As I contemplate what to write, I am foam-rolling my aching legs from yesterday’s run. I used my new trainers and, according to Strava Pro, I was faster than usual. I really am immersed in the fitness and wellness mega trend. This movement is galloping at full pace, taking me (and millions of others) with it. The industry industry is worth $4.75tn globally. That is a colossal sum of money we are pouring into our wellbeing. Whilst I am surrounded by fitness equipment, I can’t help but think something might be missing…
Wellness is meant to be the antidote to the stresses and strains of 21st century life. However, a leading cause of stress and anxiety is money worries. 77% of Americans feel anxious about their financial situation (CNBC) and 94% of the employees in the UK suffer from money worries (Closebrothers Financial Wellbeing Index). So, is pouring money into wellness trends really beneficial? Yes, keeping fit and eating healthily is important, I am not questioning that, but mindfulness and exercise classes aren’t going to take those money worries away. It’s time to stop ignoring financial wellbeing and start building confidence with money.
The good news is taking control of your money and building your financial fitness is way easier than physical exercise and strict diets. There are 5 simple exercises you need to get started. Want to know the best part? You only have to practice these once a year to keep your financial fitness up!
Get them goals down
Just like fitness and diets, you have to start with the end in mind. What are you trying to achieve? Saving money because you were told to or because you think you probably should is setting yourself up for failure. Your life goals will likely have a cost associated and that should be the basis of your money goals. It could be a career break, starting a business, buying a house or just having the luxury of choosing between any of those when you’re older. Picturing these goals will give you that extra motivation when you’re faced with a tough decision of ‘to spend or not to spend’ in the here and now.
Different purpose, different pot
Willpower is a finite and precious resource. Don’t waste your allowance on daily budgets or complex money maths. You should aim to have different accounts for your savings, bills/essentials and spending money. Only allow yourself a bank card for the ‘spending money’ account so it’s only spending money that’s available to spend. Not those precious savings! For the cash you are putting in the ‘savings pot’ you should shop around for the best return available. If your goal is less than 3 years away, that means finding the cash savings account with the highest interest rate. There is NO BENEFIT to being loyal to your current bank and often it pays to switch each year to keep accessing the best rates. If your savings goals are more than 3 years away then…
Give your savings a boost
Investing your money is the secret sauce for financial fitness. It allows you to grow your money whilst you sleep, party, holiday and live your life. It’s really easy to get started either through an investment platform (e.g. Vanguard) or using an investment app (we outline how these work here and compare the different apps available in the UK here). One thing to remember is investing is for the long term, at least 3-5 years. This is an absolute no-brainer, even if you start small it will have a huge impact in future wealth. You won’t make a fortune overnight but you could see your money double in as little as 7 years.
Remove the hassle factor
Now you have your different cash, savings and investment accounts you can remove the hassle factor completely. Arrange a direct debit from your current account on payday into your bills/essentials and your savings/investment accounts. Then you know what’s left over is for you to have fun with. Don’t know how much you should be transferring? Well, a general rule of thumb is you should spend 50% of your income on bills/essentials, 30% on the extras and having fun, and 20% on future savings (including your emergency fund and investments).
Nurture your money tree
People say “money doesn’t grow on trees” and that’s true. However, pension savings are the closest thing to a money tree you will find in the real world. They are often dismissed by the younger crowd as boring, complicated and unimportant. But let me simplify it for you… They are your best source of free money. That free money comes from your employer (they put in at least 3% of your salary), the government (you don’t pay income tax on the money you save) and investment returns (you money is invested and doubles approximately every 7 years). To really nurture your money tree you should save 8-15% of your salary in your pension.
Once you’ve finished those 5 exercises, you can return to the fitness classes, mindfulness apps and health-foods completely guilt and stress free!