Financial wellness is something that’s easier to explain than it is to define. It’s a bit like asking what does ‘peace of mind’ mean to you? The reality is that it means different things to different people. It also depends on where you are in your life – with your age, your circumstances, where you are in your career and so on; all influencing and contributing to your financial wellness. It’s not just about money.
To make it easier to understand, we’ve broken financial wellness down into four core areas: budgeting, debt, savings, and protection. The trick is to try and be mindful of each of them. And if you can, you’ll be better equipped to keep your financial health on track.
Budgeting – take control of your day-to-day
If you create a budget and stick to it, it can help you to make your money last and potentially help you save each month for your future retirement. A great way to start is to take a good long look through your bank statements and take note of your spending and income. Doing so can help you take control of your day-to-day finances by understanding what money is coming in, what’s going out, and where your money is going – so you can prioritise your spending and saving.
Debt – manage your borrowing
Debt can be positive and useful when it’s necessary. And if managed carefully – by making sure you don’t become over-burdened and that you make all your monthly repayments – it can be affordable.
Common types of debt are a mortgage, a car loan, or using credit cards for larger purchases or for regular purchases to gain rewards.
Even if you have your debts under control, it’s vital to understand what you owe and how much it’s costing you. This will help you make sure your borrowing remains affordable, and help you identify where you may be able to make savings. All of which can help you feel more in control of your money and help you build your credit profile.
Savings – move towards your goals
At its heart, saving provides financial security, freedom, and protection against money emergencies. Having savings can also help you to improve your financial wellness and reduce stress in your life.
Establishing and working towards your savings goals can help you feel better prepared for those important moments in life, such as buying a house, helping family members, or affording the retirement you want.
Protection – be prepared and safeguard what matters
We all have plans, but financial wellness means being as prepared as possible for the unexpected. From your boiler breaking down to a job loss, or the death of a loved one.
Whether you’re facing a temporary or permanent financial loss, it helps to have some emergency savings and protection in place. The good thing is there are small steps you can take today to help you feel more protected against the things we might not be able to control.
The art of setting small goals
If the idea of tackling your finances feels overwhelming, start with little steps. Set small goals and bit by bit you’ll get financially fitter. Before you know it, you’ll be feeling better than ever about your financial health.
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Important information - This is for information purposes only and the views contained are not to be taken as advice or a recommendation for any product, service or course of action. The value of investments can go down as well as up, so you may get back less than you invest. You cannot normally access your pension savings until age 55. This is due rise to 57 in 2028.