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What is financial wellbeing (and how can I get some)?

July 17, 2019

You might have heard the phrase “financial wellbeing” recently. It’s been coming up in news stories, budgeting advice and even mental health info.

As you’ve probably guessed, it’s broadly about how well you’re doing with money. But there’s more to financial wellbeing than the state of your current account.

Give me the basics.

Financial wellbeing is the sense of security you get when you’re not worried about money.

Put another way, it’s the absence of that worried, sick feeling you might have if you’re not sure you can pay the electric this month – or cover your part of a dinner bill.

If you have financial wellbeing, you feel in control of your finances. You have more choices and more freedom.

If you don’t have financial wellbeing, you might feel like things are out of your control – you’re hopping from one crisis to another, without any say in what happens next.

Having poor financial wellbeing sucks. And it’s becoming more of an issue as flexible working, zero hour contracts, the gig economy etc, becomes a bigger part of the job market. Our lives are changing in a way that means less income stability and less financial wellbeing.

What’s income stability?

So, someone on an £18,000pa salary knows they will get £1,314.65 in their bank account on the last working day of the month. This means if they budget and plan ahead, they can be sure their regular expenses are covered.

Meanwhile, someone who works different hours each month might take home £1,500 in June and £800 in August. That means lots of uncertainty about paying rent, covering bills and making ends meet etc. It’s really bad for mental health, it strains relationships and isn’t great for wellbeing generally.

There are some ways around this issue, including our new Income Promise, but most people aren’t aware of them, yet.

How big of an issue is lack of financial wellbeing?

It’s pretty drastic. Lots of people are suffering from poor financial wellbeing.

Close Brothers (a big financial firm) published a Financial Wellbeing Index early in 2019. The stats in the report come from talking to employees and employers from various companies.

A massive 94% of employees admitted worrying about money.

Of that group, over three quarters said it worried them enough to make a difference at work. When you narrow it down to Millennials, a staggering 90% are impacted.

Yes, surprise surprise, Millennials have a harder time of it – especially compared to the older (55+) people in the study. Millennials are more worried about money and they have fewer safety nets. Only about a third have emergency savings.

Women have less financial wellbeing, too, often because they are less confident about what kind of pension or savings product to go for (although they generally know more about tax).

Mental health & financial wellbeing

Financial wellbeing can make or break your happiness. If you’re worried about money, you are more likely to; have trouble sleeping, not be able to concentrate, be less productive, have issues in your relationship.

What happened to “money can’t buy happiness?”

That’s true, up to a point. Lots of researchers have looked into this, and most agree that after a certain point your happiness doesn’t keep growing with your income.

But – and it’s a big but – this point doesn’t happen until you’re earning enough that day-to-day money troubles (rent, bills and even the odd holiday) are taken care of.

So financial wellbeing goes up with salary?

Not necessarily… you can find a lot of financial wellbeing issues in the top-earning bracket, too.

This is because of things like bad borrowing habits (more on that in a minute) and spending more than they should do to keep up appearances.

Improving financial wellbeing

A lot of the blame for Britain’s bad financial wellbeing is put on employers.

They’re criticised for things like zero hour contracts (which cause unstable income) and a general lack of support in the workplace. Over half of employees in the Financial Wellbeing Index said their workplace offered nothing to improve employee financial wellbeing.

Hopefully, this will get better – only 20% of the organisations said they had no plans to start a financial wellbeing strategy.

But… it might not be for a while.

Bosses are way over-optimistic about how their employees are doing. Only 30% of the employers in the index thought that money worries were a major issue for employees.

Plus, it’s probably going to be even longer for people in low-paid or unstable jobs. High staff turnover and low wages don’t usually go hand-in-hand with “awesome perks”.

So, if your boss isn’t going to change, it’s worth knowing a few things to get yourself out of financial stress – even if you’re on a zero hour contract or similar.

Planning ahead

Planning is super important to financial wellbeing. It means you can feel more secure – even if things are hard, knowing the next step can hugely lower anxiety.

Budgeting

In the meantime, improving the state of things isn’t as difficult as it might seem. Making a budget can highlight some of the places where you can save money or spend smarter.

Deal with debt

Debt is a massive part of the stress and anxiety that many of us deal with. It can feel impossible to get out of. But by strategically paying off debts, or even lumping them into one more manageable debt, it’s amazing how quickly things can get better.

Income Promise with Wollit

Remember what we said about income security? It’s probably the biggest factor of financial wellbeing.

We’ve written this article because we’ve got experience with unstable income and unpredictable hours. It’s hard to exist month-to-month without knowing if you can afford the basic expenses.

It’s also one of the reasons we launched Wollit. We’ve created a new product called a Wollit Income Promise, which is a minimum amount of money we make sure people with in irregular work will have access to each month.

It works by looking at your monthly payslips (see our Income Promise Calculator) and calculating a minimum amount of money we will make sure you have access to each month. On months you don’t earn enough, we’ll top you up. On months you did really well, you pay us back.

The point of Wollit is to be easy, affordable and ethical. We don’t charge interest on the top-ups – you pay back exactly what we gave you. In turn, you pay a small monthly subscription.

It’s a brand new way to get by and we’re super excited about it. 😊