Updated: 24/02/2024
It’s important for us to pause and consider our financial health. This may include having financial goals, budgeting and saving to avoid a crisis.
What is financial wellness?
Financial wellness is about the peace of mind that comes from being financially secure, stable, and independent. It is the ability to meet existing and future financial obligations, while also enabling you to enjoy life.
Finances are a foundational part of our daily lives. We are constantly faced with decisions on how to spend our money, where to save, where to invest and why we should at all. These decisions can influence stress levels, the choices we have available and our overall happiness.
Some examples which highlight the importance of financial wellness and resilience include the death of a loved one, a sudden health crisis and unemployment. In supporting both mental and physical health, it is prudent to create a buffer against the unpredictabilities of life to help build security and stability.
How is your Financial Health?
We understand that discussing finances can be sensitive. It's important to recognise that everyone's financial journey is unique, with its own set of challenges and triumphs. If you're experiencing financial stress, you're not alone, and it's okay to seek support. Financial stress can affect sleep, mood, anxiety, relationships, appetite and nutrition. However small steps in managing your money can help you have greater control, reduce anxiety and build up your resilience.
How can we improve our financial wellness?
Financial wellness is about preparing for potential setbacks and creating opportunities to realise your dreams and goals. Here are some steps to consider.
1. Budgeting and understanding your finances
• Create a budget to understand how you’re spending: what are your fixed and essential expenses (e.g. rent and bills)? How much are you able to save? Make a note of this and update it regularly.
• You may wish to use AKEPB’s free budgeting template to help you get started. Click here to access it and make a copy.
• Understanding your expenditure and outgoings will help you plan and give you a sense of control over the future.
• Distinguish between 'needs' and 'wants.'
• Mindful spending: build habits and systems, and identify unhealthy spending habits. Also remember to look after yourself and put something aside for leisure.
• Ultimately having a budget can help you approach your finances with a calm mind, and reduce anxiety.
• Follow AKEPB’s new Everyday Finance Column for further tips.
Important: Be open to seeking professional guidance when needed.
2. Debt management
• Be mindful of different types of debt such as credit cards, overdrafts, loans and mortgages: what do you need them for? Do you understand how the interest rate works? Do you know how you are going to repay the debt?
• Part of financial wellness is having control over your debt, and creating (and following) a plan of repayment. This includes listing all outstanding debt, underlying interest rates, arranged durations and monthly repayments. If you're struggling, don't hesitate to seek advice. There are government agencies and charities that can help. Click here for the Government’s Debt Advice page.
• If you find that you cannot meet your monthly repayments and your debt situation is getting worse, you must ask for help. Here are some tips on what you can do.
Important: Be sure to stay away from expensive schemes and financial products like payday loans. They offer easy loans, but charge an extremely high rate of interest. Question everything, some things can be too good to be true. If you are unsure, ask for help before you sign up.
3. Savings, investment and goal setting
• After debt repayment, treat savings as a mandatory expense. Set a goal for creating an “Emergency Fund” with a suggested 3-6 months' worth of your expenses to cover essential needs, and protect against unforeseen circumstances.
• When investing, consider your future goals: what are your plans for retirement? Do you wish to start a family? What about education for yourself or your family? Is there a particular holiday you’d like to have?
• Savings and investment can help you achieve your personal and financial goals. Consistency and discipline are key. Even small amounts can get you started on your journey.
• Remember, when investing, research thoroughly and understand the risks. Investment products which offer unrealistic returns should be avoided. Here is an introductory guide on investing by the UK Government.
Important: Build up your credit score, this can provide improved options. Being able to access funds when you’re in a tight situation will offer relief. For more information here is the Money Saving Expert’s guide to check your report for free.
Financial Wellness is a central pillar in all our lives and can have a large impact on our mental and physical health, explains the Financial Literacy team at Aga Khan Economic Planning Board (AKEPB), Taking the time to budget and understand your finances will help you approach the future with confidence. Debt management is a key part of this process. Once you have control over your day-to-day expenditure, set yourself clear financial goals for the future. If you need support, make sure you ask for help!
Contact AKEPB at [email protected].
