From budgeting and emergency funds, to company benefits and retirement plans, personal finance knowledge can empower us to make life-changing decisions about our future security. But what elements make up a healthy financial picture, and how can you achieve them? Stylist investigates…
When it comes to our wellbeing, most people have a pretty good idea of the things we need to do to keep our mind and body in shape.
Working out three times a week, eating five-a-day, and drinking as much water as we can squeeze in-between tea rounds are part and parcel of everyday life.
But do we pay as much attention to how the ways our decisions around money are affecting our financial wellbeing and in turn our personal wellbeing? Not always.
The reality is, our financial wellbeing needs to be cultivated just as much as any other area of our personal lives.
And whatever you consider your money personality (take our quiz if you don’t know yours) we could all do with tools that can equip us with the knowledge we need to make stronger financial decisions, weather the unexpected, and set us on course for a stable, secure future.
Here are five key areas of financial health to know about.
The first step to financial wellbeing starts with sitting down and assessing your spending habits.
If you’ve got financial goals – be it paying off credit card debt, managing your bills or building your savings – creating a budget to track your spending is essential.
Start by gathering all your bank statements and receipts for six months to a year, and add up your total expenses.
Then, divide by the amount of months to give you your average monthly outgoings. Next, work out your total income, remembering to factor in any other income streams that you receive alongside your monthly salary. Lastly, subtract your monthly expenses from your income. When you have the final figure, you’ll be able to determine how to alter your spending habits, and whether you have more to save or more to cut.
“It’s not about how much you make, it’s about how much you budget with what you make,” says personal finance expert and founder of Redefined Currency, Bola Sol.
You’ll always have to allow for a small margin of discrepancy – such is the nature of life – but a clear budget actually gives you control over your money and helps you achieve financial freedom.
“Budgeting doesn’t mean the fun has to end, it simply means you know your priorities and how to spend.”
Tracking your progress will help you assess those priorities, too: there are plenty of budget trackers available online that take the hassle out of recording your income and expenses and priorities, which you can adjust as your money fluctuates.
“Yolt is a great app you can use on the go to budget,” advises Sol. “But a simple excel spreadsheet will work too.”
Finally, remember that breaking your budget every now and again is totally fine, providing you remember to return to your plan after a big outgoing.
2. Financial counselling
Everyone has a different money habits, and if you’ve ever wondered about how your attitudes towards money are affecting your wellbeing, financial counselling could be the way forward.
“In a time where we are taking care of our mental health, we have to remember to take care of our financial health too, and the impact they have on each other” says Sol. “Financial counselling can help anyone understand their relationship with money and help them work towards a healthier connection.”
Whether you’re looking to curb your overspending, take out a loan or simply understand what’s driving your behaviours towards money, financial counselling is a great way to get a closer examination of your money habits, especially if typical financial planning tools like spreadsheets and budget calculators aren’t your bag.
“You can figure out your financial triggers and do better in future,” says Sol, “and think about what emotions cause you to make the choices you do.”
Once you’ve identified patterns and deep-seated attitudes that might be prohibiting your financial growth, you can begin to establish more sustainable money habits, encourage strong decision-making, and improve your long-term financial prospects.
A free financial health check from NatWest, over the phone, by video or face-to-face, will help you understand your attitudes towards money, and how you can cultivate positive behaviour for the future.
3. Emergency funds
Whenever we think about the motivation for saving our hard-earned cash, we tend to think of the future – a dream holiday, a new car, a place to call our own.
But beyond ordinary expenses, a key part of your financial wellbeing is preparing for the unexpected events that we can’t always plan for.
With that in mind, it’s a good practice to start paying regular amounts of money into an emergency fund to tide you over a rocky period, whether you’re preparing against illness, unemployment or a sudden breakup.
A good rule of thumb is to have three to six months of your monthly salary available at any time in an instant access savings account, although when you’ve got a budget in place, you can calculate the amount you might need based on your current outgoings with more accuracy.
Set a target for your emergency fund, and set up a standing order so the money transfers to your savings account automatically come payday. Aim to save 10% of your earnings each month, although paying any sum into the fund, big or small, is a positive step towards financial security.
Once you’ve reached your target, you may want to continue the habit with other savings goals, or seek out a cash ISA – an individual savings account – that keep your savings and investments tax-free forever.
“See your ISA in the same way you see your relationships, if it isn’t working, find a new interest,” says Sol.
“Look into Lifetime ISAs and Help To Buy ISAs as they have the best interest rates. Some current accounts have better interest rates than savings accounts. It’s important to shop around.”
So you’ve got your savings accounts sorted, your spending tracked in your monthly budget and your emergency fund fully prepped – but there’s no need to focus solely on your ‘nest-egg’, especially if you can afford to set aside some money for five years.
Instead, consider the benefits of investment as a means to growing your money long-term by putting your money towards things that will increase in value, such as shares, bonds, funds and property.
Whatever your preconceptions of investment, remember that anyone can have a go: there are plenty of stable, low-risk investment options to explore on the stock market, which can provide opportunities for a greater return on your money than cash savings would bring.
You can start with as little as £50 with services like NatWest Invest - where experts decide the best places to invest your money for you, and you can choose from a range of ready-made investment funds.
And by diversifying your stock – i.e, spreading your money across different investments – you can lower the risk, too*.
5. Long-term plans
The future is a far-off place, or so we like to think.
But in reality, it really is never too early to start putting plans in place to safeguard your long-term security, and there are a wealth of schemes at your fingertips that you might not have considered.
“Living comfortably means having a plan for the future,” says Sol. “Find out how your company can help you prepare for the future you envision.”
No matter your industry, there will be employee benefits designed to promote your wellbeing.
Everyone is entitled to a workplace pension, income protections and holiday allowance – but there are plenty of other perks that might be available to you, such as flexible working hours and healthcare schemes, to subsided travel and wellness programmes – the key is finding out what optional benefits you’re entitled to.
Taking full advantage of your company benefits doesn’t just allow you to save money – they improve your emotional wellbeing, and help you cultivate a better work-life balance.
While you won’t be privy to the same benefits if you’re self-employed, there are a range of personal insurance policies that will protect you in the event of sickness, injury and unemployment.
“Being a freelancer means you get to choose how you get paid,” adds Sol. “It’s your job to choose how that money adds up later on in life.”
From mortgage payments and outstanding debts, to a stable monthly income, guarding against financial loss is a key part of ensuring your long-term wellbeing.
Whether you’re thinking about investing or just looking to talk about any financial issues you may have, join A Woman’s Worth Collective – a space created by Stylist and NatWest for women to get free tips on what they can be doing to improve their financial wellbeing, with no judgments or biases.
NatWest is the bank that believes ‘we are what we do’. Whatever your financial needs, they’ll do all they can to help keep your relationship with money healthy.
*The value of investments can fall as well as rise and you may not get back the full amount you invest, your capital is at risk. Eligibility criteria, fees and charges apply.
Christobel Hastings is a London-based journalist covering pop culture, feminism, LGBTQ and lore.