Oct282025
Financial PlannersNewsFinancial Planning

Financial planning is often seen mainly as numbers, spreadsheets, superannuation, investments, maybe tax or estate matters. But there is growing evidence—both in Australia and internationally—that a structured, intentional financial planning process brings psychological benefits: less stress, more life satisfaction, better resilience.

One foundational work is Kym A. Irving’s “The Financial Life Well-Lived: Psychological Benefits of Financial Planning” (2012, Queensland University of Technology). Irving argues that the process of financial planning (not just the end result) activates key psychological mechanisms such as sense of control, environmental mastery, competence, goal achievement, which all contribute to subjective well-being. (uowoajournals.org)

Below I’ll explain how each of the standard steps in financial planning can produce psychological benefit, referencing Irving and other research, and then interpret what this means for everyday Australians.

The six-step financial planning process & associated psychological benefits

Irving’s paper uses a somewhat standard financial planning model (often six steps) and maps psychological well-being mechanisms onto each step. (uowoajournals.org) I’ll go through goal identification, assessment, formulation, execution, and ongoing review (merging some steps where appropriate, since in practice some overlap) and show what psychological benefits tend to follow.

Step What it involves Psychological mechanisms it activates
1. Goal Identification Working with a planner or by yourself, defining what you want: short-term, medium, long-term financial goals—retirement, paying off debt, buying a home, funding education, holidays, leaving legacy. Clarifying what matters financially. • Purpose / Meaning: By choosing goals, you articulate values, direction. Goals that align with what matters to you give life more purpose. This aligns with psychological theories (e.g. Ryff’s model) that purpose in life is a key component of well-being. • Autonomy & Self-determination: Deciding for oneself what’s important increases autonomy. • Motivation & optimism: Having clear goals provides something to aim for, which boosts motivation and belief in the future.
2. Assessment Taking stock: what resources do you have—income, savings, debts, liabilities, investments; also what constraints: risk tolerance, time horizon, health, family circumstances. Understanding current financial situation. • Competence / efficacy: Knowing precisely where you are financially builds confidence you can manage your situation. • Sense of control: Vagueness or ignorance about financial status breeds anxiety; clarity reduces uncertainty. • Environmental mastery: The ability to handle one’s financial environment—knowing all debts, assets, financial flows so you feel in command. • Reduced anxiety & stress: Uncertainty is a major driver of financial stress; assessment helps reduce that. Research in Australia shows that financial confidence is tightly tied to psychological well-being (especially in older or pre-retiree Australians) when they feel able to assess and handle their resources. (Home)
3. Formulation (Planning / Strategy) From the assessment, you make a plan: set priorities (which goals to address first), decide on strategies (repayment, savings, investments, risk management), adjust trade-offs (e.g. how much to save vs enjoy living now), set milestones (e.g. paying off a debt by 12 months). • Goal pursuit: This is moving from mere wishes to actionable steps. Psychological science shows that goal-setting (especially with specific, measurable steps) improves performance, reduces drift. • Hope & agency: Formulating a plan increases belief that one can do something about the future. • Reduced decision paralysis: Many financial stresses come from “What should I do?” The plan gives structure. • Alignment: Making deliberate trade-offs (e.g. pushing out some spending in order to meet a goal) leads to feeling that one’s choices are consistent with values—which bolsters life satisfaction. Irving notes that when people see their plan as coherent with their values, psychological well-being is higher. (ResearchGate)
4. Execution / Implementation Acting on the plan: making payments, investing, budgeting, managing spending, possibly rebalancing, adjusting insurance, etc. Committing resources (time, money, energy) to achieve goals. • Competence and mastery: As small steps are taken and progress is observed, people feel more capable. • Sense of progress & reward: Milestones and successes (e.g. debt reduced, savings increased) reinforce positive feelings. • Stress relief: Taking action reduces worry; inaction tends to ruminate. • Resilience building: Facing challenges in execution (unexpected expenses, market fluctuations) and overcoming them strengthens psychological resilience. Research (e.g. Arya et al. 2023) from older Australians during COVID-19 shows that hope, positive wellbeing, coping are associated with more positive financial behaviours (which are part of execution). (PLOS)
5. Ongoing Review & Adjustment Monitoring performance, reviewing whether goals or strategies need changing (e.g. life changes, income change, economic shifts), adjusting as needed; celebrating achievements; staying accountable. • Adaptive control / environmental mastery: Life rarely follows plan exactly; being able to adapt builds a stronger sense of control over circumstances rather than being a passive observer. • Reduced anxiety about the unknown: Reviewing helps anticipate problems. • Sustained life satisfaction: Adjusting ensures that the plan stays relevant to one’s values/goals. • Purpose reinforcement: Seeing progress over time reminds one why the goal was set, reinforcing meaning. • Confidence & coping: Each review that leads to success, or even when things are adjusted, gives experience in coping with uncertainty or adversity.

