What is financial wellbeing?
Financial wellbeing comes from having financial security and this means different things to different people and can change with time. Some examples of financial wellbeing could be having enough money to cover outgoings, having sufficient savings, clearing debts, being able to afford your own house, getting a mortgage, being able to retire early, or helping children get onto the property ladder.
Financial wellbeing also comes from having a greater understanding of your own objectives and motivations in life. This tends to help people develop a sense of clarity and goals to work towards and that in itself could bring a sense of wellbeing.
Why is it important?
It is important for a variety of reasons, but the two most common reasons are:
1. Mental wellbeing. the links between financial and mental wellbeing are well documented. Nearly 80% of UK residents are stressed about money and three out of four employees have said that money issues impact their productivity and focus both in and out of the workplace.
2. Financial stability. Having financial security provides stability and peace of mind. For most people this would include knowing that your finances are in order which could be related to savings and budgeting, ensuring you have a plan which could be short, medium and long term and that you can withstand a financial shock.
- Develop and set goals. Consider what you would like to achieve over the short, medium and long term and create goals. Once you have an idea of what you would like to achieve then break that down into bitesize steps. It will likely be a useful exercise to create a list of goals and then consider what you may need to do to begin working towards them Having goals and objectives provides a sense of certainty and clarity and can prove to be a rewarding exercise.
- Review your monthly outgoings. Consider your goals and how these can be factored in to your monthly outgoings. It may be a worthwhile exercise shopping around to see if you can find more cost-effective solutions (without compromising the service or cover you receive) for outgoings such as insurance and utilities. It will be worthwhile looking at allocating budgets towards achieving each respective goal whether it be saving, family, property, investment, retirement related and so on. You may find it beneficial to have different accounts or vehicles for these. A simple example may be having a separate bank account to save into monthly for the holiday season each year, birthdays or trips abroad. Many banks now offer information on your monthly spending and you can use digital tools to help you look at this area.
- Review, monitor and adapt. Setting goals are a bit like using a Sat Nav. You input your address which is the final destination (your goal) and then the best route is calculated. At this point, unless you know the route already, it is likely you will periodically look at the Sat Nav to make sure you’re on track and going in the right direction. This also applies with financial planning. There may be unexpected events that occur, which in the Sat Nav example could be traffic, so it is important to not only monitor your progress but to adapt your plan as appropriate as and when hurdles appear. In some scenarios the opposite may happen and you may achieve your objective a lot sooner than expected. It is important to be realistic when setting and reviewing goals.
- Consider talking to someone. If you are going through financial hardship, are worrying about money or don’t feel particularly confident about how you can achieve the goals you have set then it may be useful to talk to someone. This could be someone that you may feel might be financially savvy such as a friend, family member, charity or a professional adviser. Personal finances are something that you may not wish to discuss with others and it can sometimes feel very overwhelming. It is very unlikely that you are alone and there is a high chance that someone has been in your shoes before. Talking it through could provide you with some reassurance and some external input and views. This may help you see things from a different perspective and could lead to setting a plan in motion to achieve your objectives and subsequently get peace of mind.
The most important asset in life is time. Taking control of your financial plans and setting goals to achieve them can provide clarity and a sense of wellbeing. This should leave you with more time to spend time with the people you care about and do more of the things you enjoy and want to do in life.