This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult an independent financial adviser.
Mental health is, rightly, increasingly recognised as an important aspect of wellbeing to maintain. It helps with our overall mood, reduces anxiety and has a positive impact on relationships. Your daily functioning can also improve, helping you to think more clearly and operate with a greater sense of self-esteem. Many point to learning new skills, connecting with others and engaging in physical exercise to improve mental wellbeing. Yet your financial plan also plays a key role too. In this article, we explain the link between financial planning and wellbeing and how to improve it in your own life. We hope this is helpful to you. If you want to discuss your own financial plan with us, please contact us for more information or to access personalised financial advice:
020 8366 4400 or enquiries@cedarhfs.co.uk
What is financial wellbeing?
Financial wellbeing covers many ideas. At its core, it means having a healthy relationship with money. Some people feel like money “controls them”, rather than the other way around. This might look like excessive “retail therapy” – spending money to feel better. It may involve judging others based on their wealth and income, feeling jealous of others’ lifestyles, blaming others for financial problems or taking needless financial risks (e.g. reckless gambling). All of these things make you feel out of control, which is deeply unsettling to most human beings.
Financial wellbeing, however, involves you having control over your money and recognising this, giving you a sense of security. You might not be perfect with your spending, but you regularly get the most from it (e.g. having the patience to “shop around” for a good deal). You are largely aware of what is going in and out of your budget, and you are well-positioned to deal with most unexpected events that may occur – such as needing to pay for a family emergency. The result, in general, is less stress and worry about money. You are more likely to feel confident about the future, minimising (or avoiding) expensive debts and saving regularly towards your goals.
Why financial wellbeing matters
Before the COVID-19 pandemic in 2020, around 11.5 million people had less than £100 saved in their account(s). 9m people were in “serious debt”, regularly borrowing money to pay for food and other bills. Now in 2023, with the cost of living crisis putting further pressure on households, the situation is likely worse. One bank CEO recently disclosed to the BBC that over 80% of their customers have less than £500 set aside for a “rainy day”. Almost 10% of UK adults confess to feeling “hopeless” about financial circumstances, with 34% feeling anxious, and almost three in ten (29%) feeling stressed in the past month.
Part of the issue is a lack of financial education. About 22m people claim that they don’t know enough to plan for their retirement. An estimated 5.3m children do not receive a meaningful financial education, such as learning about compound interest on investments or APR on credit cards. Fortunately, it is never too late to improve your financial education. Doing so can bring great benefits, such as helping you avoid scams and getting better returns from organising your wealth more tax-efficiently. You start to feel more confident as you better understand how events in the wider world might impact your finances – e.g. interest rates, inflation and announcements in the government’s latest budget statement. You begin to feel like you have more wisdom to pass on to others, such as your children, to help them make better decisions.
How to improve financial wellbeing
A good starting point to improve your financial education is to read the news or subscribe to a decent financial blog or newsletter. The Moneysavingexpert website is a great resource to learn about the “essentials” of budgeting, council tax and other day-to-day financial matters. At some point, you might move onto deeper matters of financial planning such as pensions, investments and tax planning. Here, you might turn to a trusted financial adviser or planner for content. You are always welcome to subscribe to our newsletter here at Cedar House!
Another idea is to simply start saving, even if the initial amount is small (e.g. £50 per month). This simple act can help you realise that you can exert control over your finances, building up further as you gain more confidence over what is possible. If you have costly debts like credit cards or personal loans, then these can be a big drain on your mental health. Organising your affairs to start paying these down – e.g. cutting needless luxury spending and diverting this to your debts – can do wonders. Finally, taking time to craft a long-term financial plan can be very beneficial. This joins together all aspects of your “financial life” under a unified set of goals including pensions, savings, investments, protection, taxes, estate planning and more. This gives you a sense that you are “going somewhere” with your money and not just aimlessly floating through life. You feel more prepared for the great “what ifs” of life (such as premature death in the household) and better understand how decisions in one area, such as pensions, may impact others – such as your taxes.
Conclusion
Interested in discussing your financial plan with an experienced financial adviser? Get in touch today to discuss your financial plan with a member of our team here at Cedar House via a free, no-commitment consultation:
020 8366 4400 or enquiries@cedarhfs.co.uk