Irving also discusses how these steps map onto constructs of subjective well-being (happiness, life satisfaction) and psychological well-being (more eudaimonic: purpose, autonomy, environmental mastery, etc.). (ResearchGate)

Empirical findings from Australia & elsewhere

Here are some findings from empirical work that support the psychological effects of financial planning or related behaviours among Australians.

  • The Australian Unity-Deakin financial decision-making report explored how protective financial behaviours relate to psychological well-being. It found that people who engage in planning, budgeting, financial monitoring tend to report higher psychological well-being. (Home) 
  • In Household finances and well-being in Australia (Brown, et al. 2016), researchers show a positive correlation between strong financial position and measures of well-being. While not always isolating the planning process, having more control over finances (less unsecured debt, more savings) is strongly associated with greater life satisfaction. (ScienceDirect) 
  • During COVID-19, studies among older Australians (55+) show that “hope” and “coping” and general mental wellbeing are predictive of positive financial behaviours—i.e. people with better psychological resources were more likely to budget, save, reduce non-essential expenditure. But conversely, engaging in these financial behaviours also relates back to better mental wellbeing. Thus, financial planning-type behaviours and psychological wellbeing reinforce each other. (PLOS) 

Psychological constructs invoked: control, environmental mastery, purpose, resilience

It helps to define some of the psychological benefits in more depth, to see what financial planning is doing under the hood.

  • Sense of control / autonomy: Feeling that you have influence over your life and decisions. Psychological literature (e.g. self-determination theory: Deci & Ryan) holds that autonomy is a basic mental need, affecting well-being. When you identify financial goals, assess your options, plan, act and review, you are exercising control, not being buffeted by external circumstances. Irving explicitly says that planning helps clients feel more organised and aware, and thereby more in control. (ResearchGate) 
  • Environmental Mastery: From Ryff’s model of psychological well‐being, environmental mastery means being able to manage one’s life and surroundings in ways suited to one’s needs, to choose or change the context rather than being overwhelmed by it. Financial planning concretely helps people manage their financial environment: understand cash flows, debt, assets; adjust plans when things change. That leads to this sense of mastery. The “Psychological Well-Being Revisited” review by Ryff (2013) emphasises that environmental mastery is a strong predictor of psychological health. (PMC) 
  • Purpose in life / Meaning: Goals aligned with values give meaning. Having long-term aims (retirement vision, family, legacy) goes beyond short-term utility. People who feel their life has purpose tend to report greater life satisfaction, lower depression and anxiety. Irving notes that goal identification in planning gives purpose. (uowoajournals.org) 
  • Competence / Efficacy: As people assess, learn, act, see outcomes, they gain confidence in their ability to manage the financial domain. This belief in one’s ability has been tied to psychological well-being; studies show financial self-efficacy is a predictor of financial well-being. (The study Financial Well-being and Its Psychological Determinants included “financial self-efficacy” and “propensity to plan” as positive predictors. (ResearchGate)) 
  • Resilience: The capacity to bounce back from setbacks—unexpected expense, investment loss, changes in income. A planning and review process means people are less thrown off by shocks—they have coping strategies, buffer plans, are mentally prepared. Execution and review phases are especially relevant here. 
  • Reduced anxiety / stress, improved mental health: Financial stress is common in Australia; research from Beyond Blue, Tackling Your Feelings, etc., show strong links between financial hardship and increased rates of anxiety and depression. (Beyond Blue) Financial planning helps reduce these by clarifying uncertain situations and giving actionable paths. 

What all this means for everyday Australians

Let’s translate from theory to concrete everyday life. What are the psychological benefits Australians can expect, and why they matter (especially as many face cost-of-living pressures, rising debt, housing costs, uncertain markets, etc.)

  1. Reduced anxiety & worry

     Many people feel anxious about money—not knowing if they will have enough for bills, or if an emergency hits, or if they can retire. Planning steps (especially assessment + formulation) reduce uncertainty: what debts you truly have, what savings, what risk exposure. Knowing that a plan is in place helps quiet rumination (worrying repeatedly without action). Reduced uncertainty translates to lower stress hormones, better sleep, less psychological strain. 
  2. Improved life satisfaction

     Life satisfaction is often tied not just to what we have, but how we feel about where we are headed. Clarity of goals plus seeing progress on them (even small) increases satisfaction. When one feels in control, competent, aligned with values, life feels meaningful. Empirical data from Australia (Brown et al., Australian Unity-Deakin etc.) supports that people who manage finances well report higher wellbeing. 
  3. Better resilience to shocks

     Australia has had floods, bushfires, pandemics, inflation spikes. Plans that include buffers, risk assessments (insurance, emergency funds), regular reviews make people better able to weather these shocks without losing psychological balance. Execution builds coping skills; review ensures plans adapt to the changing environment. 
  4. Stronger sense of identity, values and purpose

