Six things that will improve your financial wellbeing

What is financial wellbeing?

Financial wellbeing is a crucial part of our overall wellness, alongside mental and physical wellbeing. It is different for everyone, as we all have different circumstances, needs and objectives.

As a general rule, however, good financial wellbeing can be summarised as:

• Having financial security and being able to afford your day-to-day expenses
• The ability to absorb a financial shock should the unexpected happen
• Being on course to achieve your personal financial objectives and planning for later life
• Having the freedom to make financial choices in life

Why is this a problem?

A recent study by the Money Advice Service found that 21% of people in the UK said that they rarely, or never, save anything from their income, whilst 22% have less than £100 in savings or investments. Furthermore, around 17% of people often use credit to pay for essential daily items, such as food and paying bills.

Worryingly, 47% stated they do not feel confident when making decisions regarding financial products or services, and 51% thought they would not be able to last three months should they lose their main source of income.

Attributing to these issues is a lack of financial education for all ages, which results in people making misinformed financial decisions. Only 52% of children aged between 7 and 17 said that they received meaningful financial education, whether at school, home or elsewhere, and 55% of working age adults said they did not know enough about pensions to properly plan for their retirement.

What can you do to improve your financial wellbeing?

There are several options you should consider implementing in order to improve your financial wellbeing.

Understand your discretionary spending triggers

Often the first step to take is understanding your spending patterns and identifying discretionary and/or unnecessary spending.

Whilst everybody has guilty pleasures, controlling these can be made easier by understanding what it is that makes you spend erratically. For example, minimising the time you spend on retailers’ websites might reduce the amount you spend on impulse purchases.

Set a monthly budget – and stick to it

Whilst this is of course easier said than done, you should be realistic when setting your monthly budget and allow for some discretionary spending on items that are not essential.

There is no point in being unrealistic as it will only put you off trying to keep within your budget next time.

You could also consider cutting back on the frequency of which you purchase low-cost items, as they tend to add up over a month. For instance, if you buy coffee from a café daily, this will soon equate to a relatively high expense. You could decide to only buy a coffee once a week instead, as a treat.

Determine what your financial objectives are, and plan how you are going to achieve them

This could be buying your first home, moving to a larger home, or buying that new car that you really need. It could also be an experience that you want to do, like travelling the world, or helping your children financially in the future.

Whatever your life objectives are, it is important to make a realistic plan on how you will achieve these. Setting a monthly savings target is a good start towards accumulating the money you need to achieve those objectives. If your objective is longer-term, you could consider investing some of those savings to try and generate growth via investment returns.

Start saving for your future as early as possible

The earlier you start saving, the easier it will be to ensure you can maintain your existing lifestyle when you retire. Whilst retirement may seem like a long way away for those in their 20-30s, any savings made now will make a huge difference for the future, and you can invest that money for the long-term to achieve investment growth.

Retirement is not the only reason to start saving, however. The more savings and investments you have available, the more realistic your other life objectives will be in the future.

Set aside a rainy-day fund for emergencies

You never know when the boiler may fail, or your car may break down. Whilst you may try everything you can to look after your possessions, these things happen from time to time and can result in large, unexpected expenses. Having an emergency cash fund set aside will alleviate any financial stress that would otherwise be caused and avoid you potentially having to borrow money to resolve the problem.

Of course, this depends on your individual circumstances and will not be achievable for everyone.

Consider personal insurance protection policies to safeguard yourself against the unexpected

An unexpected accident, serious illness, or death that meant that you were unable to continue working could have serious detrimental implications for your/ your dependant’s financial security. Whilst you may think that these events are unlikely to happen, being prepared for them could make a big difference.

There are various insurance policies that you could put into place to protect you and your family against the financial impact of losing a regular income, and the costs of these may be much less than you think.

How can we help you?

To help our clients prepare for their future, we provide a range of financial planning services. These include:

• Retirement planning;
• Personal insurance protection planning; and
• Lifetime cashflow planning