On your way to financial wellness

Experts reveal how to improve your relationship with money, reduce stress and stay financially fit throughout your life

YOU’D BE HARDPRESSED

to find anyone who enjoys talking about their finances and their relationship with money, despite its importance. It’s a difficult conversation that often results in concern and stress, which can damage your health, selfesteem, make you feel flawed, and fill you with a sense of despair. When financial stress becomes overwhelming, your mind, body and social life pay a heavy price.

Achieving financial wellness can help reduce stress levels and financial anxieties. But what is it, and why’s it important? Well, just as eating healthily and exercising makes you feel good about your body, positive money habits help you feel financially well. Like a fitness plan, financial wellness covers routines and behaviours that make you feel more satisfied with your financial situation.

If you earn above a certain income threshold, it’s assumed you’re financially fit. While it may be true you have buying power, that doesn’t mean your finances are healthy. Many people earn enough money to cover their bills, invest in their future, and progress in life without having to read the price tags on goods. But that sort of freedom could also be coupled with poor financial management, which could cause stress and anxiety. Financial wellness means having control over your money, regardless of how much or little you make, managing your financial stress, planning for future endeavours, and being prepared for unplanned costs. It also means being able to pay your debts on time, track and meet your financial goals, and build and maintain emergency savings.

If you’re not used to taking control of your finances, it might sound intimidating, but it’s never too late to learn positive habits to enhance your relationship with money.

The way you manage your cash has a drip-down effect on your lifestyle and stress levels. Unfortunately, many of us didn’t learn financial wellness in school, so not all of us understand the impact of creating positive money habits.

Emotions can influence how you manage your money. Poor mental health can make money management challenging, while worrying about money can worsen mental health issues. Tackling both of these aspects at the same time is crucial to financial wellness. Some situations are outside of your control, such as a job loss or financial emergencies. Regardless of your circumstances, by educating yourself and learning how to manage your emotional responses to money, you can seize back control.

HOW DO YOU ATTAIN FINANCIAL WELLNESS?

Author of Everything Personal Finance in Your 20s and 30s and financial lawyer and advisor Dr Howard Davidoff advises the following:

Plan: Outline the steps you need to take to improve your financial wellness, including your budget, goals, saving amounts, and ways to reduce outgoing payments or boost income. You wouldn’t venture into unfamiliar territory without a road map, yet many people go through life without a concrete plan for their financial future. In fact, most people spend more time planning a single holiday than they do their financial future. The road you take to financial freedom can lead directly to your destination or a dead end. Specific financial goals and written plans for meeting them help you focus your efforts on the result.

Set realistic financial

goals: It might take a long time to pay off debt, learn new habits, or start saving. Setting unrealistic goals means you’re more likely to become disheartened.

Instead, set small, attainable goals. Financial wellness is a marathon, not a sprint. Don’t expect to transform your relationship overnight. Learn how to budget: This will give you more control over

your finances, overspending and help you reach your financial goals. Create an emergency

fund: If you don’t have one, now’s the time to start. The idea is to have a cash reserve you can access quickly if you lose your job or an unforeseen emergency occurs. Experts advise stashing at least three to six months’ worth of expenses. Don’t live off borrowed money: Reaching your financial goals is harder if you’re in debt.

Maintain good credit:

Your credit score is a critical part of your financial health. Things like late payments, too much debt or high balances negatively affect it. A higher credit score tells banks and lenders you’re a reliable borrower. The best way to build and protect your credit score is to pay your credit card bill on time and keep your balance below 30% of your credit limit.

FINANCIAL PLANNING FOR EVERY STAGE OF YOUR LIFE

‘Your goals evolve as you move through the different stages of your life, so it’s crucial to have a flexible financial plan that reflects where you are now and where you want to be in the future,’ says financial planner at Old Mutual Vincent Osborne.

IN YOUR TWENTIES

Typical events common to this phase include finishing your studies, moving out of your parents’ home, buying your first car, getting married, having children, entering the workforce, saving to buy a property, travelling and paying off student loans.

You’ll probably have completed your education and are at the beginning of

‘Most people spend more time planning a single holiday than they do their financial future’

your career. Now, you have to start budgeting, which means understanding what you can afford and how to live within your means. You may be paying rent for the first time or saving for a property. Maybe you have a debt to pay off, such as a student or car loan.

You have to track your expenses and reconcile them regularly in the form of a budget. It’s crucial not to use consumer debt such as credit cards and overdrafts to fund your lifestyle. These forms of debt are expensive, and the interest rates are very high. You need to use credit cards in the right way, as a convenient way to transact, and be disciplined in repaying the debt on time to avoid incurring interest charges.

Now’s also the time to start saving towards your retirement. Most employers offer access to a retirement fund, whose contributions are tax-efficient and a great way to save money for the future. You’ll probably change jobs a few times during your twenties. It’s crucial to preserve the retirement capital you’ve accumulated within your retirement fund. When you start a new job, you have the option to invest your retirement savings from your previous one in your new employer’s retirement fund, a preserved pension fund or a retirement annuity.

IN YOUR THIRTIES AND FORTIES

Your thirties bring additional responsibilities, and you may take on debt in the form of a home loan, postgraduate studies and travelling.

Financial considerations in this life stage include getting debt-free and building a career, saving money for travel and holidays, updating your will, starting your own business and generating passive income.

As you move into your 30s and 40s, one recommendation is to pay off your non-mortgage debts as soon as possible. That may necessitate an aggressive approach, meaning you direct a larger percentage of your salary to paying off debts, slashing monthly living expenses or taking on a second job to earn an additional income. You need to gradually enhance your emergency reserve based on lifestyle inflation and changes in your expenditure. Having a sufficient amount in your emergency fund gives you a sense of security and stops you from dipping into your other investments. Also, don’t forget to replenish your emergency fund once you withdraw money from it.

And increase your retirement contribution. These are your prime earning years, so look at skills, knowledge or experience you can monetise to increase your income.

IN YOUR FIFTIES AND SIXTIES

You may be taking care of your parents, ageing family members or loved ones who don’t have enough income to support themselves. Remember to consider your retirement needs too. You have to visualise what your retirement will look like, what you want to do when you reach it, and understand how you’ll be able to achieve it and where the money will come from. If you have children, understand what you have to do to ensure you don’t become a financial burden to them.

It’s crucial to think about how the cost of assisted living and healthcare increase with inflation and if your retirement income is enough to fund these expenses.

Keeping in mind that every stage of life has its financial considerations may help you tremendously when creating your financial plan. Creating milestones according to your terms will give you something to consistently work towards, create a positive relationship with money, and help you achieve financial wellness.