From leaving your childhood home for the first time to entering retirement, most of us will find ourselves facing sudden changes to our financial circumstances during our lifetime.
Being financially resilient could help to alleviate any additional stress of learning how to manage your finances at an emotional time, such as splitting up with a partner, or a sudden bereavement. While these moments can be daunting, taking control of your own money and planning for the future can act as a positive and empowering step – serving you well during life’s twists and turns.
Read on for some hints and tips (based on different circumstances) to find out how you could achieve better financial independence.
Financial empowerment for women
Women can face additional challenges when trying save consistently and for the long-term. They’re often more likely to have disrupted work patterns, experience career gaps and work part-time. The gender pay gap also comes into play. Working full time women were paid 7.9% less on average, compared to men working full time in April 2021 – despite the Equal Pay Act.1
This typically means that women end up having lower pensions to live on in retirement. Research by the Office for National Statics (ONS) revealed that for private pensions specifically, the median pension wealth of men (£315,300) is nearly double that of women (£157,900).2
There’s no easy overnight solution but there are various things you can consider doing to help improve your financial situation:
- Get clarity on where you are: carve out time to do a review of your finances sooner rather than later. It’s also a good idea to understand what benefits and tax allowances you could be entitled to – these will depend on your personal circumstances.
- Create a comprehensive plan: once you’ve a better understanding on where things are, take action to create a written plan. This should align with any long-term goals you might have and address any glaring gaps. It can be scary dealing with financial decisions, especially if you’re struggling to make ends meet. By tackling financial problems head on, you’ll feel more empowered and better prepared.
- Ask for help: increasing numbers of employers are developing financial wellbeing policies to help with their workforce’s financial resilience, reach out to see what help is available. You could also consider finding a financial role model or work with a financial adviser.
Financial equality in relationships
Often, one partner in a relationship takes more of a lead in financial matters than the other – this is usually due to practical reasons as they probably know more about finances.
If you’ve found your partner taking lead in managing your finances, you can offer to help and share the load – this could help improve your financial knowledge and boost your confidence with money management.
Even though it is good to review your finances together, it's also important to develop a sense of independence of your own. Not only does this prepare you – should you find yourself without your partner – it’s empowering to make your own decisions about what you want to spend and where. It’s just about finding the approach which works, and feels best, for you.
To establish financial equality in your relationship, you can work from these principles:
- Communicate: it’s easy for one person to hand over responsibility for financial decisions to the other. But by communicating effectively, you not only support each other, you’ll also keep up-to-date with all of your joint income and outgoings, which makes it less likely either of you will overspend.
- Develop mutual trust: money can be a source of disagreements, but over time you’ll begin to learn how each of you feels about certain financial decisions. There’s no guarantee that you’ll always agree, but by working together you’ll learn to trust and value each other’s approach.
- Set boundaries to maintain independence: while working together is helpful, you should still make sure you continue to have independent sources of income (where possible), so you’re not financially reliant on each other. Consider setting up your own savings account, review if you’re on track to meeting your own financial goals and think about setting up your own side hustle if you’d like to earn an additional income. Bear in mind that any additional income could have tax implications, so check what you need to tell HMRC about.
Financial independence for young adults
Some of us will only begin to think about our own finances when we leave home for the first time, whether that’s to going to University or moving out to live with a partner. If you, or your children, have no experience of dealing with money before you leave home, the cost of living can come as a shock. Where possible, build up some savings beforehand and try to save at least three months’ worth of income, as a financial cushion to fall back on if anything unexpected happens3.
Here are some other things to consider before you move out:
- Make sure you can cover your rent and bills: the best way to do this is to work out a budget before you leave home and make sure you can stick to it. There are plenty of saving apps out there to help you with money management.
- Make sure you meet debt repayments regularly and communicate with your creditor if problems ever arise: this will show them that you’re actively trying manage your debt4
- Protect your credit score: if you have loans or credit cards, you must keep on top of payments and make them on time. Any delay can negatively impact your credit score.
- Try to save when you can: it might seem impossible, or unimportant, but putting something into your savings when you can, should help set you in good stead.
General tips for embracing your financial independence
1. Address your mindset
An important step to embracing your financial independence is to address your mindset. Most people think finance is very complicated, but it doesn’t need to be – especially if you take your time and put effort into understanding the different types of products and services you need to engage with. Our financial wellbeing index can also help you discover what brings you joy and purpose and how you can apply this to your finances.
2. Take stock
Now is the time to explore all the places your money goes. Do you know all your bank account details, both joint and personal? Where do you have money saved and do you have access to it? Who supplies your energy – are your details on the bill and are your payments up to date? What debt do you have, and who do you need to pay most urgently? Simply taking stock could bring a huge sense of control.
3. Learn more
If you don’t yet feel confident in dealing with your own finances, there are plenty of tools you can use to skill up financially. Our financial wellbeing hub shares a wealth or resources, and you can talk a financial adviser to receive some help on improving your financial position. You can find a financial adviser through MoneyHelper.
A financial adviser is likely to charge for their service and should provide details of their charges upfront.
Take the first step in building your financial independence today
In most lifetimes, sudden changes in circumstances can see financial support reduced or removed entirely. Handling your finances is a bit of a juggling act sometimes, but it can also be a starting point for a better financial future. With the right approach and some guidance, reclaiming financial independence can be an empowering experience.