Introduction to financial wellness

What is financial wellness?

Also known as financial wellbeing, financial wellness is about developing and maintaining good habits in every area of your finances. It covers everything from “How do I pay my bills this month?” to “What will my income be in retirement?”

It’s not necessarily about how much you earn. It’s about managing your money more effectively, so you make the most of your earnings and money is no longer a source of stress.

To get an idea of your current financial health, take a look at the questions below:

• Do I keep my spending within my means?
• Am I financially prepared for emergencies?
• Do I have access to the information and tools I need to make good financial decisions?
• Do I have financial goals and a plan to achieve them?

If you can answer yes to all of these, then congratulations! You’re well on your way to financial nirvana. If not, then read on for tips on how to improve your financial wellbeing.  

1. Do I keep my spending within my means?

According to the Citizens Advice Bureau, 2.9 million households are struggling with problem debt in the UK.[1]

Struggling with debt can have a knock-on effect - the links between debt and poor mental and physical health, for example, are well established. If you’re trying to recover from debt, you may find helpful our articles on ‘Facing up to financial fears’ and ‘Budgeting for beginners.’ It’s important to know that there is always help available, no matter what your situation is.

2. Am I financially prepared for emergencies?

Due to the COVID-19 crisis, millions of people have seen their income reduce unexpectedly. But global pandemics aside, everyday life events can leave people unable to meet their bills – things like a separation, losing their job, illness or even a new baby.

Being able to absorb financial shocks is a key indicator of financial wellbeing. Consider building up an emergency fund of instant access savings – enough to meet your expenses for three to six months. If something happened to your income, this would keep the wolf from the door and give you time to plan your next move.

Many people also take out insurance to cover them should ill-health leave them unable to work. This can help give you peace of mind, especially if you have family members who also rely on your earnings. 

3. Do I have access to the information and tools I need to make good financial decisions?

Many of us received little or no education in financial matters at school. As a result, many people struggle with how to manage money – but may be unwilling to admit gaps in their knowledge for fear of looking silly. The good news is that it’s never too late to learn the concepts of good financial health and access the right tools to act on that knowledge.

For some people, this is as simple as taking advantage of technology. Apps from digital banks like Monzo or Starling Bank make it easy to manage your money with features like budgeting tools, auto-saving, and over-spend alerts.

Others may need more education around what products are on the market and what the best option is for them. Having a financial coach or adviser to review their finances and offer suggestions does more to keep them accountable and engaged with their goals.

Your employer might be a good place to start; see if they offer a financial wellbeing programme where you can access financial advice and education.

4. Do I have financial goals and a plan to achieve them?

Working on your financial wellbeing means you can look beyond day-to-day expenses and start to think about the future. Common goals include paying off debt, owning your own home, helping family members, and saving for retirement.

Everyone’s situation is different, so seek advice from an expert on the best way to reach your goals. Again, try your employer as a first port of call – they may be able to offer you everything from mortgage advice to pension planning.