The short-term financial and economic outlook for the UK is cloudy, with rising inflation, interest rates and energy bills among the challenges we all face.
The Bank of England has increased the base rate to 0.5% with the likelihood of more increases to come and is forecasting inflation will peak at 7.25%[1] in April, when energy bills for millions of homes are set to rise to a typical £1,971.[2] It all adds up to a cost of living squeeze, which the Bank of England is predicting will reduce post-tax disposable income by 2% this year. [3]
The impact of these factors on our short-term financial wellbeing is also worrying, but I am consoled by research we’ve conducted among 3,000 UK adults for HSBC Life’s +Factor study, which suggests their long-term outlook appears to be more positive. +Factor set out to understand the relationship between our physical health, mental wellbeing, and financial fitness. The UK findings are part of a global survey of over 10,000 people, which also included Hong Kong, mainland China and Singapore.
The power of financial planning and planners
Our study highlights a strong correlation between financial fitness, physical health, and mental wellbeing and reveals that when one of these wellbeing pillars improves, it can have a positive impact on the others. It also highlights how financial planning can help general wellbeing, and how making small changes in long-term financial planning habits may have a positive impact on mental and physical health.
For example, nearly three-quarters (72%) of people who review their financial plans ‘at least once a year’ reported to have average or above average mental health, while half of those who don’t review their financial plans admitted their mental health was below average.
We also found that taking financial advice can also be good for you – as nearly three quarters (74%) of respondents who saw an adviser reported average or above average mental health, while more than two out of five (42%) who do not take financial advice have below average mental health.
It’s about more than financial planning
Of course, financial planning cannot immediately tackle the cost of living squeeze on its own, nor can it guarantee physical and mental fitness; but our +Factor study found a correlation.
We found that a majority (83%) of people who rate themselves as physically fit, report average or above average mental health, and over a third (37%) scored highly for financial fitness.
More than half (53%) of those with above average mental health say they are physically fit and 47% scored highly for financial fitness whilst among those with poor mental health, just 9% said they were physically fit and only 12% were rated as financially fit.
Healthy habits
More than two-thirds (68%) of people we surveyed said they believe it’s becoming more important to pass on healthy habits than to pass on wealth. When it comes to advising their younger selves, there was strong agreement that increased exercise, maintaining a healthy lifestyle and saving money were important. Even those who regard themselves as physically fit, now believe they should have exercised more when they were younger. Starting exercise at a young age and maintaining good habits appear to be the best ways to enhance physical, mental, and financial fitness throughout your life.
Holistic wellbeing is the goal
It is clear from our study that optimum holistic health and wellbeing can potentially be achieved by being financially fit. Advisers can play a pivotal role by helping people to develop financial plans and build their financial fitness levels, enabling them to make the goal become a reality.
Mark Hussein is CEO of HSBC Life (UK) Ltd
[1] https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/february-2022
[2] https://news.sky.com/story/cost-of-living-millions-face-energy-bill-hike-as-ofgem-lifts-price-cap-12531711
[3] https://news.sky.com/story/bank-of-england-raises-interest-rate-to-0-5-12531683
