We all know what it’s like to stress about money and how much it impacts our lives. Financial happiness is about taking control of your money, being secure in your situation and feeling empowered to make informed decisions that fit your goals. Loqbox takes the weight off your shoulders with practical tips on how to improve your financial wellbeing.
What is financial wellbeing?
Financial wellbeing, in the UK or anywhere in the world, goes beyond wealth accumulation and focuses on achieving a healthy balance between financial stability and personal satisfaction. In short, it’s about having confidence in, and control over, your finances.
Financial wellbeing has lots of names — financial wellness, financial fitness — but whatever you call it, it’s about having the ability to reach your current and future goals, and not becoming overwhelmed by money because you have strategies, resources, and support in place that protect your mental health. You can read more about financial wellbeing here.
Why is financial wellbeing important?
Your financial wellbeing and mental health go hand in hand, and in fact, they can lead to issues with your physical health too. If you’re wondering how a person’s financial situation affects their wellbeing, think of a time when you felt uncertain about money. Facing financial stress can lead to anxiety, depression, and a meaningful slump in our quality of life.
On the other hand, having a solid financial foundation provides a sense of security, reduces stress, and enhances our ability to focus on other areas of our lives. Taking control of mounting debts, finding strategies to navigate the cost of living crisis, and even building towards savings goals can give us a serious boost to our happiness.
Five steps to financial wellbeing
If you want to find your happily ever after with your money, here are Loqbox’s five steps to financial wellbeing, simple tips that you can use to build a financial wellbeing strategy:
1. Create a budget
Budgets are amazing. OK, that's a hard sell, but when you take the time to see your income, expenses, debts, and savings all in one place, you might be surprised at just how useful it is. When you have too much on your plate, it’s important to write everything down. Confronting what you need to do can make it feel more achievable.
Creating a budget helps you to understand where your money is going and find areas where you can improve your finances. Be realistic and develop a budget that fits your financial goals. Track your income and expenses, prioritise your needs, and allocate funds for savings and future investments. You don’t have to be wealthy to start saving!
There are lots of budgets out there, so you should be able to find a rule that suits your needs. A great option in the 50/20/30 rule, which simply breaks your post-tax income into percentage chunks: 50% for what you need (rent and bills), 20% to pay off your debts or save towards your goals, and 30% for what you want (entertainment and luxury).
If you’ve never made a budget before, don’t panic: Loqbox can help! Use this simple monthly budget planner to organise your money:
2. Pay your debts first
If you have debt, create a repayment plan to gradually get rid of it before you start to save. There’s nothing wrong with being in debt, necessarily - lots of people make large purchases on credit because it makes more sense. But high interest debt becomes worrying when it gets out of control and it can be a major factor that impacts on your mental health when it overwhelms you.
There are two ways of approaching your debts. One is known as the snowball approach, where you start to clear your smaller debts and build up confidence to tackle your larger ones. The second is the avalanche approach, where you hit your largest debt first and then mop up any smaller ones once you have more financial freedom.
Either way, clearing your debts first will help to build your financial security and boost your financial wellbeing. While it can be tempting to start building your savings first, remember that the interest you pay on your debts can far outweigh the interest paid to you on your savings. Clearing your debts gives your saving power a shot in the arm!
3. Build an emergency fund
If you’re not sure where to start with your savings, why not build an emergency fund? This is a pot of money that can cover you if life throws a curveball. We never really know what’s around the corner. You could find yourself temporarily unable to earn money, or you might have a sudden need for a large purchase. An emergency fund could be your lifeline!
Generally, an emergency fund would be equivalent to 3-6 months of your salary. Set this as a goal and automate your savings payments with direct debits paid into a separate account on pay day. Give yourself a savings foundation so that life’s surprises don’t pull the rug from underneath you.
If you find saving money to be a real challenge, consider using a tool like Loqbox Save that can help you do it automatically each month. It also offers credit-building perks too, read more about that here.
4. Invest in your financial literacy
Expand your knowledge of personal finance. Use financial wellbeing resources, finance apps, or consult with a financial advisor/coach to explore investment strategies, retirement planning, and money management. Loqbox Learn is a great place to start building your know-how.
There are lots of financial services and products. Learn how to make them work for you!
This is known as financial literacy. In simple terms it’s about growing your confidence to make the right decisions when it comes to managing your finances. You can read more about financial literacy here.
5. Grow your credit score
You can begin working to protect your financial future today by focusing on building your credit score and tidying up your credit report. If you know there’ll be a time ahead when you will want to take out a mortgage, loan or credit card in the future, having a good credit score could save you thousands in interest rates.
Strong credit scores help you get the best deals, and although there’s some mystique around building credit, it’s not that difficult to do with the right tools.
You could grow your credit score by up to 200 points in 12 months using Loqbox Grow, Loqbox Save and Loqbox Rent together. Start your Loqbox membership for just £2.50 a week to get access to all three!
Improvements to your credit score are not guaranteed.
As with using any financial product, differing factors can impact the credit scoring system — use this simple guide to understand more about what can affect your credit scores and how to improve them.
Financial wellbeing at work
Of course, an important element of your financial wellbeing is receiving a fair income, but you also need to feel motivated, secure and empowered.
This is important for your productivity, engagement and attendance at work so it’s important to your employer as well. You can read more about financial wellbeing at work and workplace support tips here.
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