     Financial planning isn’t just “how to get rich” but “what kind of life do I want”. For many Australians, this means family, security, lifestyle, freedom, legacy. Goal identification makes values explicit. That gives meaning. When life becomes busy or uncertain, having values-based financial goals can act as a compass. 
  5. Greater environmental mastery

     Australians living in high cost of housing zones, with mortgages, rent, or with large debt burdens often feel controlled by bills. Planning flips the narrative: “I can manage my financial environment.” That means budgeting, saving, maybe reducing debt or restructuring it. The psychological lift from feeling that you are not helpless is substantial. 
  6. Reduced mental health burden / social costs

     On a systemic level: when individuals have better financial planning and financial well-being, there is less toll in terms of healthcare, mental health services, social stress. For the individual, fewer sleepless nights, fewer conflicts in relationships over money, less avoidance of seeking help. 

Special considerations & caveats

  • The benefits are not instantaneous; part of the psychological lift comes from perceiving progress. If someone sets unrealistically ambitious goals and fails repeatedly, that can harm rather than help. So the plan must be realistic, with achievable milestones. 
  • Psychological traits moderate outcomes: self-efficacy, optimism, coping skills. Those with initially low confidence may need additional support. Irving notes that less financially knowledgeable people benefit most in psychological terms when they engage in planning—especially when the process gives them knowledge and feedback. (ResearchGate) 
  • External shocks still matter: unexpected job loss, illness, macroeconomic crises. Planning helps, but does not eliminate risk. Regular review is essential. 
  • Social & cultural context: Different Australians have different value systems, risk tolerance, family obligations, social norms about savings vs present consumption. A good financial plan must respect those. Psychological benefit arises when there is fit, not when plan feels imposed or misaligned with values. 

Summary: How financial planning steps map into psychological benefits

Putting it all together, here’s a summary mapping:

  • Goal identification → purpose, meaning, autonomy 
  • Assessment → control, competence, environmental mastery 
  • Planning/formulation → motivation, hope, clarity, reduced paralysis 
  • Execution → competence, progress, resilience 
  • Review & adaptation → sustained control, flexibility, reduced anxiety, reinforced life satisfaction 

Implications for policy, practice, and individual action in Australia

  • Advice industry / financial planners ought to emphasise not just what clients can achieve financially but how the process itself supports well-being: explicitly acknowledging client values, supporting client agency, helping clients see small wins, reviewing regularly. 
  • Financial education should cover planning steps, not just “financial literacy” as facts, but goal-setting, regular review, behaviour change support. 
  • Mental health / wellbeing services could partner with financial advice or counselling because the overlap is large: financial stress is a precipitant or exacerbator of anxiety, depression. 
  • Individuals can begin even without a professional planner: set one or two meaningful goals, assess debts & income, pick simple strategies, take small steps, review monthly or quarterly. 

Conclusion

Financial planning is more than just making money: it’s a structured journey that, if followed well, delivers psychological benefits—greater sense of control, environmental mastery, purpose, competence, reduced anxiety, improved life satisfaction, increased resilience. The evidence—from Irving (2012) to recent studies in Australia—shows that engaging in this process can help people navigate not just financial uncertainty but emotional and psychological uncertainty too. For everyday Australians living under pressures of cost-of-living, employment instability, housing stress, the psychological boost from having a coherent financial plan can make a material difference in wellbeing.

References

  1. Irving, K. A. (2012). The Financial Life Well-Lived: Psychological Benefits of Financial Planning. Australasian Accounting, Business and Finance Journal, 6(4), 47-59. Queensland University of Technology. (uowoajournals.org)
  2. Australian Unity – Deakin University. Financial Decision-Making & Psychological Well-Being Report. (Year). [Report exploring protective financial behaviours and psychological well-being in Australia]. (Home)
  3. Arya, V., Banerjee, R., Lowies, B., Viljoen, C., & Lushington, K. (2023). The effect of psychological factors on financial behaviour among older Australians: Evidence from the early stages of COVID-19 pandemic. PLoS ONE, 18(6), e0286733. (PLOS)
  4. Brown, S., et al. (2016). Household finances and well-being in Australia. Journal Name / Publisher. explores how household financial position relates to levels of well-being. (ScienceDirect)
  5. Financial Well-being and Its Psychological Determinants: Mathew, V., Santhosh Kumar, P. K., & Sanjeev, M. A. (2024). FIIB Business Review. Looks at traits like financial self-efficacy, propensity to plan, etc. (ResearchGate)
  6. Lowies, B., Kutin, J., Russell, R., Cornell, V., & Altieri, B. (Australia). Research poster/report: Older Australians’ psychological wellbeing is linked with their financial confidence and financial help-seeking. (Home)
  7. Beyond Blue. (Australia). Financial Well-being and Mental Health. Australian resources on how financial challenges are linked to mental health consequences. (Beyond Blue)
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