Your money and your wellbeing are closely linked. Research has consistently found that people with financial troubles often experience mental health issues, while people struggling with their emotional wellbeing often make financial mistakes.
A major new study from insurer Aegon has found that there are two factors which, when combined, lead to financial security. These are:
- Healthy finances
- A positive “money mindset”.
The study found that just one in six people – around 16% of Brits – are lucky enough to combine healthy finances with a positive mindset. Meanwhile, 45 million people could be taking steps to improve their financial wellbeing.
Better emotional wellbeing comes from a combination of steps to increase your money and your mindset. Let’s start with improving your “money”.
3 tips to improve your finances
Create an emergency fund
Setting up an emergency or rainy-day fund is good for your financial wellbeing. This is a pot of money that you can use to cover unexpected costs such as a new boiler, repairs to your roof, or even an unexpected period of unemployment.
In addition, this fund could be used as a “freedom fund” which could enable you to learn new skills or even change your career.
Experts typically recommend having three to six months of household expenses in an easy-access savings account – perhaps a Cash ISA or similar.
The Aegon research found that a third of people in the UK have no emergency savings and that most people could only survive for around three months if they lost their income.
Put the right protection in place
What would you do if you had an accident, and you were off work for a few months? Could you afford to keep paying your mortgage and bills if you were diagnosed with a serious illness and had to take an extended period away from work? And would your family be able to remain in your home if you were to pass away?
Protecting your family, your health, and your income can improve your emotional wellbeing. Knowing that financial support will be available if the worst was to happen provides the peace of mind and reassurance that you and your loved ones won’t struggle financially.
We can help you find cheap life insurance and boost your security and wellbeing.
The Aegon study revealed that four in ten people have less than £100 to spend at the end of the month. That can make money a worry.
Interestingly, money worries don’t disappear if you’re more well off. Roughly the same number of people on middle and higher incomes worry about money. This highlights that a bigger mortgage to pay and higher lifestyle expenses can put you under pressure.
Learning to budget carefully, so you know exactly how much cash you have available, can help you to keep your finances under control and support your financial wellbeing.
3 top tips to adjust your mindset and improve your financial wellbeing
It’s not just practical financial steps you can take to boost your wellbeing. There are also ways you can adopt a more positive mindset, and this will also help support your mental health.
Think long term
Thinking about the future is a big part of achieving financial wellbeing.
Imagine giving your child a sweet and telling them: “If you wait 20 minutes without eating the sweets, I’ll give you another”.
Most children won’t wait and will eat what’s in front of them now rather than wait for double the sweets later.
Many adults will also do the same. You’re probably often tempted to spend extra cash on things like nice holidays rather than invest or save it.
However, you’ll support your financial wellbeing by thinking long term. Consider your future goals and what you want your future to look like. Picture the type of house you want, the activities you want to be doing, and your social life.
When you do this, you’ll remain focused on these outcomes and save towards them.
Make a plan
People who write out a financial plan save more regularly and do better financially. So, make a long-term plan and write it down.
A good financial plan contains the goals you want to achieve, and factors in what makes you happy and gives you a sense of purpose. It isn’t just numbers and a list of investment products and returns.
Unless you focus on what you want to achieve in life, your financial plan can easily seem like a numbers game. As we mentioned above, focusing on your long-term goals and sticking to a plan can help you achieve your ambitions, boosting your financial wellbeing.
Remember also that a good plan is flexible and adaptable. Your plans will probably change but that’s perfectly fine.
Hold your nerve in a crisis
The last year has shown us that unexpected events can happen at any time. Nobody would have predicted millions of workers would be furloughed, the economy would plunge into the biggest recession in 300 years, or that global stock markets would fall sharply.
When these things happen it’s easy for your emotions to take over. However, if you’re tempted to sell your investments after a fall or cancel your protection contracts if your income has fallen, these could seriously damage your security and wellbeing.
Remember why you started saving, and why you put your protection in place before you panic and do something you might regret. Using statements like “next time markets drop in value, I will remain calm and think of my long-term goals” can prepare you for a financial crisis.
Helping you boost your peace of mind and security
By the end of 2020, life insurers had paid out claims of more than £200 million as a result of Covid-19. There has been no better evidence recently of just how important it is to have the right protection in place.
Thousands of families have been impacted by the virus. Many thousands of “long Covid” sufferers have been forced to take an extended period off work. Many people have spent weeks or months in hospital battling the effects of Covid-19. And, tragically, more than 127,000 people in the UK have passed away.
Making sure you have the right life insurance, Critical Illness cover, and income protection gives you the peace of mind that you’ll be financially supported if the worst happens:
- Life insurance ensures your loved ones receive a lump sum when you’re no longer around. They can use the payout to repay your mortgage, replace your income, or to pay bills.
- Critical Illness cover pays you a tax-free lump sum if you have a serious heart attack or stroke, or you’re diagnosed with certain types of cancer. This money provides vital financial support at an emotional time, meaning you have one less thing to worry about as you focus on your recovery.
- Income protection provides a regular sum if you have to take an extended period off work due to illness or injury. It can help you to pay your essential bills until you return to work.
The security provided by the right protection can really boost your wellbeing. Get in touch with us to find out how we can help you, or compare life insurance quotes online and let us scour the market to find the most cost-effective cover for you.
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