5 Ways to Improve Your Financial Well-being
Simon Gladding DipPFS
Helping women make the most of their financial resources | Money Mentor @ Women's Wealth
Here are some simple yet effective ideas for improving your financial well-being.
Tip 1: Understand your current situation
This might sound obvious, but it isn’t obvious to everyone. Some people love maintaining a spreadsheet of their expenses, others are horrified at the idea.
Here’s what you need to know to understand your current financial situation:
Understanding where you are today means you can measure your progress. You can also take stock of your current situation. Knowing this means you can start to take action to improve your finances.
In case you still aren’t excited by this idea – here’s a way of looking at the expenses tracking task that might get you interested.
The last time I did this for my family, I noticed something:
There were some expenses where I thought “that was fun, we should do more of that”.
These weren’t lavish expenses, more like small, fun things we did as a family. The process of looking at my expenses made me more aware of the things we had done and how enjoyable they were. By becoming more aware of this, I was then able to plan to do more of those kinds of things.
Which felt like a well-being win to me.
Tip 2: Be prepared for the unexpected
Financial security provides the basis for financial wellbeing. If you know you are financially secure, then this gives you the foundation for so many things. If an unexpected or unfortunate event can knock you off course, then you don’t really have the level of security that you need.
Only 8% of people in the UK have insurance to protect their income. This type of insurance pays out if you are unable to work due to sickness or disability. Your ability to work is likely your most significant asset, so insuring it can bring peace of mind and help you to maintain what you have if something unexpected happens.
Other areas where you can prepare for the unexpected:
Knowing you’ve taken steps to protect yourself brings peace of mind that you are likely to be financially secure if any of these unexpected events were to happen to you.
Tip 3: Make positive behaviours automatic
This is a simple, but effective step you can take to boost your financial well-being : take steps to make sure that good financial behaviours happen automatically. You can also make bad financial habits more difficult.
If you are working towards building an emergency fund – a direct debit that automatically moves money into a designated emergency fund each month will help you achieve this goal.
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If you are working on building investments: a direct debit that automatically funds your investments each month helps you work towards your goal without you having to do anything.
To make negative behaviours more difficult you have to be a bit more creative. But, it’s surprising how effective making a behaviour just that little bit more difficult can be.
If you wanted to reduce your spending you could:
If you would like to place that extra barrier between yourself and a credit card you could freeze your card in ice. It is available if you need it, but not available immediately, placing some all important friction between you and a purchase.
Tip 4: Make a plan for worst case scenarios
A post about well-being might not seem the right place to talk about writing a will. But here are some of the problems it can cause if you don’t have one in place:
Nobody wants to deal with these kinds of problems at the best of times, but having to deal with them when you have lost someone you care about is going to be even worse.
Knowing that you have made a plan and shared it with the people you care about is a sensible thing to do, it will also bring well-being benefits. Having a will and Lasting Power of Attorneys in place will bring peace of mind for you and clarity for those you care about.
Tip 5: Spend on experiences, not things
How do you get the biggest benefit for every pound that you spend? Do you get more of a benefit from buying things or buying experiences?
Research shows that you are likely to get a bigger well-being boost when you spend your money on experiences rather than when you spend it on things. Experiences also have the advantage that they leave you with memories. These memories are something you can look back on with enjoyment.
This is why our phones show us last year’s holiday photos – we enjoy remembering the experience.
It’s also interesting that we regret spending money on experiences less often than we regret spending money on things. When experiences are not as good as we might have hoped it turns out that we find those experiences memorable (and enjoyable) too.
By spending on experiences rather than stuff you get more benefit for your spending and create more memories. It pays to plan to spend money on experiences. As does saving up for big holidays or experiences. Don’t be afraid to spend your money once you’ve saved it – spending it on valuable experiences can give you a huge well-being boost.
Thanks for reading - I'm Simon, I work at Women's Wealth where we are independent financial planners & advisers focused on helping women to make the most of their financial resources.
If you have any questions you would like help with, please feel free to send me a message on linkedin.
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