The 5 key parts to financial wellbeing

The 5 key parts to financial wellbeing

Did you know that philanthropy has been scientifically proven to make people feel good? If you can achieve financial wellbeing, you’ll be in a better position to help your family and friends. Giving back not only helps others, but it also gives you a sense of reward. Let’s look at the five key parts to financial wellbeing and how you can improve these areas of your life.

Firstly, what do we mean when we use the term “wellbeing”? This includes having a sense of purpose, belonging to a community, and having quality social relationships. Your physical health is also an important factor, as this will affect your emotional and mental wellbeing.

Financial wellbeing is having enough money available to enjoy your life. When people lack financial wellbeing, they will usually struggle in all the other areas. The Institute for Financial Wellbeing have identified the following five pillars…

1. Clear path to identifiable objectives

Having a clear understanding of your aims and aspirations is important when you’re trying to improve your financial wellbeing. Reflect on your current lifestyle and discuss your own aspirations with your partner. What does a good life look like for you both? What’s important to you in terms of your values? What do you want to achieve now and in the future?

You might not have all the answers yet but try to list a few ideas to start off. Keep the conversation going. These discussions will prove crucial, when you sit down with your financial planner to shape your financial plan.

2. Control of daily finances

In today’s volatile economic landscape, more people are feeling as if they have lost control of their finances. Due to rising interest rates, an increasing number of middle-earners are having to make difficult decisions. Some are debating whether they can afford their mortgage, car leases, luxury holidays, clothing brands, and other lifestyle choices. When you feel out of control of your finances, this will affect every aspect of your wellbeing.

No matter what you’re earning, everyone can benefit from having a monthly budget. Record all your income and outgoings and log these in a spreadsheet, so you know what you are spending each month. Work out what you can pay off in terms of debts and credit cards, and get rid of any unnecessary costs, such as unused subscriptions. Then, decide on the amount you can afford to spend, so you can take control of your daily, weekly and monthly finances.

3. Ability to cope with financial shocks

Fear of the unknown will affect your mental and emotional wellbeing. Sadly, financial shocks often happen when we least expect it. Ensuring you have the right level of protection in place is essential. Check your insurance policies will provide adequate cover.

Cash-flow planning enables our financial planners to make sensible assumptions about your financial health. Together we will look at “what if” scenarios to ensure you have a financial shock “absorber”, should the worst happen. Being prepared in advance for big life events will enable you to live a more secure lifestyle. If you are worried about any aspect of your financial planning, talk to our financial planners.

4. Having financial options

Your financial options could include how you can spend more wisely, reduce your tax, and make your money work harder. This involves looking at what you have and making better use of your savings, investments and any pensions. But your financial options might also extend to helping family members, such as funding children’s studies or their first home.

For higher earners, you might want to find better ways to protect your assets and reduce your liabilities. If you already have a financial planner, you may already be aware of your options. But if you have been considering using one, think about this as an investment into your financial wellbeing. We can help you to diversify your investment strategy, which could lead to greater returns. Financial planning can provide tax-efficient strategies for your assets.

5. Clarity and security for those we leave behind.

Gaining clarity and security for your children or grandchildren is important, especially from an inheritance tax (IHT) perspective. Effective estate planning will give you peace of mind for your family’s future. But giving to loved ones doesn’t always have to wait until you have passed away.

An increasing number of grandparents are paying off their grandchildren’s student loans to give them a better start in life. Debt can feel like a heavy burden, especially for young people. Helping the younger generation means they will be better placed to save for things like their first house deposit.

Gifting can also offer tax-efficient advantages for you and your beneficiaries (those who will inherit from you). Seeing others benefit from your money at a time when they are in need will give you a sense of reward. And remember, philanthropy has been scientifically proven to provide pleasure!

If you would like to improve your financial wellbeing, this starts with a financial plan. Our qualified and accredited team have the expertise to help you organise your money, so you can gain clarity and a sense of purpose. Together we will help you achieve your goals.

Do you need a financial plan? Get in touch to speak to our financial planning team.