Financial Wellbeing: Gaining mastery over your financial situation

  • 28 September 2020
  • 10 mins reading time

On Tuesday 22 September 2020, we launched Schroders Personal Wealth's Money and Mind Report. This is designed to:

  • Identify what financial wellbeing means

  • Determine the nation’s financial health

  • Understand the links between financial wellbeing and general wellness

  • Identify steps you can take to improve your financial wellbeing

What is financial wellbeing?

Financial wellbeing can be boiled down to not having to worry about money. It can include retiring sooner, clearing debt, supporting children when they are buying their first home, passing on inheritance efficiently, covering later-life health needs and so on.

The priority is to get these financial challenges under control by creating a plan to help you achieve the peace of mind you need to enjoy life.

The results from our first Money and Mind Report

The importance of getting money to work in your favour rather than it being a burden of worry was amply evident in the results of our first Money and Mind Report. Our research indicated that 48% of UK adults regularly or occasionally feel stressed or overwhelmed due to their financial situation.

The full details of the report can be found here but, in the meantime, here are some of the insights that the report revealed, some of which could be contributing to stress:

  • The UK’s overall wellbeing scored 52 out of 100

  • The Northwest of England top-scored with 54 while London came in last at 49

  • The majority of people across the UK have debt and household finances under control

  • But most people have not planned sufficiently for the future, leaving them vulnerable to unexpected events

  • A worrying number of people who think they are in a financially sound position, are not

  • The consequences for employers is profound with over a quarter of UK consumers saying their performance at work is affected by financial worries.  

The stress factor

The report also found that the levels of stress rises among younger people. More than 60% of 18 to 34-year-olds confessed to regularly or occasionally experiencing stress over their financial situation. There is a disturbing corollary with this statistic. Around a quarter of all respondents said that financial worries affect their performance at work, with this rising to over a third among 18-34-year-olds.

The importance of mental wellbeing cannot be overstated. It can erode quality of life, disturb sleep patterns, generate physical illness and lead to some tragic consequences. The good news is that there are some simple steps that can be taken to improve your financial wellbeing.

What can you do to improve your financial wellbeing?

In short, plan.

As independent financial adviser and writer, Jason Butler, said on a recent webinar with us, “the process of planning is more important than the plan itself”. By this, he means that some unexpected things are going to happen, so the plan itself is likely to be adjusted over time. But if you have a plan, you understand your situation, what you are striving to achieve and how you can get there.

But the key is to take the steps necessary to create an effective plan. Don’t be intimidated.

You don’t have to do everything right now. You just need to get started. Jason’s approach to planning involves having milestones for three years’ time. He likes that timescale because it is not so far away for it to seem out of touch. But it’s long enough for a plan to have an effect.

Note also that Jason refers to “milestones” rather than goals. The distinction can help to lift pressure which, after all, is what we’re trying to avoid; a milestone is a mark along a journey while a goal is something that has to be achieved or else there could be a sense of failure if it isn’t.

Those milestones depend on understanding your circumstances and what outcomes would provide peace of mind. The milestones can be broken down to yearly actions. These can include such things as updating your will, nominating pension beneficiaries, powers of attorney provisions and so on. They don’t all have to be done at once, but they do need to be done.

These tasks can be included in monthly habits so that you take steady steps towards your milestones. And, as the chart below shows, there is a clear correlation between greater happiness and having a financial plan across all levels of income.

Emotional wellbeing and empowerment

Source: Jason Butler/ Morningstar, 22 September 2020

The next step

The timeline process outlined above is just one of many possible approaches to taking control and improving your overall wellbeing. We would always recommend that you get professional financial advice to find the approach most suited to your unique circumstance and needs, so that you can get on with your life and have your money work for you, not the other way around.

Important information

Any views expressed are our in-house views as at the time of publishing.

This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

Fees and charges apply at Schroders Personal Wealth.

In preparing this article we may have used third party sources which we believe to be true and accurate as at the date of writing. However, we can give no assurances or warranty regarding the accuracy, currency or applicability of any of the content in relation to specific situations and particular circumstances.

Forecasts of future performance are not a reliable guide to actual results in the future; neither is past performance a reliable indicator of future results. The value of investments, and the income from them, may fall as well as rise and cannot be guaranteed and the investor might not get back their initial investment.

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