24th July is International Self-Care Day which promotes self-care as a vital foundation of health. Financial planning may not be the first thing that springs to mind when you think of self-care but we know that financial problems can take a huge toll on our mental and physical health. Getting your finances in order significantly reduces stress so we believe that financial planning is, in fact, a vital element of self-care.
The link between health and wealth has been proven by numerous studies. There is clear evidence that increased financial security is linked to improved health outcomes and improved quality of life. That’s why we are evangelical about helping as many people as possible to take control of their finances and eliminate financial stress.
We recommend this six-step plan to tackle all the different aspects of your financial planning and ensure that whatever life has in store you’ll have the economic resilience to cope.
Our six-step plan to stress-free financial planning
1. Take control and budget
A laissez-faire approach to your finances and failure to budget often leads to overspending and reliance on overdrafts and credit cards to get through the month. While the spending may be carefree, all too often the debt caused by it will be a huge source of stress.
Having a budget and taking control of your expenditure will enable you to target areas where savings can be made to ensure that your outgoings do not exceed your earnings and eliminate the anxiety debt provokes.
2. Start saving
Once you are debt-free, set up a regular savings plan. The golden rule is to save before spending, not the other way round. Prioritise saving once all your essential outgoings are taken care of each month, before you start frittering money away on luxuries.
Even if you can only afford to save a small amount each month, seeing your savings grow will empower you and provoke a sense of calm.
3. Create an emergency fund
Much of the anxiety we have surrounding our finances revolves around ‘what if’ scenarios: ‘What if I get ill and can’t work? How will I pay the rent?’, ‘What if I lose my job? How will I support my family until I get a new one?’
An emergency fund eliminates these short-term worries. Aim to build up enough to cover at least six months’ of outgoings. Keep this safety net of cash accessible but separate from your everyday finances so you aren’t tempted to spend it. Knowing it is there when you need it will give you peace of mind.
4. Start saving for your retirement
However old you are, start a pension fund if you don’t already have one. If you have a work pension, make the most of it by contributing as much as you can, especially if your employer also contributes as this is essentially free money.
If you don’t have a work pension, it’s up to you to ensure your golden years will be comfortable. Retirement may seem a long way off but with life expectancy increasing and more and more of us likely to reach a century you may need to support yourself for three decades or more once you stop working.
If you put in place a sensible financial plan with regular monthly payments invested wisely and making the most of compound interest to grow your savings, you will be able to sit back and relax safe in the knowledge that your retirement won’t be marred by money worries.
5. Protect your wealth
Life is unpredictable. None of us know when we are going to suffer a serious illness, job loss or even a premature death. What we can do is ensure we are financially prepared for such an event. You can minimise the potential financial impact of these significant life events with life insurance. You may also want to consider critical illness and income protection insurance policies. Knowing that your family is protected whatever happens will almost certainly reduce your stress levels.
6. Get help
If we have health concerns we seek the advice of a doctor. Similarly, worries about financial health can be assuaged by seeking the advice of a professional qualified financial adviser who can assist with all of the above steps. They have the knowledge, skills and tools to help you work out clear financial goals and how to achieve them.
Life is so much better without financial worries. Why not use International Self-Care Day to start your journey to a stress-free financial life and contact us for a consultation with one of our financial advisers?
A leading provider of expat financial services and wealth management services across Asia.