‘Financial wellness‘ is one of many terms that has seen a resurgence in usage, as the cost-of-living crisis continues to make it harder for households to make ends meet. The term describes a state of harmony between you and your financial situation; people with poor financial literacy might find themselves dipping into overdrafts or credit often or might find it hard to save properly.

Financial wellness, then is a sense of security and control over your finances, with all the tangible and mental benefits that brings. But how can it be achieved?

Money Management

Fundamentally, financial wellbeing begins and ends with the proper management of your money. How much is coming in each month, and how much is going out? Can your outgoings be divided, and how much is being spent on unnecessary or luxury costs? An ‘audit’ of your outgoings can reveal shortfalls, and give you a glimpse of what a healthy financial future might look like.

Debt Repayments

Arguably the most crucial step in your journey to financial well-being is the repayment of your debts. Debts range widely, from the pennies you might inadvertently owe in the form of an overdraft to the hundreds of thousands that constitute your mortgage. Some debts are absolutely fine to maintain course with, mortgages chief amongst them, but other debts are very much a different story.

Credit cards, bank loans, and payday financing loans are detrimental to your credit score, and their interest rates will absolutely outweigh any potential savings interest rates you find – meaning your saving ability is hampered until you pay your debts. If you have multiple loans and credit card debts distributed between multiple lenders and sources, you will find yourself beholden to a potentially confounding mixture of lending terms and interest rates.

This can not only make it hard to pay off your debts efficiently, but also to manage the rate at which your debt balloons. One of the better ways to approach this is via a debt consolidation loan, which allows you to pay off all debts and effectively transfer them to one place, and one interest rate. This protects you from the potentially predatory small print and allows you to focus on clearing your debt before you proceed with saving.

Budgeting And Saving

With your debts in hand, you can start to make longer-term plans for your finances. While you wait for your debt to clear, it can be smart to plan out your future plans for your income. How much could you feasibly afford to put away, without negatively impacting your lifestyle or existing obligations? Depending on your living situation, you may be able to make some compromises in the name of more immediate financial wellbeing.

With a rough budget set in place for what you can afford to either spend or save, you can enact your thinking through active saving. Basic savings accounts are useful for the building of an emergency fund, your safety net for unpredictable costs. For long-term or retirement savings, though, a stocks and shares ISA can be a solid option; simply place your money in an index fund to minimize risk, and aim for relatively high rates of yield.

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