3 Ways to Build Financial Wellbeing
Financial wellbeing is about having security and freedom of choice.
It’s when you feel in control of your finances and can handle what life throws at you.
No stress about bills. No feeling ashamed of debt. Just a clear head and the confidence that you can live life to your fullest.
Sounds pretty good, huh?
Unfortunately, for 13 million Brits, they don’t have enough savings to support themselves if they experienced a 25% cut in income. And 11.5 million UK households have less than £100 in savings*. If money worries are a constant factor in your life, then you probably experience stress and anxiety daily.
So what are the ways you can improve your financial wellbeing? Let’s find out.
Remember to budget
The first step towards financial wellbeing is sitting down and assessing your spending habits. Identify your goals and create a budget to track your spending. Budgeting can do wonders for your mental health by making you feel in control of your situation.
- Track it – Take notes on your phone throughout the day, then update your main spreadsheet in the evenings while all your expenses are fresh in your mind.
- Create it before the month begins – A week before the current month ends sit down and plan all the expenses you can think of for next month. Then set a realistic budget.
- Keep bills and receipts organised – Whether you receive your bills in the post or electronically, have a system for organising them all. It’s also handy for tax purposes and refunds.
Use an emergency fund
Unexpected expenses can quickly lead to financial trouble if you don’t have a pot of savings to help. Experts recommend having three to six months expenses in a savings account which you only dip into during emergencies. This means if you lose your job you have a cushion of money to rely on until your next employment begins.
But moving some of your wages into an Emergency Saving Fund before spending it requires willpower. To make life easier set up a direct debit on pay day to make this automatic. If you work for one of our Select Partners then you can benefit from payroll deduction. By having your emergency fund in a separate account to your day-to-day Current Account, you’ll avoid the temptation to spend it.
“Don’t save what is left after spending; spend what is left after saving”
~ Warren Buffet knows a thing or two about financial wellbeing.
Have a plan to pay off your debt
First, distinguish between your ‘good debt’ and ‘bad debt’. Good debt includes mortgages, student loans and loans for reliable used cars. These are often from trusted companies who provide ethical loans. Whereas bad debt has no long-term return. For example, payday loans, high interest credit cards to pay off other debt, and loans on brand new cars which depreciate in value quickly.
To tackle paying off your debt there’s a number of strategies you can use, like the “snowball” or “avalanche” method.
The snowball method involves you paying the minimum weekly or monthly payment on all of your debts. Then use the excess money to focus on the debt with the smallest balance. Your goal is to pay off this debt as quickly as possible and then move onto the second smallest debt, and so on. The benefit of this approach is the feel good mini-wins each time you pay off a debt – a perfect solution if you’re feeling anxious or stressed about your finances.
An alternative is the avalanche method. This is similar to the snowball method, as you initially pay off the minimum on all your debts. However, the second stage involves going after the debt with the highest interest first. After the debt is cleared you move onto the debt with their second highest interest etc. The advantage of this approach is that you will pay less total debt but you don’t enjoy as many morale-boosting wins along the way like the snowball approach.
So try implementing a budget, an emergency fund and a plan to pay off your debt. You’ll build your financial wellbeing and enjoy the mental health benefits of feeling in control of your money.