Financial wellbeing is a term that describes your ability to confidently manage your money and plan for the future, regardless of how much money you may have.
Your Financial wellbeing can be improved and enhanced, this is why Bank of Ireland UK has developed a detailed financial wellbeing programme designed to help you to manage your money better and understand how money works.
What can you do to improve your financial wellbeing?
Knowledge is key to developing financial resilience and your financial wellbeing. For example, a first step towards managing your money better is to make your spending visible. By doing this, you are in a better place to take control of your spending. So, while we can all overspend from time to time, when it becomes a habit, it can be hard to break. Happily, there are some simple steps you can take to get on top of your spending.
Understand if you have spending triggers.
We all have different financial personalities. Some people spend to feel good. Some spend when they see a ‘SALE’ sign and believe they can save money. Understanding what those triggers are is really important. Start avoiding situations that lead you to overspend – such as going online to retail sites or dropping in to a store when you don’t really need anything.
Track your spending.
Take some time to review your bank account and credit card statements to work out exactly where your money is going. What you’ll find can often be really surprising.
Make money visible again.
Get receipts for everything you buy, even if it’s only a cup of coffee or a newspaper. At the end of the month, simply add up where you are spending your money. This is known as making your money visible, letting you see where your hard-earned cash is going. It might surprise you to see that ‘just a cup of coffee on my way to work’ might be costing you £50 or more each month. Or, it might be a small gambling habit on lottery tickets or via an online gambling account, it’s amazing how little wagers can quickly add up!
Choose your money goals.
If you want to build up a deposit for a home, buy a car or pay for a wedding, you might need to cut back now to save for those future goals. Having a firm goal is a great way of focusing your efforts, and can often make it easier to make those little sacrifices that you’ll need along the way.
Set a budget.
Work out the cost of your essentials such as mortgage or rent, bills, food etc. Then set yourself a budget for each week or month, depending on how you get paid.
Learn how to budget your money better.
Not having a personal budget or a money plan is a key reason why many people struggle to stop spending money. A budget is made up of two parts – your income on one side of the page, and the amount of money you spend on a weekly, monthly or yearly basis on the other.
So review your payslips, your current account statements, your credit card statements and receipts to understand exactly where your money goes. We recommend that you track your money for three months to get a very accurate snapshot of your spending habits.
Manage your borrowing better
If you have outstanding loans or credit card balances, you may want to make it a priority to pay them off. But if you have more than one debt, which one should you repay first?
The most financially savvy way of doing this is to put your debts in order – from the highest interest rate to the lowest interest rate. Once you’ve done that, use any extra cash you have available to pay off more of your debt with the highest interest rate. Continue until all the debts are paid off, continuously moving to the debt with the highest interest rate as your debts are cleared.
Why a ‘rainy day’ fund is so important.
Things often happen when you least expect them – the car breaks down, the boiler fails, you spend longer than you expected to find a job. All of this can seriously affect your finances, so you need a rainy day fund to help cover these financial shocks.
As to how much you need to put away, the experts recommend that you build up a sufficient fund to cover three to six months’ essential expenses. By ‘essential’, we are referring to mortgage or rent, food, utility bills, transport, medical bills etc.
Check back on your budget planner from time to time and see how much you spend on essentials each month. If all your bills add up to £2,000 a month, then ideally you’ll need a rainy day fund of £6,000 to £12,000.
That might seem like a lot if you have no savings, but the key is to start saving what you can now – and build it up gradually. And make saving automatic by setting up a direct debit or standing order to transfer money to a separate account as soon as you get paid.
Why you should be saving for your retirement now
It’s important to plan for your long-term life goals while still managing your short-term, everyday expenses. Top of the list when it comes to long-term saving is your retirement needs.
The good news is that people are living longer. However, this means that because they are retired for longer, they need more money to enjoy their retirement.
A private pension can be very important if you want a similar lifestyle to the one you have during your working life. Putting the right private pension in place depends on a number of factors including:
- Your age.
- Your expected retirement date.
- The lifestyle you want when you retire.
- What you can realistically afford to save.
Always be prepared for the worst
Nobody likes to think that the worst could happen to us, but unfortunately it can. Have you thought about how you or your family would pay the household bills each month if you got seriously ill or died prematurely?
Fortunately, you can take out protection insurance which can help you and your family survive the financial shock of events like this.
As long as certain criteria are met, income protection insurance pays you a monthly income to replace some of your income if you fall sick for a set period of time, or until you return to work.
With a family protection plan, you can:
- Clear any loans or debts at the time of death.
- Pay a monthly income in the event of illness or death.
- Pay a monthly income to your family if a stay-at-home parent dies.
- Pay a lump sum amount if you suffer a serious illness.
- Pay a lump sum amount on death to cover funeral expenses.
Quite simply, protection insurance like this means enjoying the peace of mind of knowing that your loved ones will be protected if the worst happens.