Are you financially healthy?

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Are you financially healthy? Here’s why financial wellness really matters and how to be more money mindful this autumn

By Liz Connor

Why the latest millennial wellbeing trend could play a key role in our mental health and happiness.

When it comes to self-care, pulling up your bank statements is possibly the last thing you'd think of doing - but experts suggest this is an important part of the happiness equation. 'Financial wellness' is particularly relevant for millennials. Recent figures from the Office for National Statistics show that more than half of 22-29-year-olds don't have any savings, while the Money and Mental Health Institute found a quarter of the UK workforce are experiencing financial insecurity to some extent.

But, while money-induced anxiety is familiar to many of us - what is financial wellness all about?

"At a basic level, financial wellness is about having peace of mind that you will have money when you need it - now and in the future - whenever that may be," says Laura Laidlaw, head of customer communications at Standard Life (standardlife.co.uk). "It's about knowing how to manage your money, giving you control over day-to-day finances and having the capacity to absorb something unexpected happening."

It's not all about how much you earn

Achieving this isn't all dependent on earning huge amounts of money though. Instead, it's about adopting a sense of control over the cash you have, and setting goals that can lead to rewards - whether that's savings for a dream trip, or pulling together the deposit for a mortgage. "It's also the assurance that comes from knowing you have a back-up plan if something unexpectedly goes wrong and you need to access finances quickly," says Holly Andrews, managing director at KIS Finance (kisbridgingloans.co.uk).

Do you understand your pension, clear on how your tax is calculated and what benefits you're entitled to? Andrews says knowing that your finances are well organised means you can relax in the knowledge that you're less likely to get an unpleasant surprise. "Ignorance isn't bliss; it's knowing where you are financially that gives you peace of mind," she stresses.

Financial and mental wellbeing are closely linked

It's no surprise that the stress of financial woes can have a detrimental effect on mental health. Money and Mental Health surveyed nearly 5,500 people with experience of mental health problems, and 86% said their financial situation had made their mental health problems worse. "Financial wellbeing is a key component of overall wellbeing, as it is central to our sense of security," agrees Dr Meg Aroll, a psychologist speaking on behalf of Healthspan (healthspan.com). "In terms of our basic needs, money provides us with the necessities for survival such as food, water and shelter, and without financial security we can slip into a chronic stress loop, which directly impacts both mental and physical health."

While money was once a bit taboo, the tide is turning - as increasingly millennials are prioritising their mental and spiritual wellbeing. Whether it's celebrating getting out of your overdraft or discussing the best ISA rates, don't be surprised if financial wellness is brought up at your next brunch date.

"Being reliant on others can make us feel powerless, while being financially independent gives the freedom and choice which is essential for happiness," says Andrews. Aroll adds: "Debt and lack of financial control can lead to anxiety, depression and in severe cases suicidal ideation and also suicide. The impact of debt should not be underplayed - talking about money is key to a healthy financial relationship."

Top tips for achieving financial wellness

Check out these expert tips for being more money mindful this autumn...

1. Build a budget

Start by working out a monthly budget by factoring in the costs of all essentials. Include any debt, all basic living expenses such as rent, travel and food, as well as recreational spending," says Laidlaw.

Work out how much money you need to cover these costs and set up a direct debit for money left at the end of each month to put away into savings. "By cutting back on luxuries such as takeaway coffees or eating out at lunch, you will surprise yourself by how much you can save," Laidlaw adds. "There are plenty of apps that can help you monitor your spending, such as Money Dashboard, Get Chip and Fast Budget, which will make sure you're staying on track."

2. Set some goals

"Once you've got into the budgeting habit, it can really help to set some clear saving goals to aim for. Prioritise your goals according to what is most urgent or most important to you, and make sure each goal has a time-frame," says Laidlaw. "These may be modest and relatively short-term, like saving enough for a holiday, or they may be longer-term and more complex, such as working towards a deposit."

Reviewing this list regularly and reminding yourself of what you want to work towards will help boost your motivation.

3. Make the most of tax-free saving

ISAs are a popular way to save, thanks to a combination of simplicity, accessibility and tax efficiency - you don't normally pay tax on any income and gains on your ISA savings. "Using a high interest Easy Access savings account will allow you to top up your savings pot on a regular basis," says Kevin Mountford, finance expert for Raisin (raisin.co.uk).

Once you have accrued enough, Mountford advises moving your savings pot to a Fixed Term Savings Account which pays even higher interest rates, and then start all over again - this will ensure your hard-earned savings will continue to grow, but are also locked away to ensure you don't dip into them unnecessarily.

4. Prepare for the future

"Since 2012, over 10 million people have been enrolled by their employer into a UK workplace pension and fewer than one in 10 have chosen to opt out," says Laidlaw. "In fact, most employees are now saving for their retirement this way, which is a huge positive change when we compare it to the days pre-auto enrolment."

More of us are living longer, and a reduction in final salary pensions and an increasing State Pension age means everyone needs to take more personal responsibility for planning for their long-term future. "Your workplace pension is a great place to start but also getting into the habit of investing your savings will go a long way in helping you plan for a future that you can look forward to," Laidlaw notes.

5. Plan for the unexpected

To avoid worrying about the impact of unexpected financial issues, Andrews recommends keeping a credit card with a clear balance that can be used in the case of a genuine emergency."For example, if you unexpectedly need new tyres for your car, you'll want to be able to replace these without delay so that you can continue to get to work," she says.

With a bit of planning, you can spread the cost over a couple of months if you need to - but Andrews says you should make sure you clear the debt as soon as you can, to avoid interest racking up.

6. Turn thrifty into fun

You don't need to spend large sums to enjoy the feeling of financial wellness. "If you have a tight budget, you can enjoy the pleasure of tracking down bargains and relish the feeling of having fun with a minimal financial outlay," says Andrews. "Encouraging friends to get involved means you no longer feel the pressure to keep up with others, and instead can take pride in living within your means."

Finally, it's important to reach out for help if you need it. Dr Aroll adds: "If you're struggling with money worries, don't suffer in silence. If you find it too hard to speak to your loved ones, seek impartial advice from the Money Advice Service (moneyadviceservice.org.uk), which provides advice and guides on how to improve your finances, in addition to online and telephone support. "

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