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Guide Money building blocks

To achieve financial wellbeing, we need some money building blocks, like an income, a safety net fund, and long-term investments.

Money provides financial security, so we can do the things that bring us joy and happiness today and in the future. Just don’t forget, you also need a good mindset towards money to support you in improving your financial wellbeing. 

There are five key money building blocks for financial wellbeing.

1. Income

Juggling the monthly bills and your spending can take practice. It’s a balancing act of covering the costs of living, and spending on things that make you happy.

We all have different needs to fulfil, such as entertainment and mental stimulation, relaxation, or simply using transport to get from A to B. Once you know what you need and what makes you happy, think of ways you can achieve them that will cost less. For example, could you substitute your gym membership for a jog in the park? Or replace takeaways for budget-friendly, home-cooked meals?

This video highlights how your purchases might satisfy the different needs you have:

If you need a little more help, MoneyHelper’s budget planner can help you review your monthly spending and provide personalised tips on changes you could make.

Pension Wise, a service from MoneyHelper, is a free and impartial government service offering guidance about your retirement options. This service is available online at MoneyHelper or by phone on 0800 138 3944. 

2. A strong safety net

Knowing your expenses could be covered in every eventuality is an important part of financial wellbeing. Yet, many people could only live off their cash savings for less than one month if they lost their job.

A good starting point to protect you from unexpected events is having an emergency fund, or some call it rainy-day savings. It should cover at least three months of your typical expenses.

To make saving into an emergency fund potentially easier – think about automating regular payments into your savings each month. You could use the principle of ‘paying yourself first’, for example on pay day, if you can afford to do so. Even adding a small amount each month will build up emergency savings over time.

3. Long-term savings

Saving money for your future is just as important as managing your money today. For many people, the amount they have saved is likely to be far too little to be able to live the lifestyle they’d like to achieve.

The MoneyHelper Pension calculator can give you a forecast of the likely pension income you’ll get when you retire. It also suggests a target retirement income to aim for, considering your current salary. Just remember, the value of your pension pot can fall as well as rise and isn’t guaranteed.

To help you manage your long-term savings, it’s good to have a clear idea of how much you’ll need in retirement. Our Retirement Income Planner tool could help you see if you’re saving enough for the lifestyle you want. If you’re not on track, you could look to save more or set targets to help you get back on course.

Saving for retirement as early as possible could make a real difference to your retirement savings.

  • Guide

Staying on track

Good saving habits can be life-changing. With a clear vision and some simple tips, even a small amount put aside each month could help you grow your savings.

Read our guide for more tips

4. Debt

Many people have debt. Whether it’s paying off student loans or credit cards, debt can be managed and repaid with long-term planning.

Try to keep debt at a level your income can comfortably pay for, while leaving enough to live on. Setting up automatic payments on pay day could help to maintain this – as well as making sure you prioritise any debt problems.

If you need more help, visit Citizens Advice for tips on managing debt. Or if you’re in Scotland you can call the Money Talk Team for personalised advice.

5. Assets

Owning our own home and reducing or paying off our mortgage is a goal for many of us. You could also think about downsizing your house as you get closer to retirement, which could help you pay off your mortgage faster and reduce your regular outgoings. This could provide you with some future stability – giving you more disposable income once you’re retired or on a fixed income.

One way to pay off a mortgage is seeing it as ‘forced saving’. By saving what you can today and paying off a little more of your mortgage each month (if your mortgage terms allow) – it’s an investment that could mean your housing costs are much less in the future.