Everybody dreams about financial wellbeing, but few actually have it, according to MaPS’ new Financial Wellbeing Survey.
Are you feeling stressed about money? Anxious about not being able to pay your bills? Or maybe you’re worried about an unexpected expense that will cause a strain on your budget and your daily routine? If you answered “Yes” to all these questions, it’s very likely that you don’t have financial wellbeing. And, a new survey found that you’re not alone.
Money and Pension Service, an organisation that aims to develop and coordinate a national strategy to improve people’s financial capabilities, asked over 10,000 people across the UK about their financial wellbeing. The results revealed some interesting insights about people’s views and relationships with their money. More precisely, the survey found that nearly 31% of people report having low financial wellbeing. Plus, 36% of the respondents also claimed that they are feeling worried when thinking about money. Yet, the same survey found that financial wellbeing may not always come down to how much you earn.
Financial wellbeing explained
First things first, let’s make sure we’re on the same page with what financial wellbeing really is.
In a nutshell, financial wellbeing means not having worries about money. More precisely, it is a state of being where you can afford to meet your current and ongoing financial obligations, which makes you feel secure about your financial future. But that’s not all! Financial wellness also means that you can afford to make choices that allow you to live your life to the fullest.
However, there is no such thing as a specific amount you need to have in your bank account to be considered financially healthy. Instead, financial wellbeing is closely linked to simply not feeling financial stress but feeling financial confidence instead. Simply put, financial wellbeing occurs when you feel calm and secure when thinking about money matters.
It’s the relationship with money that matters
Now you know that financial wellbeing doesn’t necessarily equal having more money. So, one can only wonder, “what does matter then?”. The answer is straightforward: the relationship you have with money. And MaPS’ survey confirms this.
The survey found that those people who gave “high financial wellbeing,” which means precisely what we’ve previously discussed, are amongst the most content individuals. In fact, the survey discovered that those satisfied with life from a financial perspective are even more content than households with an income of over £50,000 per year. In other words, those who report having financial wellbeing are more likely to be more satisfied with their lives than people who earn top salaries. This is significant proof that money alone doesn’t necessarily mean happiness.
Essentially, money is neither bad nor good. They can either fuel your wellness or act as a destructive force in your life, and it all comes down to your relationship with money, how you feel about it, and how you spend them.
Building a healthy relationship with money
So far, so good. But, how do you build a healthy relationship with money? This section explores different strategies to build a healthy relationship with your finances and gain more confidence from a financial perspective.
Pay off debt
Debt is a huge burden on your budget that can prevent you from building a stable and good relationship with money. Essentially, debt can easily cause more debt as you may be tempted to borrow more money when times get challenging. Debt is also what usually takes a great portion of your monthly income, leaving you with significantly less money to invest or save. So, one essential step to building a healthy relationship with money is to pay off debt and minimize your financial obligations.
Learn to differentiate wants from needs
You know what they say, “It’s not your salary that makes you rich, it’s your spending habits.”
Not differentiating wants from needs is a common financial mistake that many people make. Simply put, you need to be aware of the things you need and those that are not truly necessary. Once you learn how to do that, it will be a lot easier to not spend money on stuff you don’t really need, whether that’s a new pair of shoes, the latest gadgets, you name it.
Pay bills on time
Another smart strategy is to get really serious about your financial obligations and pay them on time. Paying bills on time helps you avoid extra costs that can lead to unbalance in your budget. A 2019 study found that 36% of the UK workers feel they would struggle to pay a £100 bill. What’s more, 56% of them said they would struggle to pay a £500 bill. So, now imagine how much you’d struggle to also pay some extra money for late fees. To avoid that, make sure to pay your bills on time.
Invest to increase your earnings
More money doesn’t necessarily mean higher financial wellbeing, but investing to increase your earnings can really teach you a thing or two about financial literacy. Investing can teach you to be organized and disciplined when it comes to money. This is a know-how that will help you on a daily basis.
Luckily, although investing sounds intimidating and complex, these days, there are a number of investment opportunities that don’t even require deep financial knowledge, at least in the beginning. You can use high leverage brokers and trade Forex. Or, you can invest in cryptocurrency or NFTs. If you’re a more traditional investor, you can look for real estate investment opportunities.
Surround yourself with the right people
Another way to build a healthy relationship with money is to find the right people to learn from. Staying close to those who share the same financial goals and values you have can be beneficial for your financial wellness. Those people who have a healthy relationship with their finances can also motivate you to build a good relationship too. In contrast, those who lack financial literacy may also influence you into making poor spending decisions.
Save for the unexpected
Last but not least, an essential factor that contributes to financial wellbeing is knowing that you have a financial safety net to “catch” you if anything goes wrong. Whether it’s a medical emergency, a car issue, a burst pipe, or a salary cut, the unexpected can cause a pretty significant unbalance in your finances. But, having an emergency savings account can help you maintain your financial wellness even during more difficult times.