Money affects everything, whether it’s where we live, what we eat, how we dress, and how we spend our free time. Essentially, it affects our quality of life and can have a significant impact on our mental health. Here’s how achieving financial wellness could help improve your mental wellbeing.
How money affects your mental health?
Worrying about money can have serious consequences on your mental health. In fact, money is the main cause of stress in Britain before work and health concerns1. And financial stress doesn’t discriminate, it can affect everybody. Whilst young Brits worry about paying off their student debt, people aged between 45 and 56 are particularly concerned about saving for their retirement2.
It’s not a small number of people who will experience mental health issues because of financial stress either – a recent study revealed that about 9.5 million Brits have dealt with mental health problems due to money concerns2. Another survey found that people with financial worries are more likely to have anxiety, panic attacks, and depression3. And these mental health struggles can have repercussions on the quality of your life. According to the same survey, people who are stressed about money are more likely to have sleepless nights and struggle at work3.
Needless to say, there’s a very clear link between money and mental health. So, if you want to preserve and improve your mental health, it’s important to take control of your finances and chase financial wellness.
What is financial wellness?
Financial wellness is synonymous with financial security. In other words, it’s the ability to live your life without worrying about money. And it’s not necessarily linked to how much you earn, in fact, it has more to do with your relationship with money. In practice, achieving financial wellness means paying off your debts, keeping your spending under control, being financially prepared for emergencies, and planning for the future. In short, it’s about being in control of your finances, now and in the future. But how do you achieve financial wellness? What do you need to do to feel good about your financial life?
What can you do to achieve financial wellness?
Like a fitness plan that requires healthy habits, financial wellness is about changing your routines and behaviours in order to improve your relationship with money and get your finances in shape. Here are some things that could help you achieve financial wellness.
Create a budget
The first thing you could do to take control of your finances is make a list of all your monthly outgoings, including, debt repayments, mortgage/rent, bills, and other types of expenses. Once you know how much is going out of your account and how much is staying, you can start drawing up a budget. There’s no specific rule when it comes to creating a spending plan, but a well-planned budget should keep track of all your savings and expenses, and give you an allowance for things you enjoy such as going to the cinema or eating out with the family.
Change your spending habits
If you want to achieve financial wellness, it’s important to keep your spending under control. Put simply, spending more than you earn is generally not good practice, as you could be accumulating debts and money worries. But more generally, regardless of your financial situation, it could be worth reviewing your spending habits anyway.
As human beings, we’re all a bit emotional and prone to act on impulse. Think about it, how often do you buy things you don’t actually need? Don’t feel ashamed, we all do it! But when it comes to getting your finances in shape, it’s wise to leave your emotions at the door and only act based on your needs. So, how do you do this? Well, this the hard part. You need to find ways to resist temptation and limit your consumerism. You could, for instance, make a list every time you go grocery shopping – but remember, this only works if you stick to the list. Also, if you see a pair of shoes you like, wait at least a week before you buy them. Chances are you won’t even think about this pair of shoes by then – but if you can’t get them out of your mind, and you can afford them, then go for it!
Changing your spending habits is no easy task. It’s something that requires effort and resilience, but if you commit to it, and make small changes whenever you can, then over the long-term, you could see tremendous results in your financial wellbeing.
Turn saving into a habit
Another way to take control of your finances is to try and consider building up your savings. The good thing about putting money aside is that it allows you to be prepared in case of emergencies. Say, your washing machine breaks, and you need to fix it, how would you afford it? If you have an emergency fund, the answer is clear. If you don’t have anything saved, then getting your washing machine fixed may be a bit difficult.
Now, saving money is easier said than done, especially if you’re on a low income. But it’s not mission impossible. In fact, it’s possible to build a decent emergency fund by saving little and often. Over time, it all adds up! For example, by saving £50 a month, you’ll have £600 in your account after just one year. And if you’re serious about building an emergency fund, then try to treat savings like any other monthly bills, and consider setting up a Direct Debit or a standing order so your money leaves your account just after payday and you’re not tempted to splash the cash.
Think about the long-term
When you’re in a good position financially, it could be a good idea to start planning for the long-term. Start by listing your goals. Where do you see yourself in 10 or 20 years? And how will you achieve these goals?
One way to bring your long-term goals to life would be to invest. Saving could also be an option, but with interest rates falling below the inflation rate, your money may not grow as much as it could, and it may even lose purchasing power over time. That means your savings may not be worth as much as they used to. So, if you’re looking for potentially inflation-beating returns, investing could be worth a look.
With investing, there’s some risk involved as you could end up with less than you initially put in. But since your returns aren’t tied to any fixed interest rate, there’s also a chance you could end up with higher returns over the long-term. And with robo investing platforms, like Wealthify, investing has never been easier. You decide how much you want to invest and how long for. You also get to choose the risk level you’re most comfortable with – you can be Cautious, Adventurous, or somewhere in between. Even better, you don’t need any financial knowledge or experience to start your investment journey. Our team of experts will pick your investments and manage your Plan on a regular basis to keep it on track with your investment style.
Also, if you’re ready to plan for your retirement, why not look into personal pensions where you can make your own contributions? The good thing about personal pensions is that you’ll receive a 25% top-up every time you add money to your pot – so if you invest £80, you’ll get an extra £20, bringing your pension contribution up to £100. If you’re saving towards your later life and want to know more about personal pensions, also known as SIPPs (Self-Invested Personal Pensions), here’s a short guide that explains it all for you: https://www.wealthify.com/blog/how-do-sipps-self-invested-personal-pension-work-and-are-they-right-for-me.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.