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How To Achieve Financial Wellness And Protect Your Well-Being

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May. 5 2022, Published 8:05 a.m. ET

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How often do you think about money? The chances are, thoughts of, ‘Will I ever be able to retire?’ or ‘What if I need money fast to cover an unexpected bill?’ often crop up. In truth, money is never far from most of our minds.

In fact, a staggering 24 million of us feel "financially vulnerable," according to research from the 2021 Money and Pensions Service’s (MaPS) "Financial Wellbeing Survey."

Often, you just need to know you’re doing something and making good decisions to get you on the right track to meet your short and long-term needs. You don’t need to have lots of financial knowledge or understand technical details about products.

A large part of financial well-being is about building confidence.

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Often when we don’t know what to do about a particular subject, we turn to people we think know more than us, our friends or family. Or we Google it.

The latter comes with its problems. Suddenly, you’ve got information overload. Do the authors know what they’re talking about – could their advice leave you worse off, not better? What if it’s actually a scam? The challenge then is, when faced with 20 answers, not just one, many of us do nothing.

The effect this has on our financial wellbeing – of not being in control – is undeniable.

Access to information is both an advantage, and a disadvantage. Access has changed, but the complexity of finance hasn’t. Sometimes the more we know, the worse it gets.

Getting into a regular savings habit is a big part of feeling assured that you’re doing something positive towards retirement.

It can put your mind at rest and help you feel more confident about the future just by taking simple steps. A lot of people put off long-term saving because they’re unsure about how products work, whether they’re good value and what they can and can’t do.

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A positive of the pandemic is that more people are aware of the strength of their financial position and what they can do to bolster it. Whilst we’ve seen lots of hardship, we have also seen people taking the opportunity to clear debts, overpay their mortgages, increase their savings and generally build their financial resilience.

Managing finances is an emotive subject as it’s difficult to know which options to take to support our own path in life.

Take retirement as an example. Having more choice over when we take our retirement is a mixed blessing. On one hand, it gives us more options and let’s us have more say. But it also increases the pressure on us to make the right choices. And this can lead to poor outcomes if professional advice hasn’t been sought.

But having a preferred retirement age in mind can also make it easier to prepare properly.

Whether you want to leave the decision of retiring to when you feel ready, or you’re certain you want to retire at a certain age, it’s important to have a good understanding of what your retirement looks like for you personally. Then you can start to plan how you get there and this can generate a sense of wellbeing in itself.

For most people, the first place to look when starting your regular savings journey include:

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Pensions

For longer-term objectives such as saving for retirement, pensions are the obvious place to start, not least due to their tax efficiency.

The tax relief available on pension contributions is a generous government incentive to save as much as you can. If you’ve taken out a workplace pension, it’s likely that your employer is paying into it too.

IRAs

You can also build up your IRA investments over that time. With an IRA, you can invest in cash, shares or funds and any growth is free of income tax and capital gains tax.

Emergency Cash Fund

As well as long-term savings plans, you’ll perhaps need to have cash you can access as an emergency fund. This money will be serving a different purpose and meeting a different objective, even if you feel that pot of money isn’t working as hard.

Having someone to help you identify your objectives, see what you’re trying to achieve and put a plan together to get you there can give you the financial wellbeing that you need and make you feel confident in doing more to address your own needs.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

This article was written by Sharon Bonfield and originally appeared on Your Coffee Break.

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