Financial well-being has become an increasingly important topic recently, especially in the light of the Coronavirus pandemic which has had such a bad effect on people’s mental health.  So what is financial well-being?

Financial wellbeing is about a sense of security and feeling as though you have enough money to meet your needs. It’s about being in control of your day-to-day finances and having the financial freedom to make choices that allow you to enjoy life.

Why is financial wellness important? Financial wellness is critical for all people because it can help lower your stress levels. Stress related to money can affect every aspect of your life. Your personal and professional productivity could potentially suffer due to financial worry.

Habits that Build Financial Well-Being

  1. Spend less than you earn. Bolster your savings and reduce your expenses. 
  2. Save for future spending. Get yourself into a habit of saving. 
  3. Only borrow what you can afford. Don’t deny yourself, but avoid spending for an outward show or status symbol. 
  4. Grow your money. 
  5. Boost your earning capacity. 
  6. Protect what you have.

 

 

The 4 pillars of financial wellness are financial awareness, financial literacy, financial behaviour and financial satisfaction. These 4 pillars form the basic foundation of financial wellness.

Money can buy happiness to a certain point. But how much do you need to feel good about life? One study* famously calculated that you need to earn at least £100,000 every year in order to be happy.

Financial wellbeing is how people feel about the control they have over their financial future – and their relationship with money. It’s about focusing on the things that make their life enjoyable and meaningful both now and in retirement.

Being financially prepared allows you to keep up-to-date on your household bills and readily provide for the needs of your family. This pandemic caused supermarket shelves to become empty as more people clamoured for basic necessities like food and medication.

Mental health and financial safety are strongly linked. Some signs that financial stress is affecting your mental wellbeing include: arguing with the people closest to you about money, having trouble sleeping, feeling angry or fearful, mood swings, tiredness, loss of appetite, and withdrawing from others.

There is undoubtedly a link between wealth and health as wealthier people live healthier lives on average.

 

 

As Chartered Financial Planners we are only too aware that a financial plan is essential in helping clients to achieve financial well-being.

Financial planning is a step-by-step approach to meet one’s life goals. A financial plan acts as a guide as you go through life’s journey. Essentially, it helps you be in control of your income, expenses and investments such that you can manage your money and achieve your goals.

8 Components of a Good Financial Plan

  • Financial goals. 
  • Net worth statement. 
  • Budget and cash flow planning. 
  • Debt management plan. 
  • Retirement plan. 
  • Emergency funds. 
  • Insurance.
  • Estate plan.

5 steps to mental wellbeing

  • Connect with other people. Good relationships are important for your mental wellbeing. 
  • Be physically active. Being active is not only great for your physical health and fitness. 
  • Learn new skills. 
  • Give to others. 
  • Pay attention to the present moment (mindfulness).

We consider financial well-being to be so important we decided to join the Initiative for Financial Wellbeing, IFW, a few months ago.

https://initiativeforfinancialwellbeing.org.uk/

Our next step will be to go through the audit process to become an IFW accredited firm.  We have always considered that the financial well-being of our clients is at the heart of what we do. Achieving IFW accreditation status will simply prove that we practise what we preach.** You know it makes sense.

*Princeton University study 6.9.10.

** The contents of this blog are for information purposes only and do not constitute individual advice. You should always seek professional advice from a specialist.  All information contained in this article is based on our current understanding of taxation, legislation and regulations in the current tax year. Any levels and bases of and reliefs from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future.