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Written by: Steven Cameron
23/07/2021
Intentional or not, many of the things we do each day are an investment in our future self – our future health, wealth, career and happiness.

Budgeting for the future probably lingers at the bottom of many to do lists – it’s a thankless task that overwhelms many. But your future self would be grateful for you spending time on budgeting for the future.

According to findings of the Aegon Financial Wellbeing Index which looks at both money and mindset when measuring financial wellbeing, more than half (55%) of people worry a little or a lot about money, 26% agree money worries cause sleepless nights and 16% agree money worries cause them relationship problems.

On top of this around 6% of households spend more than they earn, 10% spend all they earn, while 24% have less than £100 left at the end of the month.

78% have some form of non-mortgage debt to pay off, with credit cards most common at 30% followed by car loans and student loans both sitting at 13%.

It’s clear that there are a lot of competing pressures on people’s finances, so how can you build a budget to fund your future when facing these immediate budgeting challenges?

A common assumption when it comes to budgeting is that it’s just about the difference between our income and our outgoings. It’s not that simple. Beyond purely making the numbers add up, it’s important to consider the relative value of different expenses to you. For example, does a purchase bring you joy or purpose. Money spent on books or a catch-up with a friend isn’t money down the drain if it improves your wellbeing. Of course, this line of thinking may allow you to justify all sorts of expenses to yourself so you have to be really mindful of what matters most.

Similarly, does a cost enable your future wellbeing? Pension contributions are a good example of something which may come out of your budget each month, but if that money is an investment in your future self, then it can be a cost worth paying.

If you’re among the people in the UK losing sleep due to money worries, give budgeting a try. Looking both at your income and outgoings and evaluating where your money should best be going could help you sleep more soundly now and in the future.

Five mindset tips for budgeting to improve your financial wellbeing

  1. Keep joy and purpose on the budget. Be conscious of the things that give you sustained happiness and ensure that you are spending time, energy and money on those things with your future happiness in mind. Within reason, try to protect expenses that give you joy or purpose. The relative benefit of these expenses provides an outsized boost to financial wellbeing.
  2. Focus on the need rather than the cost. Rather than focusing purely on the expenses try to identify what need you are satisfying with different expenses. Are there cheaper alternatives that satisfy the same need?
  3. Make a long-term plan and write it down. People who write out a financial plan save more regularly and do better financially. While doing this, picture your future self and lifestyle. Spend time regularly visualising your future self and what you might be doing. Paying attention to our future selves, the life we want to live and our pension and investment goals to achieve that lifestyle, can keep us on track.
  4. Build a financial safety net. The pandemic might have forced you to dip into your emergency savings over the past year. Keep an eye on the future and the unknown and try to start building up your emergency savings again as soon as you can. Knowing you have a financial safety net can really improve your financial wellbeing.
  5. Get support and guidance. There are many online resources and services available to help people get their finances in order and on track. Don’t feel overwhelmed, talk to anyone who might be able to help.

Get more money and mindset tips and information at aegon.co.uk/wellbeing

 

Steven Cameron is pensions director at Aegon

 

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