Financial Wellbeing: A Short Guide

Many of us take our health for granted when we are planning for the future. However, living a healthy and fulfilling life is strongly linked to financial success.

There is a great deal of evidence to suggest that finances and health are intertwined For example:

• Life expectancy is strongly correlated with socioeconomic People living in a deprived area can expect to live for 8 years less than their wealthier counterparts.
• Families living in poverty may not be able to afford healthy food, adequate housing, transport, or access to social and physical activities, all of which can impact health.
• 1 in 5 people with a mental health condition struggle with debt, and almost half of people with problem debt live with a mental health condition.

The effects go both ways – a lack of financial security can negatively affect health, while poor health can, in itself, cause financial uncertainty.

In this guide, we consider the main areas of financial planning that can impact or be impacted by your health.

Budget Problems

If you spend more than you earn or regularly go without basic essentials, there is a problem with your budget.

For many, a simple review of finances and spending can go a long way. Most of us have areas in which we could cut back to free up some extra cash.

But if you are on a low income or live in a major city, the cost of living may be unsustainable. You might be able to increase your earnings by changing employment, taking on an extra job, or starting a side business.

You may also be eligible for benefits, particularly if you are on a low income, care for children, or have a disability. You can check Entitled To to find out more.

Financial Instability

Life is unpredictable, and usually people don’t expect to find themselves in poverty. But what would happen if you were faced with a bereavement, a life-changing illness, redundancy, or even just a large repair bill? A run of bad luck can quickly change your financial fortunes.

There are a few ways in which you can prepare for the worst:

• Make sure you have an emergency fund to cover at least 6 months of essential spending.
• Arrange life cover to clear any debts and provide for your family if you are no longer here.
• Set up critical illness insurance to pay out a lump sum if you are diagnosed with a serious health condition.
• Arrange income protection cover to replace lost earnings if you are unable to work long-term for health reasons.
• Think about private healthcare to potentially obtain treatment more quickly, reducing time out of work.

Planning for contingencies can help to reduce the financial impact of unforeseen events.

Debt

Being in debt can be a highly stressful experience and may have an impact on your overall well-being. Additionally, people with poor physical or mental health may be more likely to find themselves in debt, either due to unaffordable costs or erratic spending habits.

Taking control of your budget and setting aside an emergency fund can help to avoid getting into debt or making the situation worse. But if you have a problem with debt, you need to confront the issue. There are several options available, and a number of charities (for example, StepChange) can offer free, impartial advice.

Uncertainty About the Future

Money worries can impact your mental and physical health. Even if you have enough to cover your day-to-day costs, what will happen when you retire?

Will you have enough to live on, or will you need to work for longer than planned? Will you be able to financially support your children through their major milestones?

It’s normal to worry about these issues, but it is equally common to avoid thinking about them and hope for the best. Many people face financial hardship in retirement because they don’t start planning until later in life.

A lack of money in retirement can impact quality of life, health, and life expectancy.

To make the most of your retirement:

• Start paying into a pension as early as possible. Ensure you’re enrolled in your workplace pension scheme.
• Check your statement each year to confirm if you are on track to achieve your desired lifestyle.
• Try some online calculators to test out different scenarios and make key decisions, for example, how much to contribute, when you can retire, and what rate of investment growth you need.
• Look towards potentially investing your pension in a diverse range of assets at an appropriate risk level. Your pension provider might have some guidance available, or you can seek financial advice.
• Don’t forget to account for the State Pension. You can check your record here to make sure you are on track for the full pension.

Financial Literacy

Understanding your finances can help you take control and give you peace of mind. This can help create financial security, reduce stress, and improve your quality of life.

It’s a good idea to educate yourself on areas such as:

• Cash management and budgeting.
• Options for bringing in more income, whether you are employed, caring for someone, or unable to work due to ill-health.
• The basics of taxation.
• Types of debt, when to use them and when to steer clear.
• Building good savings habits.
• Pensions and investments.
• Estate planning, including making your will and arranging powers of attorney.
• What to do in a financial emergency.

It won’t happen overnight, but Money Helper is a good place to start for free guidance.

One of the most important things you can do is to educate your children about money. The more they understand from an early age, the less likely they are to face financial hardship later in life.

Please don’t hesitate to contact a member of the team to find out more about financial planning.

The value of your investments and pensions (and any income from them) can go down as well as up which would have an impact on the level of benefits available