If financial health is the goal, are we measuring the right things?

Like personal health, MYMAVINS research suggests building and maintaining financial health is an ongoing process with multiple drivers. These include mindset, capabilities, habits, decisions and actions. It is lived, dynamic and deeply personal.

If advisers and super funds aim to improve financial health at scale, the focus should be on the drivers that shape trajectory and ultimately outcomes. While we are less able to directly influence someone’s income, savings, or debt in the shorter term, there is much we can do to influence the trajectory towards improving them.

As for public health initiatives, we need to consider prevention of poor financial health outcomes rather than just looking to administer a ‘cure’ when things go south.

What gives us an ongoing sense of being financially healthy?

Advisers and super funds know in tangible terms it’s having enough income to live on, being able to manage expenses, build up a range of savings and investments and service borrowings. Importantly it is also about having a secure roof over our heads.

In addition, because life inevitably has its ups and downs and we live in a country ‘of droughts and flooding rains’, financial contingency plans are important. Like having emergency savings to quickly draw on, insurance for property damage and accidents, alternative sources of income and diversified investments.

Of course, extremely poor financial status can throw clients into financial hardship, with crisis events ultimately forcing a reliance on emergency assistance and government income support.

Beyond financial status, financial wellbeing is the subjective experience of how financial health feels. It reflects how secure, confident and in control someone feels. Even high income households can experience acute financial stress if expectations and obligations outpace perceived security.

Poor financial wellbeing tends to drain energy and motivation. In fact, chronic worries around money have been shown to make managing finances even harder. When stress rises, decision quality falls. When decision quality falls, financial outcomes deteriorate. The cycle reinforces itself.

Why this matters now

Few would deny personal health is among our greatest assets, and likewise financial health is a priority for most. It is not only central goal for Australians and a key driver of quality of life but also impacts the sustainability of our economic systems. At one extreme it reduces the burden on the public system and at the other it promotes a vibrant economy. It is vital ultimately, as is the Government legislated purpose of superannuation, to achieve ‘dignity in retirement’.

One in seven Australians now live below the poverty line. More than one in three adults report finding it difficult to get by on their current income. Many Australians approaching retirement continue to carry significant mortgage and consumer debt. Others rely heavily on the Age Pension, limiting agency and spending confidence in later life. MYMAVINS research shows almost 7 in 10 Australians are experiencing some level of financial stress within their households. It is sobering to note these indicators have been increasing in recent years.

Why people struggle to improve their financial health

So why do so many people struggle to address their financial health? Just as for personal health, your circumstances play a big factor but building and maintaining financial health can be elusive. Even once we become aware of the right things to do, making good decisions and maintaining good habits is easier said than done. How many health intentions have slipped for you this month?

Competing priorities, present bias and rising complexity all make sustained good decision-making difficult. Life events compound this challenge. Career transitions, family formation, divorce, illness and retirement each introduce new pressures. Without support, many households default to reactive decision-making rather than strategic progression. This is where advisers and super funds play a pivotal role.

The need for a holistic approach

The traditional industry focus has often been on outcomes such as balances but these are a result of upstream drivers. To change and maintain positive behaviours it takes motivation, capability, opportunity and confidence to act. Staying on track requires a structured disciplined approach, which is where ongoing financial guidance and planning support is so important.

Advisers and superannuation providers are uniquely positioned to influence these drivers. Not simply as managers of capital, but as partners in behaviour change, builders of financial confidence and whole of life architects for sustainable progress in quality of life.

This model shows how capability, resilience, wellbeing and support interact to shape financial health and quality of life outcomes. 

Supporting financial health and quality of life outcomes

Measuring what matters in financial health

Savings, debt and income matter, but they are lag indicators. They tell us where someone has landed, not whether they are equipped to move forward. If we want to improve Financial health at scale, we need to focus on the drivers that shift direction – capability, resilience, confidence, behaviours and access to support.

The commercial implication for advisers and super funds are clear. This is not just a social issue. It is a strategic one. Clients and members who lack capability and confidence disengage. Those under stress make reactive withdrawals or fail to adhere to plans. Households without resilience reduce contributions and coverage at the first sign of pressure. Lack of engagement undermines trust, loyalty and retention.

If you want better long-term outcomes, you need better short-term behaviours. That means expanding what you measure.

Not just:

·       Account growth

·       Insurance coverage

·       Contribution adequacy

But also:

·       Financial confidence and capabilities

·       Emergency preparedness

·       Behavioural consistency

·       Stress and perceived control

·       Propensity to seek and act on guidance

These are the leading indicators that signal direction.

Closing thoughts

Financial stress is rising. Too many Australians are entering retirement with more debt than savings. Too many households are living close to the edge. Waiting until hardship appears is the financial equivalent of treating a preventable illness in the emergency ward.

We need to build capability early and strengthen resilience before crisis hits. We need to reduce stress so people have the cognitive and emotional bandwidth to act. We need to create systems that make good decisions and habits easier to sustain.

This is where advisers and super funds play a pivotal role. Not simply as managers of money, but as partners in the behaviour changes needed to successfully navigate shifting life-stage circumstances, risks and opportunities. As builders of confidence and capability to act. As architects of long-term financial stability and quality of life.

Financial health is not just a final destination. It is a dynamic, lived experience shaped by circumstance, mindset and action over time. It is momentum. If we measure what truly matters, we can do more than report on financial health. We can actively promote it. The financial services firms that win the next decade will not just report balances and estimated retirement preparedness. They will measure and actively manage the drivers of financial health.

In this ongoing series of blogs, we will further unpack our practical ideas and tips to help all Australians achieve a dignified retirement. This will include how to engage, motivate and empower individuals to act in their best financial (and life) interests.

In our next blog, we will outline a practical framework for measuring and influencing the financial health drivers that matter most.

Authors

Humphrey Armstrong is a specialist consultant to MYMAVINS and has an extensive background in psychological practice. He has decades of experience helping Australians navigate their transition to retirement and journey successfully through their third act.

Tai Rotem is a consulting partner at MYMAVINS with several decades experience in financial consumer, public health, social and behavioural change research.

Reach out to him at Tai@mymavins.com.au