The concept of “financial wellness” is becoming increasingly important as more and more people seek to achieve a balance between their financial responsibilities and long-term security.
Financial wellness refers to being in control of your wealth, having the ability to meet your needs and goals, and feeling confident about your financial future.
While the cost of living crisis may be fading, financial concerns seemingly still persist. Indeed, a survey reported by Money Marketing found that 60% of advised clients are now more worried about their financial wellbeing than they were even during the Covid-19 pandemic.
With the new year here, this could be the ideal time to focus on your financial wellness for the year ahead. So, with that in mind, continue reading to discover five strategies to help you boost your financial wellbeing and secure some peace of mind in 2025.
1. Keep your budget under control
While creating and maintaining a budget might seem like an apparent step towards financial wellness, it remains vital nonetheless.
It’s worth beginning by assessing what you have coming in and what is going out each month. By breaking your monthly expenditure into “needs” – costs like mortgage payments, utility bills, and food – and “wants” – more non-essential spending – you could potentially identify areas where you might have disposable income available.
A useful strategy for managing your budget is the “50/30/20” rule. This involves using 50% of your income to cover your needs, allocating 30% to wants, and saving or investing the last 20%.
Additionally, reviewing your outgoings may reveal money leaks, such as subscriptions you no longer use but still pay for.
Knowing that your finances are organised and aligned with your priorities can strengthen your financial position and fill you with confidence as you navigate 2025.
2. Bolster your emergency fund
If, after assessing your budget, you find you have some disposable income, it might be prudent to build an emergency fund or bolster an existing one.
This can act as a financial safety net for any unexpected expenses, such as a car breakdown or home repairs.
Without it, you may have to dip into savings earmarked for other purposes or rely on high-interest debt, which could derail your progress towards your long-term financial goals.
It’s worth saving between three and six months of essential household expenses in an easy access savings account. If you have many dependants, you may want to save as much as 12 months to cover any potential costs.
Moreover, if you’re retired, a fund equivalent to one and two years of expenses could mean you avoid withdrawing investments held in your pension during periods of short-term market downturn.
Building this financial buffer could help ensure that any unforeseen events won’t compromise your financial stability, potentially bolstering your financial wellness.
3. Assess your protection needs
While an emergency fund can be an invaluable source of financial support, it may not cover every eventuality.
For instance, if you suffer a serious illness or injury that prevents you from working, would you and your loved ones still be able to maintain your standard of living without this income?
Similarly, if you suddenly passed away, would your loved ones be able to maintain their financial security without you?
This is where financial protection comes in, and there are several forms available.
Income protection can provide a regular income if you’re unable to work due to an illness or injury, while critical illness cover offers a tax-free lump sum if you’re diagnosed with a severe illness.
Meanwhile, life cover ensures your loved ones will be financially supported if you pass away.
Even if you already have protection in place, the start of the year could be an excellent time to reassess your needs and ensure your cover remains adequate.
Having the right levels of protection in place offers both financial security and invaluable peace of mind.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
4. Think about your estate plan
The beginning of 2025 could also be an opportune time to review your estate plan, as preparing for the future is one of the pillars of financial wellness, providing clarity and assurance for you and your loved ones.
You could start by ensuring your will is up to date, especially if you experienced significant life changes in 2024, such as the birth of a new child, marriage, or divorce. By doing so, you could ensure that your assets will be distributed according to your wishes.
It’s equally important to have a Lasting Power of Attorney (LPA) in place. This allows a trusted individual to manage your affairs if you lose mental capacity, so you can be safe in the knowledge that you’ll be looked after.
It can also be sensible for your estate plan to include considerations for Inheritance Tax (IHT). By making use of your gifting allowances and exemptions before the end of the tax year in April, you could potentially reduce the IHT liability your loved ones will face when they inherit your estate.
Addressing these issues could ensure that your loved ones will be taken care of no matter what the future holds.
The Financial Conduct Authority does not regulate estate planning, tax planning, Lasting Powers of Attorney, or will writing.
5. Speak to a financial planner
Perhaps one of the most effective ways to boost your financial wellness is simply by speaking to a financial planner.
Interestingly, research from Royal London suggests that working with a planner could reduce financial stress, help you feel more in control, and boost overall feelings of wellbeing.
They do so by:
- Helping you assess your budget
- Identifying areas where you can save
- Ensuring your protection needs are met
- Optimising your estate plan.
Moreover, their expert guidance could help you make complex financial decisions by offering tailored advice to help you achieve your goals.
Whether you’re looking to invest, save for retirement, or navigate the complexities of tax planning, a planner’s insight can be invaluable for boosting your financial wellness for the year ahead.
To find out more about how we can help you, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.