8 ways to improve your financial wellbeing
Published February 2023 | 6 min read
Expert contributors Christine Lusher, financial planner; Max Phelps, money coach and author
Words by Becca Whitehead
Understanding your financial wellbeing can help you take control of your money. Follow these eight tips from the experts to take the stress out of cash management.
With the cost of living increasing and interest rates rising, it's a good time to look at your overall financial wellbeing and see how well your money is working for you.
Financial wellbeing isn’t just about the amount of money you have, it’s about being in control of your money and being happy with your standard of living. This forms a big part of our overall health and happiness. According to Beyond Blue, financial health and mental health are intrinsically linked and taking control of our money can have positive flow-on effects to other areas of our lives.
Financial planner Christine Lusher says it also means you're not struggling day-to-day. “You know that you can pay your bills, and you've got a little bit left over,” she says.
Low financial wellbeing can affect your mental and physical health. Financial stress can cause poor sleep, a lack of energy, mood swings, muscle pain, headaches and a loss of libido and appetite.
Financial distress can also lead to depression and anxiety, and relationship problems. One in four Australians are finding it difficult to get by on their current income, says research from The Australian National University (ANU).
“People are becoming more aware that their finances affect their overall health,” says Christine. “When you’re stressed, you might eat or sleep badly. It becomes a self-fulfilling prophecy.”
How many Aussies have low financial wellbeing?
A joint study by CommBank and the University of Melbourne found that, in the year to March 2022, there was a 2% increase in the number of Aussies frequently living pay cheque to pay cheque and that more Aussies were spending over 80% of their income without adding to savings.
As a result, financial stress is a big problem. AMP’s 2022 Financial Wellness Report revealed nearly a million workers are severely financially distressed and feel they’ll struggle to meet their bills each month. The same people are also worried about their financial future.
When it comes to financial stress, there are competing factors. “The cost of living has certainly increased recently, and not everyone's wages have kept up. So, we've had the double effect,” says Christine.
Money coach and author, Max Phelps, agrees: “70% of Australians have said they are stressed about money [in 2022].”
Christine and Max have some simple steps to improve your financial outlook and wellbeing.
1. Start with a budget
Christine says budgeting is the first step to knowing where your money goes.
“As boring as budgeting is, it’s the foundation to any financial plan,” she says. “If I know I've got my budget under control, that's going to be one less thing to be stressed about.
“It's about knowing what you spend your money on. There are plenty of different options for tracking your spending,” she adds.
Try tracking your budget on paper or with a budget planner template or app. “Creating a budget begins with listing all your income and expenses,” says Christine.
Next, categorise your expenses into wants and needs. Rent, electricity and transport costs, for example, are essential living costs and are classified as ‘needs’. ‘Wants’ are discretionary expenses like restaurants, holidays and beauty treatments.
“When you understand where your money is going, you can determine whether you’re happy with the way you spend it,” says Christine.
Get started by using budgeting tools and apps. There are plenty available, and Money Smart budget planner is a great place to start.
2. Use automation to your advantage
Automation is about using technology to help things like avoiding late fees on bills, making sure you’ve always got enough cash put away to cover your expenses and saving time on managing your finances.
“Automate things to keep it simple,” says Christine. “Set your electricity and rates up via direct debit. Set up an account for your bills. Then you're not going to get late fees from forgetting to pay it on time. There are a lot of pay-on-time discounts. And you don't need to think about it.”
She also suggests regularly monitoring your spending to see if anything’s getting out of control. “Check your bank or credit card statement once a month, so you can see if there's unusual transactions or if you've overspent somewhere.”
3. Set aside money for bills and pay yourself weekly
This is all about setting up different bank accounts for your money. Max suggests making sure your money for bills is kept separately from your everyday expenses account.
“It works better having your pay land into a bills account, and then giving yourself a weekly allowance that you can access,” he says. “Obviously, don't overspend the weekly amount. It's easier to manage on $150 or $200 a week and to know there’s more coming.”
You can also have a separate savings account or split accounts to save for more than one goal.
4. Start earning compound interest
Albert Einstein is reputed to have called compound interest the eighth wonder of the world.
“Compounding is earning interest on top of interest,” explains Christine. “For example, with an online savings account that pays interest every month, if you’re not withdrawing that money, you’re earning interest on top of interest.
“It could be just popping a little bit extra into your super each pay. Or if you do get a pay rise, popping that into your super rather than letting it eat into your lifestyle.
“If you can put a little bit aside in a savings account, it'll make a big difference over time.”
5. Save now for your future financial wellbeing
Max says a portion of your pay should be put away for the future.
“The rule of thumb for saving is that ‘future saving’ should be 20% of your income,” he says. “That is money you are saving for your future, rather than big items, like a car. Those items are on top of the 20%.”
Max suggests putting your future savings into property, your super or investment in shares to get bang for your buck.
“For me it’s property,” says Max. “You can turn a modest amount of money into a much larger amount by borrowing the bank’s money.”
If you struggle with spending, Max suggests writing down what you’d like to buy. “I have a list on my phone of things I'd like. The simple act of adding it to your list gives you that little hit of dopamine that makes you feel better. When you look at the list later, some things have lasting appeal, and others don’t.”
6. Plan for the unexpected
There’s no way of knowing what is around the corner, and if you fall ill or become injured and need time off work, a safety net can help you stay afloat when you’re off work or having to pay for recovery expenses like taxis, extra rehab, parking, babysitters or help around the house.
Our Income Protect Insurance* pays up to 70% of your average monthly income^ (up to $7,500 per month for up to 12 months) if you can’t work for more than 30 days because of an illness or injury+ and starts at $2.65 a week#.
7. Watch out for lifestyle inflation
Lifestyle inflation is the trend of spending money on things you might not need. Christine says it’s all about spending in the right areas.
“People think, ‘I should reduce takeaway coffee’,” she says. “But those are the fun things in life. Don’t squeeze the joy out of your budget.”
Instead, make bigger savings rather than small ones – for example, choosing to continue to rent a smaller house, rather than feeling your next home needs to be an upgrade.
“People always want to upgrade. That’s lifestyle inflation. But do you really need to rent a better house? That's where the big savings come – on the big-ticket items,” she says.
8. Renegotiate your mortgage
“With rate rises being an issue, one of the big things you can do is renegotiate your mortgage,” says Max.
“Often you're better off renegotiating with your existing bank than switching banks. You should [renegotiate] every year. Everyone's rates have gone up by whatever the Reserve Bank rate has gone up, but new customer rates have not gone up by that much. Most banks will give you that new customer rate if you ask them. And that can make a massive saving,” he says.
Taking some of these steps can boost your money mindset, which will improve your overall sense of financial wellbeing both now and in the long run.
If you need financial counselling, contact:
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