7 tips for financial wellness
Updated: Feb 11
Financial well-being is all about decluttering and simplifying your finances to reduce stress. Money is the number one stress factor, however, we can reduce this stress and create ease by focusing on financial wellness. Here are seven tips to get there.
Financial wellness isn't about restricting yourself by a tight budget, but about spending on what really gives you something. Are friends and health your top values? Spend on socialising and a gym membership instead of an expensive watch! Is cooking your big passion in life? Spend on good ingredients and kitchen equipment rather than designer shoes. Buy less and appreciate what you have.
Saving for a pension should be a priority regardless of your age. If your employer matches your pension contribution, make sure you take the full advantage - this is free money! Besides a pension, having money put aside is key for financial well-being. Savings provide freedom and reduce stress.
LIVE BELOW YOUR MEANS
Building wealth is not about how much you make, but how much you spend. You can make £15,000 a month and still be broke. You can make £3,000 a month and have very decent savings. According to a 2019 survey, we overspend by £6,000 per year! Reduce your spending and set aside money every month.
BUILD AN EMERGENCY FUND
An emergency fund might be boring to build, but it truly is a cornerstone of financial wellbeing. Some say you should have 3-6 months salaries in your emergency fund, however, I'd recommend starting with £1,500, and then focus on debt and/or investing, slowly building your emergency fund by adding a small amount a month, i.e. £15.
SET UP SINKING FUNDS
I don't know why so few people are talking about sinking funds! The idea is simple - rather than saving frenetically for Christmas in November, put away £15-£20 a month in a Christmas sinking fund, and by Christmas, you'll have £200 without disturbing your budget! Sinking funds can be intended for larger expenses you know are coming, such as a holiday; or expenses that are likely to come, but hard to predict, such as veterinary expenses or a house related repair expense. I set up pots in my Monzo account, clearly labelled, often also with a photo to illustrate the purpose! Holidays, weddings, Christmas and shoes all have their own little pot that I add to monthly, giving peace of mind and 10/10 for being organised!
MAKE A DEBT PLAN
List all your debt in four columns: who you owe, how much you owe, monthly min payment, and interest rate. Add up the total min payment of all your debts to know how much you need to spend a month. Decide if you want to do the debt snowball (starting to pay off the smallest loan, then the second smallest and so on), or debt avalanche (prioritising loan based on the highest interest rate). How much can you afford to put towards your loans? Make a plan, check when you can be debt-free, and use a debt calculator to see how much you'll save on interest with your new plan. It's very motivating!
CONSOLIDATE & SIMPLIFY
Do you have different credit cards for different benefits, lots of small loans, your savings in one bank, your income in another, and a third one for spending? You might benefit from a financial spring clean! Can you consolidate any loans? Can you negotiate a better savings rate with your main bank so you can move your savings there? Can you cancel your credit cards, or identify the one with the best benefit and stick to that one? Fewer banks/creditors mean fewer logins, fewer systems, fewer letters and less virtual clutter.