Living a life free of financial stress
Updated: Feb 15, 2022
Money is a powerful tool. Power over your own safety and that of your family, as well as the ability to make decisions with dignity and freedom. Money serves as a springboard, a cushion, and the means to enjoy life. As a result, money serves as the financial foundation for human flourishing.
Financial stability is, at its most basic level, having the money you need when you need it and a prerequisite for a just, free, and prosperous society. As for financial concerns, these tend to result in anxiety, stress, and depression. Exacerbated by the COVID-19 pandemic, the recognition of this is now well established. Financial struggles impact all demographics, but millennials aged 25 to 34 have been recognised as the most at-risk group, who claim to struggle with financial difficulties ‘very often’.
Financial well-being is an inherently subjective phrase that refers to a person's perception of their financial condition as providing security and freedom of choice. It can be recognised as having control over day-to-day finances, capacity to absorb financial shock, meet financial goals and the freedom to make financial choices that allow you to enjoy life.
However, many don’t make the connection between poor financial health and mental health. Generally, women are more negatively impacted than men; 46% of females highlighting the connection, compared to 36% of men. As a result, poor mental health can make it harder to feel in financial control of the future and manage money effectively.
Since the pandemic, more employees have seen a fall in their income or changes to their job which put a strain on finances. Organisations are now encouraging people to pay special attention to their financial wellbeing, and to think about what precautions they may take now to avoid financial problems afterwards.
But what are the building blocks of “financial wellbeing?” And what does it take for individuals to achieve it?
Any budget must cover every need, some wants and crucially a savings buffer for emergencies and the future. The pandemic was an unexpected disruption that impacted everyone and taught people the importance of taking protective steps to buffer against a crisis.
Examples of budgeting techniques include the envelope system, zero-based budgeting and the 50/30/20 rule.
Allow up to 50% of your income for needs.
Leave 30% of your income for wants.
Commit 20% of your income to savings and debt repayment.
→ Track your progress
Manually record and track spending or use online budgeting and savings tools, such as apps or templates, to help pinpoint unnecessary expenses as well as act as an incentive.
→ Automate your savings
When savings are automated it means money is put away with minimal effort. This can help prioritise savings contributions, minimising the temptation to spend money without thinking it through.
Accountability through a partner or online support group can act as a motivator and ensure you remain on track.
→ Revisit your budget as needed
Income, expenses, and priorities will change over time and budgets must be adjusted accordingly. Employers should be equipped to help provide information or direct individuals to online sources that can act as guidance.
→ Talk Money
9 in 10 adults don’t find it easy to talk about money. However, research shows people who can talk about money make more informed and risk-free financial decisions, feel less worried or anxious and more in control and have stronger personal relationships.
Financial situations and what is important to you will differ. However, incorporating the above are the fundamentals of financial wellbeing. It takes time to achieve financial stability. To gradually work towards a whole picture of wellness means a consistent and focused effort concerning your financial goals. Each situation is unique and subjective to the individual; therefore, it may begin as a trial-and-error activity to see what works.
Are you ready to take the first step toward a brighter financial future?
Follow Level Financial Technology for more information on financial wellbeing.