The Art of Green Finance

Tips for Financial Wellness in the New UK Tax Year

Are you on track for a healthy financial future? The new tax year begins on the 6th April in the UK. This is a great time to review your finances and take any necessary steps to improve your financial well-being, no matter what position you are starting from. This post contains suggestions for everyone, from those struggling financially, those doing okay to people with money to invest. Each of the suggestions below has a link to a more in depth Art of Green Finance (AOGF) or external article with further advice and more detail.

I’m Struggling but I’m Motivated to Make Positive Changes:

Are you worried or anxious about your money situation, or living from pay-cheque to pay-cheque? Work through steps 1-5 below.

1. Review your spending over the last year and create a budget that you can stick to – see How to create a realistic budget.
2. Create an emergency buffer. £1,000 is a good starting point. If you don’t have this sort of money, you are not alone; recent research revealed that more than 11 million people in the UK have less than £1,000 in savings which means that a small inconvenience such as something breaking could turn into a bigger crisis. The idea of the buffer is that this fund should be reserved for repairs or replacements for any necessary day-to-day equipment or for other emergencies such as urgent dental care, so as not to push you into debt, or further into debt, when the inevitable unforeseen emergency happens. The “necessary” equipment will depend on your individual circumstances but examples could include washing machine repair following a break-down, shoe repair in case of a leaking sole or buying a second-hand replacement bike following a theft. Start saving whatever you can spare after your budget review (above) until you hit this target.
3. Make a plan to clear any debts. Start with debts owed to friends and family to rebuild trust and relationships. Why? The people that have already loaned you money are likely to be your biggest source of support as you work to improve your finances. Next, tackle either the highest interest debt or use the debt snowball method to clear most debts, except any student loan and/or mortgage (see below).
4. Once you are free of most debt including any overdraft, switch your current account to a fossil-fuel free account – see Greener banking.
5. If you are debt free apart from a student loan and/or a mortgage, start to build up your savings. Aim to cover your monthly budget 6 times over. This should be ideally be saved in an easy-access high-interest fossil-fuel-free account – see Green savings. This is a more comfortable buffer than the £1,000 suggestion above and should cover bigger emergencies such as storm damage to your home (whilst waiting for insurance) or the breakdown of a car needed for commuting.

I’m Doing Ok but could Build on my Successes so far:

Do you always pay bills on time, live below your means and save money consistently? Try these 5 steps to further improve your financial well-being:

1. Consider buying a small house within walking or cycling distance of your job. You could rent out a furnished room to a friend to help cover some of the costs and earn up to £7,500 tax free.
2. Research your workplace based pension. The main benefit of workplace -based pensions is that the company also contributes, but check that you are not paying into a scheme that fuels the climate crisis. If your workplace based pension is green, consider joining the scheme. Be aware though that there are restrictions on when you can access the money. If your workplace-based pension ranks poorly and your company won’t change provider, consider saving into a fossil-fuel free private pension- see Time for a green pension?
3. If you have dependents, check that you have sufficient life insurance to cover their needs should the worst happen. If you have a pension, check if your pension would provide enough cover before considering life insurance. Providers of life insurance are not known for their outstanding ethics so just choose whichever one that best meets your needs. See the Money to the Masses guide to life insurance.
4. If you have children, start to teach your children money management skills from an early age and continue this education at senior school level.
5. Start saving for your children to go to university – see How to save or invest for a university education.

I have Money to Invest and I want to do this Ethically:

Do you have sufficient savings to cover all foreseeable emergencies (at least 6 months of expected expenditure or more)? Do you have sufficient liquid assets to cover any likely big expenses in short to medium term (2-5 years). Then, consider these 5 suggestions:-

1. By this point, your finances are probably looking pretty healthy! You may have the flexibility to incorporate charitable donations into your budget – see 1% for the planet.
2. Consider paying off student debt – see the Money saving expert guide to whether or not to pay off student debt.
3. Consider paying off your mortgage – see the Money saving expert guide to whether or not to pay off your mortgage.
4. Consider investing – see Investing without compromising your ethics. Ideally, aim to do this within a tax-free wrapper. See – the ethical ISA guide. If you have the funds available, you should consider investing the full allowance at the beginning of the tax year so that your money has the full year to work for you. However, this may be a more risky strategy than drip feeding into investments.
5. Your finances are likely very healthy if you have achieved all of the above. Think about passing on your wealth and creating a legacy.