic, always changing, in flux, up and down. Your personal financial situation can be unhealthy and the result of that can lead to problems in other areas of your life. Your personal health can be poor and that can lead to significant financial issues. So, we want to help people focus on the holistic concept of “financial health,” not just the technical skills of financial literacy. We want to examine more closely how a person, family or organization uses their finances and economic resources, and ultimately how their decisions, behaviors, routines and habits impact their overall well-being.