How to Improve your Financial Well-being

The odds are, you’re conscious of your physical and emotional well-being as many people are. ‘Financial well-being’ however, isn’t thought about quite as much or as well known. It can have various meanings depending on the context. Typically, it refers to how individuals feel about their finances and it can have a direct (or sometimes indirect) impact on how we feel, our optimism for the future and potentially our performance in day-to-day tasks including money management itself. Whether you feel comfortable about your finances, and whether you feel that you’re managing money well or not is determined by a variety of factors, including debt levels, your financial goals, your money management and your credit rating. These factors aren’t determinants of financial success or failure themselves but neglecting these priorities can have serious implications in future for your personal life and your business. Financial well-being is a combination of effective financial planning, healthy money management, and sound decision-making, it isn’t innate but it’s very much a learnable skill as many are.

Financial well-being is something that can have a huge impact on our lives, both personally and professionally. It can be the difference between achieving our goals or struggling to make ends meet. It can be the difference between feeling secure and feeling overwhelmed. That is why it is so important to have a good understanding of financial well-being.

How to Improve Your Financial Wellness

Before we get into the nitty-gritty, let’s take a moment to go through some of the benefits of improved financial well-being so that you can see what these are for yourself:

• Let’s start with mental health:  Don’t forget to take care of your mental health as well as your physical health. Improved financial well-being can lead to improved mental health, as it can reduce stress and anxiety caused by financial concerns. It will also provide you with greater financial security, improved quality of life, increased productivity, and overall reduced financial stress. With fewer financial concerns comes less stress and anxiety which will both negatively impact mental health. Improving your financial well-being can help reduce financial stress and anxiety, allowing you to enjoy greater peace of mind and overall improved mental health.
• Improved quality of life: As much as you’d like to think that money can’t buy happiness, the truth is that it does play at least a part in happiness. When we feel financially secure, we feel like we can relax and enjoy life a little bit more. Financial security can provide you with peace of mind to live your life without the constant stress of money worries. Having said this it does go beyond just having a healthy bank balance. A greater quality of life is closely linked to our mental health. When we feel financially secure, it can free us from the daily grind and stress of worrying about money. We can focus on other aspects of our lives, such as our relationships, our health, and our hobbies. We sometimes find that can even devote more time to self-care and indulging in the things that make us feel good, improving our overall quality of life.
• Reduced Financial Stress: It can lead to reduced general and finance-related stress, as it can help individuals plan for their financial future and make informed decisions with the confidence to do so knowing their finances are in hand and being managed effectively.
• Greater financial security and stability: Financial well-being and financial stability and security are closely intertwined. When you have greater financial well-being, you have more financial stability and security, which can lead to greater peace of mind. As financial well-being means being able to meet your financial needs, having money saved for the future, and having money available to cover unexpected expenses.

Now that we’ve gone through the ‘why’ let’s go through the ‘how’. To keep things simple, I’ve provided a 5 step process below that you can use to achieve greater financial well-being. Gaining a thorough understanding of your current financial situation should be your first port of call in achieving this. I’d recommend taking a step back, assessing the situation from a high-level perspective and gaining a thorough understanding of the current financial situation, you can then tailor a plan to improve your financial situation based on your existing resources.

Step 1: Track ⁠— Making a budget and keeping track of your spending is key to having a good understanding of your finances. Start by writing down all of your expenses for the month, and look for ways to reduce or eliminate costs, especially those not adding any real value. There are lots of online budgeting tools available to streamline the budgeting process in a user-friendly way. Banks often provide their own budgeting tools such as spending trackers, goal calculators and budget planning calculators. These are useful for helping to keep track of your finances and make sure you stay on track with your budget.

Step 2: Create — Creating a budget is essential, how you create the budget is optional and should be done in a way that best suits you. A spreadsheet will provide you with a clear overview of your income and expenses, allowing you to create a plan for how to best utilize your resources. After tracking your spending, you can enter your income and expenses into the budget spreadsheet. This will enable you to see exactly how much money you have in surplus and available to put towards your planned savings and debt repayments each month. You can also use the spreadsheet to identify any areas where you might be able to cut back on spending, freeing up additional funds.

Step 3: Pay — When you’ve budgeted and are ready to start paying off debt, it’s important to prioritise any high-interest debt first. High-interest debt such as credit cards and high-interest loans should take priority because this type of debt is more expensive. If you pay off high-interest debt first it’ll free up money quicker and save you money in the long run as less interest is applied to your accounts. Once you’ve paid off any high-interest debt, move on to lower-interest loans. 

Step 4: Save — Creating a budget and paying down debt should be your top priorities if you want to improve your financial well-being. Once you have your budget in place, I’d recommend setting aside money for an emergency fund, retirement, and other long-term goals. You don’t need to save a large amount of money each month, but it’s important to start saving now even if it’s just a few dollars. Retirement should also be a priority, as it’s important to start saving for the future now in order to have financial security later, it’s all good stuff and all contribute to how you feel overall about your finances.

Step 5: Review — It’s important to review budgets and strategies regularly to ensure they’re working as intended. A great way to optimize cash flow is to use creative cash flow management. On a personal or business level, spreading payments out across the month can help to smooth out the amount of money you have coming in and going out. This way, you can ensure that you’re able to meet any financial obligations without putting too much strain on your budget. If you’re going into the red on a particular date, consider splitting the payment into multiple payments throughout the month, minimizing or eliminating some costs altogether to give you some breathing room. Alternatively, you can set up a payment schedule to have all payments leave your accounts on the same day each month. This can help to keep things simple and ensure that you don’t miss any payments. Whichever strategy you choose, make sure to keep track of your finances and review your strategies regularly to maximize their benefits. You’ll find that you get out of the systems what you put in but trust me when I say that having a plan is worth it in the long run and it’s critical to success for businesses.

Pro tip: Consulting a financial or business expert can be a great way to gain clarity and peace of mind if you’re feeling overwhelmed by your financial or business situation. A professional advisor can analyze your current financial and business plans and help you identify areas of improvement or areas that need to be addressed. Experts can also help you to develop a new plan that is tailored to your individual needs and goals, provide advice on financial, business and tax strategies, as well as provide guidance on budgeting, all contributing to greater control of internal finances and overall, increased financial well-being.

Now that you have a greater awareness and understanding of financial well-being you can put measures in place to improve this. I hope that this will have a positive impact on your life, even if in a small way. Don’t be overwhelmed by the process and try not to stress about things. Take small steps, take them individually and take the time to get things properly organised. You may find it more useful to implement smaller changes over time rather than a large change suddenly. This way, it will be easier to implement and track the success of these changes, rather than trying to implement a large-scale change all at once, which can be overwhelming.