Financial Wellbeing Part 2

Financial Wellbeing means different things to each of us.

It can be as simple as your ability to manage your money. And isn’t necessarily dependant on the amount of money you have.

For me it is more than just being able to pay your bills.

For me it is a deeper sense of balance, a feeling of security that I am gaining control over my day to day expenses, and that there is an element of freedom to make choices to enjoy life and looking to the future having both short term and longer-term financial goals.

Financial wellbeing and mental health (and then physical health) are closely linked: when one drops, we often see the other follow. There are 5 keys to financial wellbeing – this is the second article in the series of 5.

Key 2

Know your numbers

When we are making changes, knowing where we are starting from is the only way to measure our progress. So, awareness of your income and spending patterns are essential for managing strategic changes.

I’m not talking about a budget here – just tracking the money flow.

It can be really confronting when we realise how we are earning and spending our money, so I encourage you to be kind to yourself, and take an honest look.

The types of things to categorise are

1. Income: Your total earnings from work, investments, or other sources.

2. Expenses: Your total spending on bills, groceries, entertainment, and other items.

From here you get a feel for how much the big groups of costs are –

Living expenses – things like food, clothing, car etc,
Fixed expenses - mortgage /rent, insurances, power, phone/internet etc
Discretionary expenses – entertainment, holidays etc

Your own goals and lifestyle will reflect which category you put things in.

Now you get to make a conscious choice over how you spend your money.

If you notice you are spending $45 per week on takeaway coffees (that’s just 2 per day) – would you rather that $45 went towards something else? – that’s $2,340 over a year (over a 25 year mortgage that $45 equates to $58,500 that could go off your loan – and that doesn’t include inflation)

Become aware of how you are spending, and choose consciously if the spending is taking you towards your goals – or away from them.

Tools

I love the “Profit First” system of financial management. It is a book written by Mike Michalowicz to help businesses succeed in the long term. We can apply those same techniques to our personal finances.

There are several apps to help with categorising spending –

Mybudgetpal

Pocketsmith

And if you like tracking the woo woo and the energy of money – Lucky Bitch

What steps are you going to take to become more conscious in your knowledge of your income and spending?