Protecting your financial wellbeing

Financial wellbeing is an important consideration when it comes to managing your money. Ensuring that you’re at ease with your financial position and feel like you have everything under control is a key step. George Howard, one of our Chartered Financial Planners based in Dubai, shares her insights into how to protect and boost your financial wellbeing.

What does financial wellbeing mean?

Just like many aspects of finance, financial wellbeing means different things to different people. But the key principle is that good financial wellbeing offers reassurance that you have your finances in order and are on the right track to achieve your goals. Simply put if your finances are your causing you stress or anxiety then your financial wellbeing will be suffering. We might all worry about different things – whether it’s providing for the next generation, paying off the mortgage, or having money available for the luxuries in life. Understanding what’s important to you and how you can put the right plans in place to deal with those priorities is crucial.

The 5 key fundamentals of financial wellbeing

Taking care of your financial wellbeing can be as simple as bringing back control when it comes to your finances – setting a weekly or monthly budget, building savings or establishing goals. There are generally 5 key steps to bear in mind:

1. Spend less than you earn – budget carefully, establish an appropriate emergency fund with 6 months of outgoings and review your spending
2. Start saving as early as you can – monitor the amount allocated towards savings/investments regularly and as your income changes
3. Set clear financial goals – think short, medium and long-term and quantify key life events
4. Manage your debt wisely – it might need to be prioritised over other financial goals
5. Be cautious of lifestyle inflation – also known as “lifestyle creep” this might see you unconsciously adjusting aspirations as your earnings increase

A robust financial plan

A financial professional can help you create a plan for your finances which is regularly reviewed to ensure you’re on track. This can promote better peace of mind, helping reduce worries. A strong financial plan typically involves 3 core elements:

1. Risk – ensuring you have access to emergency funds and are protected against damaging life events such as illness or redundancy
2. Saving cost efficiently – following an investment strategy which allows you to take advantage of compound interest
3. Optimising for tax – minimising the tax you pay, which takes into account any complexities such as your residency, domicile and overseas interests and assets

Good financial wellbeing also involves estate planning. It’s critical to set up a Will and regularly review it. A Lasting Power of Attorney is beneficial too. These important documents can ensure enormous peace of mind and add to your sense of financial wellbeing.

Financial wellbeing in action

When considering what financial wellbeing means, and how it works in action, it’s useful to consider some real-life situations. A few years ago a new family began working with our Middle East team, and their circumstances demonstrate the power of good financial wellbeing:

Terry and Amanda Lewis moved to Dubai with two children aged 9 and 11. At the time Terry had been managing the majority of the family finances, with Amanda happy to let him lead. In reviewing their situation there were several key areas which the couple hadn’t considered:

1. The Lewis’ both had UK Wills but nothing in place in the UAE. Given their children were still young it was vital to get a local Will in place including guardianship arrangements for both children.
2. Additional life cover was also an issue. The couple only had mortgage protection in place so if Terry died unexpectedly Amanda would have been forced to sell property to provide income to support herself and the children.
3. Most of the savings were held in Terry’s name, with Amanda using their joint account for day-to-day expenses. If Terry died suddenly this situation would have left Amanda without access to any savings. Given probate takes at least six months to release assets from the estate there could have been issues. A sole account for Amanda, opened with some of the couple’s savings, was put in place.
4. The couple’s clear financial priority was early retirement, and a debt free future for their children’s education. We introduced a more structured monthly financial budget, dedicated savings for the children’s schooling and long-term investments to enable full financial freedom and retirement at age 60.
5. The last step was to create a document noting details of all financial information – what the couple have, where it is and all contact information. This is now kept with their Wills in a legal file at home. Terry also made a note of all digital assets, with social media accounts, log ins and password details, to store with this documentation.

After working through these steps Terry and Amanda met with our team and Amanda shared that she had been concerned about the family finances, especially as Terry had been managing most of the money. Involving her in the process provided her with total peace of mind, and she felt more comfortable knowing exactly who to turn to if something happens to Terry. This comprehensive financial plan has contributed significantly to the entire family’s financial wellbeing.

Why open conversations matter

Honest conversations about money are essential for your financial wellbeing. Keeping concerns to yourself could lead to things feeling worse, with worries building up over time or even spilling into conflict with loved ones. It’s always important to remember you’re not alone, although for many families money has been – and remains – an off-limits subject. But once you open up, you’ll likely feel better. It might even be that those around you may have been feeling exactly the same way.

Money worries come in all forms; you might be enjoying a lifestyle which is straining your means, be moving in with a partner who earns significantly more or less than you are, or have plans for your estate which might not meet your family’s expectations.

Whatever the issue, the sooner you start the discussions the better. Open and honest conversations offer an opportunity for you to plan your goals with your spouse, partner or family, and create peace of mind, reducing stress and anxiety too.

What is good financial health?

Today we’re much more aware of the importance of ensuring a good financial education, and empowering people to take control of their finances. Financial wellbeing is an important step, which should be embedded into our collective mindsets. For example, how early should we introduce the concept of finance with children? Enabling young people to grasp financial concepts and understand the value of money should, in time, ensure they can enjoy the freedom which good financial management offers.

There’s also been a significant shift when it comes to women and finance, with the old stereotypes of men being savers and women spenders now inaccurate and outdated. Far more women are now focused on the importance of taking control of their finances – and financial wellbeing – through regular investing, challenging the pay gap, managing any pension shortfalls and reducing reliance on their spouses or partners.

Strong financial wellbeing has other benefits too; if you feel financially content it can positively impact the people around you, and infiltrate all aspects of your life – from your relationships with family and friends to your productivity at work.

There are lots of steps to financial wellbeing; your circumstances and priorities will be individual to you. It’s always useful to chat things through with a financial professional, even for a second opinion, to ensure you’re on track or if you feel out of your depth. And remember the importance of enjoying the journey too!

George Howard

Chartered Financial Planner

E. geroge.howard@thefrygroup.ae

The Fry Group – UK

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