At Women’s Wealth we want to help you to use your money to get the most out of your life. Here are five financial tips for a happier life.
Tip 1: Understand your current situation
This might sound obvious, but it isn’t obvious to everyone. Some people love maintaining a spreadsheet of their expenses, others are horrified at the very idea.
Here at Women’s Wealth, we like a plan, and we also think that having a plan helps our clients to feel better about their finances.
So here’s what you need to know to understand your current financial situation:
- what your income is
- what your expenses are
- your net worth
Understanding where you are today means you can measure your progress. You can also take stock of your current situation. Knowing this means you can start to take action to improve your finances.
In case you still aren’t excited by this idea – here’s a way of looking at the expenses tracking task that might get you interested.
The last time I did this for my family, I noticed something:
There were some expenses where I thought “that was fun, we should do more of that”.
These weren’t lavish expenses, more like small, fun things we did as a family. The process of looking at my expenses made me more aware of the things we had done and how enjoyable they were. By becoming more aware of this, I was then able to plan to do more of those kinds of things. Which felt like a wellbeing win to me.
Knowing what you spend and also what you enjoy spending money on can help you to improve your financial wellbeing.
Tip 2: Be prepared for the unexpected
Financial security provides the basis for financial wellbeing. If you know you are financially secure, then this gives you the foundation for so many things. If an unexpected or unfortunate event can knock you off course, then you don’t really have the level of security that you need.
Only 8% of people in the UK have insurance to protect their income. This type of insurance pays out if you are unable to work due to sickness or disability. Your ability to work is likely your most significant asset, so insuring it can bring peace of mind and help you to maintain what you have if something unexpected happens.
Other areas where you can prepare for the unexpected:
- Ensuring you and any others you rely on have adequate life insurance
- Make sure your will is up to date
- Make sure your pension beneficiary nomination is up to date
Knowing you’ve taken steps to protect yourself brings peace of mind that you are likely to be financially secure if any of these unexpected events were to happen to you.
Tip 3: Make positive behaviours automatic
This is a simple, but effective step you can take to boost your financial wellbeing : take steps to make sure that good financial behaviours happen automatically. You can also make bad financial habits more difficult.
If you are working towards building an emergency fund – a direct debit that automatically moves money into a designated emergency fund each month will help you achieve this goal.
If you are working on building investments: a direct debit that automatically funds your investments each month helps you work towards your goal without you having to do anything.
To make negative behaviours more difficult you have to be a bit more creative. It’s surprising how effective making a behaviour just that little bit more difficult can be.
If you wanted to reduce your spending you could:
- Turn off one click ordering.
- Make sure your card details aren’t saved in your browser.
If you would like to place that extra barrier between yourself and a credit card you could freeze your card in ice. It is available if you need it, but not available immediately, placing that friction between you and a purchase.
Tip 4: Make a plan for worst case scenarios
A post about wellbeing might not seem the right place to talk about writing a will. But here are some of the problems it can cause if you don’t have one in place:
- It creates uncertainty for those you leave behind.
- It risks causing disputes between your family members.
- It makes it difficult to know what you wanted.
- It can leave inadequate provision for your children
- It can leave inadequate provision for a partner you aren’t married to.
- It can leave your relatives paying inheritance tax unnecessarily
Nobody wants to deal with these kinds of problems at the best of times, but having to deal with them when you have lost someone you care about is going to be even worse.
Knowing that you have made a plan and shared it with the people you care about is a sensible thing to do, it will also bring wellbeing benefits. Having a will and Lasting Poiwer of Attorneys in place will bring peace of mind for you and clarity for those you leave behind.
Tip 5: Spend on experiences, not things
How do you get the biggest benefit for every pound that you spend? Do you get more of a benefit from buying things or buying experiences?
Research shows that you are likely to get a bigger wellbeing boost when you spend your money on experiences rather than when you spend it on things. Experiences also have the advantage that they leave you with memories. These memories are something you can look back on with enjoyment.
This is why our phones show us last year’s holiday photos – we enjoy remembering the experience.
It’s also interesting that we regret spending money on experiences less often than we regret spending money on things. When experiences are not as good as we might have hoped it turns out that we find those experiences memorable (and enjoyable) too.
My family once booked a night staying in a shepherd’s hut next to a river. The reality was less idyllic than that might sound. It turned out to be a memorable stay because after a day of torrential rain the nearby river looked like it might flood. The owner of the hut also didn’t know how to use a vacuum cleaner – cobwebs were very much part of the decor. So, a less than perfect stay, but my children enjoyed staying there and it was a memorable experience that we still talk about today.
By spending on experiences rather than stuff you get more benefit for your spending and create more memories. It pays to plan to spend money on experiences. As does saving up for big holidays or experiences. Don’t be afraid to spend your money once you’ve saved it – spending it on valuable experiences can give you a huge wellbeing boost.
Financial planning boosts your financial wellbeing
We work with our clients to support them to implement these tips in their lives.
If you would like to explore how financial planning would improve your life, we would love to talk to you – you can book a discovery call here.
Or you could take our Fabulous Financial Future quiz. It will tell you whether you are on track for financial security and you will also get a customised report on how you can improve your finances.