Mindset building blocks

It’s not just the money you have that matters when it comes to improving your financial wellbeing. The way you think and feel about money is also important – your money mindset.

Your mindset will shape the way you feel about money and influence important spending and saving decisions. This includes whether you feel you have ‘enough’ money, your attitude to debt, and your confidence to save for the future.

People on all incomes can worry about money. Focusing on what makes us happy in the long term, rather than striving for ‘more’, can help ease money worries.1 Your financial wellbeing can be improved by having a good attitude and relationship with money.

Let’s explore the five mindset building blocks to help improve your money mindset.

1. Joy and purpose

Financial wellbeing is a blend of being able to do things that bring us joy now, while saving enough to be financially well in the future. Joy is about the moments that make us happy in the present. And purpose is about identifying the things that give our lives meaning.

Try asking yourself when you have most felt joy and purpose. Then you can begin to put a plan in place to experience more of both. For example, maybe you get the most joy from spending time with friends, exercising or cooking. Meanwhile, you might feel a sense of purpose from sharing your knowledge and skills, acting sustainably, or caring for dependants.

To help you think about what brings you joy and purpose, try our Finding joy interactive tool.

2. Your goals for the future

So, what would you like your future to look like? It’s a question that’s an important part of financial wellbeing. By having a clear picture of our future selves, this informs many of the decisions we take today, and for where we want to be in 10 or 15 years.

Try asking yourself what ‘future you’ would thank you for doing today? Whether the answer is getting on the property ladder, retiring early, or being able to take regular holidays, answering this question can help you make better financial decisions. Our Picture your best life tool could help you to visualise what you want your future to look like.

You could also choose to align your savings with your personal values and this can bring more satisfaction while saving.

For example, many people are increasingly conscious of their impact on the planet and look for ways to make a positive influence. Those who invest sustainably also feel more positive about saving – and are likely to feel an increased sense of joy and purpose as a result.1

3. Having a written financial plan

A financial plan can give you a roadmap to saving for the future.

To get started with your written plans, try our financial planning template. Just make sure you keep it updated as your circumstances change, so it stays relevant. 

If you’re not sure where to start, you could also consider getting financial advice. Financial advisers will discuss all aspects of your plans, including what your current and future goals are. They’ll then create a tailored plan suited to you. You can find an adviser on MoneyHelper. There may be a cost for this advice.

4. Social comparisons

It’s human nature to compare ourselves to others, regardless of how much you earn. But if you compare yourself to those who are better off, your financial wellbeing might be impacted.

By having positive conversations about money with financially savvy peers and people in similar circumstances, you can begin to build a clearer picture of your financial goals.

Read our article: How to find peace with your financial status to help you with this.

5. Life beyond work

We tend to pay more attention to what’s happening now than the bigger or long-term picture. Yet there are simple ways you can prepare for your future.

Getting to know the basics of your pension and the investments you have is a great place to start. 

In a nutshell, a pension is a way of saving money for your retirement. You pay into this while you’re working and how much you get back depends on a variety of factors, including; how much you save, how long you save for, and how your investment performs.

There are three types of pension:

  • The state pension
  • Workplace pensions
  • Personal pensions

These generally fall into two main categories – defined contribution or defined benefit.

A defined contribution pension is like a savings plan which you and your employer pay in to, and on retirement, the amount your pension is worth will depend on how much you have saved and how your investment has performed.

A defined benefit pension (or “final salary” pension) pays you an income in retirement which is based on the salary you earned while you were working, rather than the amount of money you’ve paid in.

If you’re working and are eligible, you’ll have been enrolled into a workplace pension. This is a really easy way to save because your employer sets it all up and the money you put in often comes straight from your salary. If you pay in, your employer will pay in and you’ll also get tax relief on your contributions – so money that you would have paid as tax will go into your pension pot instead.

A personal pension is similar to a workplace pension but is something you would have arranged yourself or with the help of a financial adviser. Your pension provider will add tax relief. A personal pension might be a good option for people that are self-employed or need more flexibility.

Your pension is then invested to potentially help it grow. You can either choose the funds your pension is invested in or your employer will do this for you.

You need to be aware that the value of an investment can fall as well as rise and isn’t guaranteed. The final value of your pension pot when it comes to taking benefits may be less than has been paid in.

You can start taking your money when you’re 55 (age 57 from 2028) and it’s yours to do exactly what you like with, but remember, this pot of money needs to last for the whole of your retirement.

Before taking money from a pension, you should consider getting financial advice and make sure you shop around to find the right solution. Pension Wise, a service from MoneyHelper - is a free and impartial government service, offering guidance about your retirement options.

The state pension is paid to you by the government – as long as you’ve made enough qualifying national insurance contributions. When you get your state pension, and how much you’ll receive, can differ from person to person, so it’s worth checking this out on the government’s website.

If employed, you’re also likely to have a workplace pension through auto-enrolment, so making the most of this pension is a good idea. Check what contributions both you and your employer pay into your workplace pension and think about ways to maximise these. For example, some employers match employee contributions.

You could also log into your online pension account, if you have one, to read fund factsheets and key investor documents to help you understand more about how your pension is invested.

Your workplace pension could be one of your most valuable assets when its time to access your retirement savings - and can support you to achieve the future lifestyle you’re aiming for. It depends how much you save throughout your working life. Managing your retirement savings well could have a positive impact on your happiness and financial wellbeing later in life.   

1. Championhealth.co.uk – financial wellbeing stats 2023