financial wellbeing

Financial Wellbeing: what is it and how to improve it

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There has been a rise in the number of conversations people are having around financial wellbeing.  It is great to see, but we still have a long way to go before this becomes a mainstream topic.

With more and more people experiencing financial strain during the pandemic, the need for practices to address poor financial wellbeing becomes increasingly necessary.

But, let’s go back to basics and unravel what financial wellbeing is, how it can affect us, and what we can do about it.

What is financial wellbeing?

Financial wellbeing is defined as having a sense of control over your current financial situation and your future finances.

For those that are financial well, they will experience a sense of financial security.  It is likely to be the absence of stress and anxiety related to money.  Long term financial plans will be in place and action will be taken to achieve them.

financial wellbeing

How does poor financial wellness affect us?

As we learn more about financial wellness, we are learning that it can have far reaching implications throughout our lives.  Going beyond just the more direct implications.

Impact on physical health

Financial stress can show up through physical symptoms.  Just like any other form of stress it can lead to anxiety, depression, sleep loss, digestive issues, headaches, high blood pressure, compromised immune systems, muscle tension and more.

Furthermore, when we experience stress of any kinds, we are less likely to look after our physical health.  Eating lower quality food and lack of exercise can lead to further physical complications.

Poor long term financial outlook

More obviously, those with poor financial wellbeing have a poor long term financial outlook.  This means that pension poverty and bankruptcy are more likely. 

Naturally, with these issues weighing on the mind, it can further impact both physical and mental health.

Poor mental health

Studies have shown that worrying about finances is a major cause of mental health decline.  Frustratingly, this in turn can lead to further financial neglect, thus creating a spiral of poor financial wellbeing.

Given that money is a common occurrence in our lives, it is hard to escape it and this can mean that mental health can be underpinned by financial wellness. It is difficult to be mentally healthy with poor financial health.

financial wellbeing

What does good financial wellbeing look like?

It can feel like achieving financial wellbeing seems like an impossible task, particularly when you are trying to improve it from a poor starting point.

However, there are a few components to financial wellness and even just taking action to improve in these areas will have a noticeable impact on how you feel about money in general.

No debt or manageable debt

A major cause of financial stress is debt.  Within the last few years, we have seen people discover new forms of debt such as Klarna and other “Buy Now, Pay Later” products.

But freedom from debt, specifically debt with high interest rates means that you can use your money to build for the future rather than pay off past purchases.

It could also mean that you have more choices around the work you do and how long for.  When you are tied to debt repayments for fear of the consequences, you may find yourself staying in jobs that are bad for your mental health.

Emergency fund

An emergency fund is a pot of money that is there to deal with unforeseen circumstances.  This could be a small expense such as washing machine breakdown, or something bigger like the loss of a job.

Having a emergency fund removes some of the worry around how you would cope with these things should they arise.  Furthermore, it gives you the freedom to look for other jobs, if yours is toxic, or to work toward other financial goals knowing that you have this safety net.

Good credit score

Previous missed or late payments can affect your credit score and this can limit your options in the future.  There are ways that you can monitor your credit score and actively improve it though.

A good credit score will give you access to the best mortgage rates, credit cards and loans, which can mean that borrowing money in future is less expensive.

Growing savings and investments

Aside from an emergency fund, people feel financially secure if they can save money regularly towards their future plans.

Whether you choose to save or invest will depend on your aims but knowing that you have the skills and capacity to grow your savings will help you plan for significant life events.

Conscious spending

This is the idea that you can choose what you spend your money on rather than making impulse purchases.  It is easy to feel out of control, when you frequently make purchases that a short while later to come to regret.

Having the presence of mind to know when a purchase is important or not important to your life and your goals will help you feel more secure in your financial decision-making skills.

Appropriate insurances

Preparing for worst case scenarios is not exactly a fun day out, but it can give you peace of mind.  Therefore having insurances in place that cover these situations is important.

Some insurances are compulsory, such as car insurance, and a mortgage provider might insist on home insurance.  However, there are other that should be considered, such as life, critical illness and income protection.

The insurances that are right for you are likely to be different for other people, so it is worth dong your research or speaking to an insurance broker before you make any decisions.

Retirement plans

Long-term financial planning becomes any increasing worry as you age.  The best time to start thinking about your retirement plans is the first day you start working, but it is rare that any of us are thinking about that then.

Having pensions and other retirement products in place and making regular payments towards these gives peace of mind knowing that you will be looked after in your later years.

financial wellbeing

How to make financial self-care a part of your wellbeing strategy?

Nurturing your financial wellbeing is a lifelong act of self-care, but what do you need to do to make sure that it is looked after?

Making plans

Regularly setting time aside to look over your financial plans will help ensure that they are still working for you in your current circumstances.  Just like neglecting your skin care regime can lead to an outbreak, neglecting your finances will likely lead to negative outcomes too.

Budgeting is the best act of financial self-care.  Decide where your money is going and looking over your net worth once a month will ensure that your finances stay on track. Here is a video of me talking through my own budgeting process:

Regular conversations

If you are in a relationship or share your finances with someone else, then it is important to have regular conversation about money and your financial goals.  Goals work better when everyone is on the same page.

Having conversations with other members of your family can be good for building generational wealth.  This is wealth within families that is passed down.

Conversations with friends around your money goals can also provide accountability for all parties involved, but choose these friends carefully.

Check bank accounts regularly

One of the simplest act of financial self-care is to regularly check your bank accounts.  Many people bury their heads in the sand when it comes to their spending, so developing a habit of checking your accounts can work to stop this.

It is also good to use this as an opportunity to look for fraudulent activity as well as monitoring your income. 

Write things down

Keeping records allows you to monitor your progress over time.  It also helps you to stay on track.  When you try to budget in your head, it will be easy to forget things or ignore the good work you have done.

Try to write down your budget, net worth, spending and income either on paper or on a spreadsheet.  You will be glad that you did.

Set goals

Having goals gives us something to work towards.  If you don’t know where you are heading with your finances you will find that make progress is a challenge.

Therefore, spending time to determine your goals and the steps needed to achieve them will provide structure and guidance to your financial planning.

financial wellbeing

What to do if you need help to manage your financial wellbeing?

If you are feeling like you cannot improve your financial wellbeing alone, then there are some options available to you.

Coaching

Financial coaching are available to work with you to look at your financial plans and talk you through the options that you have available to you.  They will help build your confidence and tackle some of the underlying financial behaviours that could be preventing you from reaching your goals.

They are not financial advisers, however, so they won’t tell you exactly where to put your money.  But they can provide you with the tools to make these decisions for yourself.  You can check out my financial coaching packages here.

Financial advisers

Financial advisers are able to assess your finances and suggest products for you.  They are regulated and can be specific about where they think you should put your money.

They are best suited for people who have large amounts of money and need specific advise to maximise the returns on it.

Debt advice

There are several debt advice charities available that will help you manage your debt.  They can be a real life line to people that are struggling, as they can give you free advice on how to manage your finances to reduce your debt.

In the past, I have worked with StepChange who offer free debt advice.  If you reach out to them, they will listen to your situation and help put together a plan of action.

Money Advice Service

The Money Advice Service can offer advice on a whole range of financial topics.  Their website is thorough, but if you have a specific question, then you can contact one of their advisors via webchat, WhatsApp, or telephone.


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