Self-love takes many forms, such as physical, mental, and emotional well-being. But have you thought about your financial well-being? Many of us don’t know our net worth, how much to put aside to reach financial freedom, or how much to invest.
Here, we'll cover how you can take care of yourself financially.
Financial well-being is a state of being where a person feels secure and in control of their current and future finances.
Here’s what “being secure and in control” could look like:
Knowing how much money is coming in and going out of your accounts
Keeping a budget and spending within your means
Being prepared for financial emergencies
Having a tight rein on managing debts
Setting yourself up to meet your long-term financial goals
Why do these practices matter? In short, it allows you to take care of future you. Having a financial plan can better equip you to deal with life’s unexpected situations, such as:
paying off an expected medical bill;
leaving an unhappy relationship; or
arranging a last-minute flight to see family.
It can also give you the freedom to build the life you want, allowing you to move countries, change your career track, or retire when you want to.
Now, imagine a state where you’re financially able to cater to all of the above situations. That’s a significant area of life where you’ve mitigated stress, preventing it from spilling over into your physical and mental health, work performance, and overall quality of life.
The COVID-19 pandemic, in particular, has exacerbated financial stress with widespread job losses, extended lockdowns, and increased medical expenses. Many of us may have even dipped into our savings or emergency fund to handle these unexpected events.
In fact, 49% of global respondents in a COVID-19 Global Impact Study reported being stressed about their current financial situation. National surveys conducted since the pandemic began in 2020 found that:
55% of Singaporean consumers felt anxious about their financial situation.
Financial stress had increased by 35% for Malaysians.
31% of Australians reported financial stress with difficulty paying for essentials.
Additionally, the 2021 Cigna 360 Well-Being Survey conducted in 21 markets across 5 continents revealed that only a minority of respondents were confident about having sufficient money for retirement (19%), their current financial situation (22%), and maintaining their current standard of living (28%).
The good news? While certain circumstances may be beyond your control, your money needn’t be. Once you’ve started budgeting with sufficient liquidity for short-term needs and created an emergency fund, it might be time to add investing to your self-care regimen.
Investing puts your money to work for you. When you consistently invest in a diversified portfolio over the long term, your money can grow through compounded returns and market appreciation. That’s because, over the long term, markets trend upwards.
For example, if you look at the S&P 500 index, an index of the top 500 US companies, you'd see that it's returned a historic annualised average return of around 10.5% since its inception in 1957 through 2021. To put that in context, if you’d invested $10 USD in the index in 1957, today, that same $10 USD would be worth almost $6,000 USD. That’s enough to beat inflation and your bank’s interest rates.
You don’t need a lot to start investing, and you only need to invest consistently to realise these long-term returns. You can even invest on autopilot by setting up a recurring transfer into an investment portfolio, so you don’t have to think about it. All you need to do is set aside a suitable portion of your salary each fortnight or month for your investments, and let your money work hard for you.
The bottom line? Investing is one way you can work towards the financial future you want. It's arguably one of the best forms of self-love you can give yourself.
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