How to improve your financial well-being

We celebrate World Mental Health Day on October 10th, so what better time is there to look at how to improve your financial well-being?

The theme of World Mental Health Day this year is that good mental health is a universal human right but recent issues affecting the UK population, such as the pandemic and the cost of living crisis, have shown that this human right is subject to inequalities.

Financial well-being is a critical aspect of overall life satisfaction and mental health. Improving financial well-being is not just about increasing income but also about making informed decisions and managing finances effectively.

Budgeting and Tracking Expenses

Creating a budget is the foundation of sound financial management. Start by recording your monthly income and expenses. This simple step helps you gain a clear understanding of where your money goes. Consider using budgeting apps or spreadsheets to streamline this process. Review your budget regularly and make adjustments as needed to ensure that you are living within your means. Read more about carrying out a money overhaul and combine that with the following tips.

Emergency Fund

Month on month, The Money Charity’s statistics show that UK households are falling into financial instability with their resistance to debt becoming dire. Establishing an emergency fund is essential for financial stability and if you are able to, aim to save at least three to six months’ worth of living expenses in a separate account. This fund can serve as a safety net in times of unexpected financial challenges, such as medical emergencies or job loss, preventing you from going into debt.

Debt Management

High interest debt can be a significant obstacle to financial well-being. Always ensure that you are prioritising repaying the high interest debts like credit card balances and personal loans. Consider consolidation or refinancing options that may reduce interest rates and lower your overall monthly expenditure. Make consistent payments and avoid accumulating more debt.

Investing for the Future

Investing is a key component of building wealth over time. Consider investing in a diversified portfolio of stocks, bonds, and other assets through tax-efficient accounts like ISAs (Individual Savings Accounts) and workplace pension schemes. It’s essential to research and understand your investment options or consult a financial adviser for guidance. We appreciate that not everyone is in this position where they may have extra funds to invest at the end of the month but if you are, this is a brilliant way to build financial strength.

Financial Education

Invest in your financial education by reading books, taking online courses, or attending workshops. The more you understand personal finance, the better equipped you are to make informed decisions. Many organisations and institutions offer free or low-cost financial literacy resources. As we have mentioned before, financial education in the UK leaves a lot to be desired and we believe that it should start early. Have a read of our blogs about teaching finance to children for more information.

Set Clear Financial Goals

Setting specific financial goals gives you a sense of direction and purpose. Whether it’s saving for a home, planning for retirement or paying off debt, having defined goals helps you to stay motivated and focused on your financial journey.

Reduce Unnecessary Expenses

Review your spending habits and identify areas where you can cut back. This might include eating out less, taking your lunch to work, reducing the amount of times you get coffee, cancelling unused subscriptions, or finding more affordable alternatives for everyday expenses.

Automate Savings and Investments

Make saving and investing a habit by setting up automatic transfers to your savings and investment accounts. This way, you’ll consistently contribute to your financial goals without the temptation to spend the money elsewhere. It is a great idea to set these automatic transfers up to go out at the beginning of the month, once you have been paid.

Seek Professional Advice

If you have complex financial situations, consider consulting a financial adviser. They can provide tailored guidance on investments, tax planning, and retirement strategies.

Stay Informed

Stay informed about changes in financial regulations, tax laws, and economic trends. Being aware of these factors can help you make strategic financial decisions and adjust your plans accordingly.

Protect Your Assets

Don’t forget to protect your assets with appropriate insurance coverage, such as health insurance, life insurance, and home insurance. Adequate coverage can prevent financial devastation in the event of unexpected events.

Review and Adjust Periodically

Financial well-being is an ongoing process and will always fluctuate depending on your life and circumstances. Periodically review your financial goals, budget, and investment portfolio to ensure they align with your evolving circumstances and aspirations. Adjust your plans as necessary to stay on track and always pencil in time to look at your money matters – New Year is a great time for this!