5 practical ways to improve your financial wellbeing today

Many studies have found a link between mental and financial wellbeing. Money troubles can affect your mental health, while mental health issues can also lead you to make poor financial decisions.

Improving your financial wellbeing is about helping you to feel more in control of your money and your financial future. 

If you can develop a better relationship with money and focus on the things that make your life enjoyable or meaningful, you can seriously improve your wellbeing and reduce your stress.

Here are five practical ways to improve your financial wellbeing today.

 

1.Improve your long-term savings

Recent research from insurer Aegon found that too few people were saving enough for their future. 

They found that most people (52%) are paying the minimum 5% into their pension, with the same amount often matched by their employers under the auto-enrolment rules.

While paying 5% of your salary into a pension might seem a lot, many experts say that individuals should be putting away closer to 15% a month to maintain your desired standard of living in retirement.

Thinking about your long-term future can be difficult, especially if you have pressing financial concerns now. However, setting aside enough for your long-term future can give you the peace of mind that you’ll be secure in later life.

Long-term plans tend to work better if you think about specifics. For example, imagine the type of house you want, or the types of activities you want to be doing in the future. Thinking more specifically, rather than about “your retirement” in general, can help you focus on these goals.

Three steps you can take right now are:

1. Check your State Pension entitlement. If you have paid less than 35 years’ National Insurance contributions you might not get the full amount, so now’s the time to see if you can top it up.
2. Pay into your workplace pension. As well as contributions from your employer – essentially free money – you’ll also benefit from generous tax relief and investment returns. Starting early gives your pot the best chance to grow.
3. Open an ISA. It’s a tax-efficient way to build up a lump sum for a future goal, and most allow you to contribute regularly. If you’re aged between 18 and 39 a Lifetime ISA can help you to build up a lump sum for a house deposit or for your retirement – and you’ll get a government bonus on top of your contributions.

 

2.Imagine your future self

Having a firm picture of what you want your life to be like in the future can improve the financial decisions you take both now and later on.

Aegon’s research found that “the more concrete your vision of your future self, the more likely you’re to be a top contributor to a long-term saving vehicle, like a private pension or Stocks and Shares ISA.”

Picture yourself in 5-, 10-, and 15-years’ time. What would you like to achieve? Focusing on these aims means you’re likely to take the steps needed to achieve them.

 

3.Have a plan

A baby girl born today has an almost 20% chance of living to the age of 100. As we live longer, having a long-term plan for how to manage our financial wellbeing becomes even more important.

A good financial plan should have specific goals, and factor in what makes you happy and gives you a sense of purpose. Aegon found that just one in three people have a plan that goes beyond a year.

As we have seen, if you have a firm picture of what you would like your future to look like then you’re more likely to achieve it. Having a financial plan in place to achieve these goals supports this really well.

Write down your plan, and keep it updated as your circumstances change. Working with a financial planner can really help here, as they will review your plan regularly and help you keep on track.

 

4.Have the right protection

Unexpected events can happen at any time. As the last 18 months have shown us, financial insecurity, ill health, or redundancy could be just around the corner. The loss of a loved one can also be devastating.

While protection can’t “fix” these issues, it is designed to give you the peace of mind that you’ll receive financial support.

If you have children, a spouse or partner, a mortgage, or any other debt, putting the right life insurance in place is essential. You can sleep at night knowing that those closest to you will receive a lump sum if you’re no longer around.

Putting health or income protection in place is also good for your financial wellbeing. You benefit from the reassurance that you will receive financial support in the event of disruption such as redundancy, an accident, or if you’re diagnosed with a serious medical condition.

The pandemic has prompted millions of people to consider putting the right protection in place, so now’s the time to ensure you and your loved ones are protected, and boost your wellbeing.

 

5.Keep calm in a crisis

Keeping a cool head in a crisis can be difficult, especially when it comes to your money. Aegon found that 14% of investors sold some of their investments the last time that stock markets fell – even though this can sometimes be the worst course of action.

Selling when markets are falling might seem like a normal emotional response, particularly if you want to avoid further market falls. However, if you’re patient, markets often recover at which time you’ll benefit from all the growth that rising markets will generate.

 

 

This chart shows the performance of various markets between January 2020 and 2021. If you had panicked, and sold your investments as markets fell in March 2020, you’d have lost all the subsequent growth. For example, had you stayed invested in the Dow Jones, your investments would now be worth more than before the pandemic!

Making knee-jerk decisions in uncertain times can derail your financial wellbeing. While you might panic when investments fall in a day, you’ll often forget that you could have 10 years or more for them to recover.

Again, this is where working with a financial planner can help. They will help you to manage your investments closely and provided reassurance when it’s needed. They can also counsel you to avoid making emotional decisions that could negatively affect your long-term financial wellbeing.

Put the right protection in place today

One of the ways that you can improve your financial wellbeing is to make sure you have the right protection in place. This might be:

• Life insurance to make sure your loved ones receive financial support when you’re no longer around. For example, a payout could enable them to pay off your mortgage and remain in the family home.
• Critical Illness cover to ensure you’re not worrying about money when you’re diagnosed with a serious illness. You have the reassurance that there will be a lump sum available if you have to take an extended period off work to focus on your recovery.
• Income protection makes sure that you continue to receive an income if you’re off work through illness or injury. It helps you to pay your bills while you recover.

As independent experts, we can help you to find the right protection at the right price. We work with dozens of the UK’s leading insurers to find the cover you and your family need to enhance your financial wellbeing.

Find out more, or get in touch to speak to one of our experts.