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Money isn’t everything, but financial wellbeing can improve quality of life and overall wellbeing significantly. Not only does it begin to eliminate the financial worries that can be a contributing factor to poor mental health, but it also reduces the uncertainty around future expenses and resources, thus providing a sense of economic achievement.
While there are elements of personal finance that are situational and can’t be controlled, good financial planning can help anyone to begin to feel more secure with their money. In essence, having control over the financial situation you are in, is preferable to your financial situation being in control of your life.
Financial planning provides the ability to obtain, protect, and utilise financial resources more effectively while also avoiding economic dependence, debt, and bankruptcy.
Everyone’s financial plan will be unique as they’re dependent on current circumstance, financial needs, and economic ambitions.
However, the general guidelines of the steps that can be taken towards financial wellbeing are applicable to everyone.
The first step in any successful financial planning exercise is to assess current financial situation and develop an understanding of your income, overheads, and non-essential outgoings. This step will provide the foundation for the production of a financial plan.
To assess your finances, use either paper or a spreadsheet and record all of your income, living expenses, debt payments, recreational spending, and savings contributions for the previous month. Having all of this information visible in one location gives you a holistic view of your cash flow.
Once you have an understanding of your current finances, the next step is to develop financial goals. These will help to determine where you spend and save money, presenting you guidelines for improving your financial wellbeing and providing aims to strive towards.
Goals that you develop should be SMART; specific, measurable, achievable, relevant, and time-bound. Making sure that you create goals around these guidelines will avoid you falling short of unrealistic expectations.
With goals in place, you can begin to identify areas where you can change your lifestyle or choices to begin to meet your financial aims. Taking into account your current circumstances and general economic conditions, evaluate your spending and figure out where you can cut back on.
The decisions made in this step will have a direct impact on your lifestyle, so they should be considered thoroughly before being decided. Changes that will affect your daily wellbeing, such as skipping meals or working debilitating hours, can present particular risks. Avoid sacrificing your general wellbeing for your financial wellbeing.
Fully implementing your financial action plan is the next step in pursuing better financial wellbeing. At this point in the process, you should be prioritising the financial goals that you’ve set, making changes in your lifestyle that will reduce your outgoings or increase your income, using financial services, and potentially seeking professional financial advice.
Technology is available that can help you to find success in this step, such as budgeting planner mobile apps that can track your spending, and contribute towards your savings with each purchase you make on your debit/credit card.
After following your financial plan for several months, you should be in a position to assess, evaluate, and revise it. This is an important step to make sure you don’t get complacent. Without reassessment, your financial plan can become outdated and irrelevant which will lead to dissatisfaction with progress.
Once you have reassessed your financial progression, you can start again from Step 3.
You should also make sure to re-evaluate your plan when you achieve any of the goals you have set for yourself, or if your circumstances (personal, social, or economic) change.
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