Do you worry about money, or do you not worry enough? Do you bury your head in the sand, or find you can’t control your spending?
The way we think about and approach our finances differs enormously from person to person. But one thing that’s certain, is that having a healthy relationship with your money can help enormously with stress and increase your chances of achieving your long-term financial goals.
All too often, money, or a perceived lack of it, can make lots of us feel insecure, if we do not have the things we want. According to ‘How Britain Spends’, a study by Topcashback, three-quarters of people (76%) feel jealous that other people can afford things they can’t and 80% feel confused as to how other people can afford their lifestyles.
Sue Hayward, personal finance and consumer expert, says: “What none of us know is how our friends, family or neighbours pay for that luxury kitchen, exotic holidays or expensive meals. We all need to work at getting our own finances under control, not trying to aspire to match others’ spending.”
Making time to ensure you feel in control of your money matters can be a huge step forward in gaining that clarity and peace of mind.
A few simple steps can help:
Stay on top of your spending. Even if you’re fortunate enough not to be worrying about how you’ll pay the bills each month, having a firm idea of where your money goes helps you feel in control – and, if you think your spending is too high, you will quickly see where you might free up money that could go towards building more robust savings, investments or pensions.
Curb your impulses. If you’re guilty of online shopping when you are bored or spending impulsively, try and slow down. Leave items in your online basket for 24 hours before clicking ‘buy’ – that’s often enough to make you realise you don’t really need, or even want it that much.
Bolster your savings. Having savings to fall back on in an emergency or should an unexpected expense occur is not only sensible, but it will also give you peace of mind there’s money should you need it. If you haven’t reviewed what you’re saving for a while, see if there’s more you can be saving.
Review your spending every year. Any quiet weekend is a great time to revisit your money matters. Check there are no direct debits or subscriptions going out for services you no longer use.
Emotions and investing
While wellbeing experts advocate living in the moment, much of your financial wellbeing hangs on knowing that you are doing everything you can to improve your future by saving and investing.
But our own emotions can be a really significant driver in the investment decisions we make.
While emotions are an important part of decision-making in general, they can lead to investing in areas that may not be suitable or making poor choices, according to research by the financial watchdog, the Financial Conduct Authority (FCA). In particular, it warned about younger investors speculating with higher risk investments such as cryptocurrency and foreign exchange.
Its research found that for many investors, emotions and feelings such as the thrill of investing, and social factors like the status that comes from a sense of ownership in the companies or assets they invest in, were key reasons behind their decisions to invest.
The FCA reported that this was particularly true for those investing in high-risk products for whom “the challenge, competition and novelty are more important than conventional, more functional reasons for investing like wanting to make their money work harder or save for their retirement”.
Some 38% of those surveyed did not list a single functional reason for investing in their top three.
Other investors can be prone to short-term thinking and panicking when stock markets are volatile. If left unchecked, this can result in you making knee-jerk reactions that can crystallise any losses and see you miss out on the recovery.
Work with your adviser
If you have any concerns that your relationship with money is not as healthy as it could be, it’s important to lean on your adviser, to help keep you on the right track.
However, your personality affects your spending and investing decisions – your adviser is well placed to act as a sounding board.
From an investment point of view, they can ensure your holdings are managed with a financial goal in mind – it might not give you the thrill of a buying or selling more speculative investments, but it can give you the peace of mind that you are in control of your longer-term financial planning.
Alternatively, if you need reassurance when markets are volatile, they are on hand to steady your nerve and help you maintain the perspective you need to achieve your long-term goals.
For those people that are prone to burying their head in the sand, or procrastinating, your adviser can also give you the push to deal with the less exciting side of financial planning. This might be ensuring you’ve got the right amount of protection in place for your family or that you’ve written a will.
And, if you’re worried that you aren’t in control of your day-to-day spending, for whatever reason, they can help you put it under the spotlight and put in place a plan to get you back on track.