Ten Steps to Financial Wellbeing
Financial wellbeing is all about feeling in control of your money. If you can meet your day-to-day needs and prepare for the future, you’ll have a lot more headspace to enjoy life.
Here are 10 steps to improve your financial wellbeing. They appear in order of difficulty, so take it slowly!
1. Reduce unnecessary spending
Take a good look at your credit card statements, even if you have to peep through your fingers. Are there any outgoings that are absolutely unnecessary? Old subscriptions to services you no longer use? Extended warranties on appliances that no longer work? Insurance policies for people you no longer like? These expenses are easy to ditch, so do it now!
2. Check you’re getting the best deal on your bills
Admittedly, getting insurance quotes and changing gas suppliers isn’t much fun. However, an hour’s rummaging on the internet might save you hundreds (even thousands) of pounds over the year. As we’ll see later, that money could be working for you, rather than a large corporation.
3. Create a spending plan
The word budget isn’t very inspiring (see also diet), so replace it with spending plan. Look at what you’ve got coming into your account each month, then make sure every pound has a job. If you’ve followed steps 1 and 2, you’ve hopefully got some spare cash. Where can that money support you? You can just use a simple spreadsheet or an app like You Need a Budget.
4. Eliminate debt
Maybe you’ve discovered that a big chunk of your income is immediately pinging to credit card companies. Some of that spare cash from earlier steps can help you pay off those debts much faster. Even a small increase on top of your minimum monthly payment makes a big difference. This applies to mortgages, too. Although loans on property are often described as ‘good debt’, you’re still paying interest to ‘rent’ that money.
5. Get ahead of yourself
Once you commit to paying off debt, it’s crucial that you don’t accumulate any more. If possible, try not to buy anything on credit – only spend what you have in your account. Typically, we spend on our cards all month, then frantically hope there’ll be enough to cover the bill on payday. By getting ahead of ourselves, we remain in control. You Need a Budget, the app mentioned in step 3, shows the age of your money. Aim for at least 30 days.
6. Automate your finances
There’s always a good reason why we can’t pay more off our credit card this month. Next month will be easier, of course. Except it isn’t. If we allow ourselves to rationalise, we’ll invariably come up with a story that keeps us exactly where we are. By automating payments, we remove the decision-making process – the one that gets us in a pickle. So, rather than just promising yourself that you’ll bung an extra £50 towards that credit card bill, set up a direct debit now.
7. Build an Emergency Fund
One of the most common reasons for getting into debt is unexpected expenses. The boiler explodes, the big-end goes on the car, or the cat falls out of a tree and ends up in a fiendishly expensive plastercast. We don’t have £1,000 knocking around, so we put it on a credit card. Once you’ve imposed order on your finances, start putting some money aside for emergencies. How much you need depends on your financial responsibilities, but even a modest sum of a few hundred pounds could get you out of a hole.
8. Increase your income
The trouble with the steps we’ve covered so far is that often there’s just not much money left over at the end of the month, even if we’ve been organised. It’s time to consider whether there’s anything you can do to increase your income. A pay rise might be out of the question, but could you sell some stuff, let a room for a few weekends a year, or share your car with people in your area? Turn some of those liabilities into assets that make money for you.
9. Consider your life goals
Most of us don’t really know what we’ll want in 10, 20, or 30 years’ time. Heck, it’s difficult deciding what to have for dinner. However, it’s almost certain that your future plans will require a pot of money. Maybe you want to travel, retrain for a different career, or reduce your hours at work. Stashing money in an ISA can help you realise those dreams. ISAs allow you to invest and save money tax free and with most accounts you can access your funds at any time (although Future You will be annoyed if you spend it all on cake).
10. Invest in a pension
If there’s one word that’s less appealing than budget, it’s pension. Yet we all need to think about building one, unless you’re happy (and fit enough) to work till you’re 97. Perhaps you already have a workplace pension to which your employer contributes, but you still need to check it’s growing enough to cover your outgoings in retirement. If you’re self-employed, investing in a pension is completely your responsibility.
Remember, take it one step at a time. And make sure you control money, rather than money controlling you. That’s the path to financial wellbeing.
This article was written by Yurt Keeper Catherine Pope
Catherine will be running her masterclass in London in January and Brighton in February. Follow the links below to read more and to book your place.