Sometimes we waste money by buying things that we either don’t need, or get little benefit from, or that don’t last, or that don’t add to our wellbeing. Sometimes it’s all these things.

But sometimes it’s good to ‘waste’ money, and that includes buying human insurance that you never make a claim on. Human insurance is an insurance policy which pays out if you can’t work due to illness or disability, or you get a critical illness, or you die.

In my latest Financial Times article - Will inherited wealth help or hurt those you love? - I cover the issue of why 90% of families’ wealth doesn’t survive three generations and what to do about it.

Learning to control your day to day spending is the essential foundation upon which your financial wellbeing is built. My Smart Spending System introduced the simple concept of the THREE YOUs and using separate accounts to quarantine money for those different priorities, as shown in the diagram below.

Being good with money means different things to different people but at its core it means not worrying about it, being able to enjoy life now and having financial security when you can’t or no longer wish to do paid work.

Warren Buffett is one of the richest people in the world, with an estimate financial fortune of $82.5 billion. He built his fortune through a company called Berkshire Hathaway, which has invested in a range of businesses, including household names like Coca Cola, American Express, Apple and GEICO (the second largest vehicle insurer in the US).

It is widely acknowledged that Buffett is one of the smartest investors in the world. Berkshire Hathaway’s shares have grown at 20.5% per annum between 1965 – 2018. This compares to 9.70% for the S & P 500 (an index benchmark of the 500 largest US quoted companies).[1]  

 Ten planning actions to consider before 6th April 2019: 

TAX FREE SAVINGS: If you are aged 18+ you can invest up to £20,000 into cash, fixed income, equities and alternative investments through Individual Savings Accounts. If you are aged 18-40 and never owned a property before, you can invest up to £4,000 into a Lifetime ISA. If you are aged 16+ and never owned a property before you can invest up to £1,200 followed by up to £200 per month for five years into a Help to Buy ISA. Anyone under 18 can have up to £4,260 per tax year invested in a Junior ISA in cash or stocks and shares.

When he was 19, Michael Carroll won nearly £10 million on the lottery. Today he earns £10 an hour chopping wood and filling coal bags for a fuel merchant in Moray, Scotland, having spent all his winnings on cars, jewellery, parties, drugs, new homes and generous gifts for family and friends.

He told The Sun “My £10million vanished in just 10 years and I don’t have a home or a car to call my own. But I’m not bitter. Easy come, easy go. Going broke was the best thing that happened to me.” And he said he’s “never been happier” since returning to work.

Your saving and investing efforts can be given a serious boost if you can benefit from free money in the form of bonuses and tax reliefs. Here are four key saving incentives available to UK tax residents.

Pension

Employees under age 75 and who are not members of a defined benefits pension can attract a bonus payment from their employer and the government that has the effect of increasing their own contribution by at least 108%. Higher bonuses are available to higher and additional rate taxpayers, and from certain employers that pay more than the legal minimum.

A healthy relationship with money means that you can balance your immediate and longer-term lifestyle desires and needs, the most expensive and non-optional of which is financial independence – that stage when you have enough money to make paid work optional.

The key variables that will affect your ability to build financial assets are the amount you save, the returns you achieve on your money and the period of time your money is invested.

Barely a day goes by without something in the media or online about the financial challenges facing young people. Whether it’s the spectre of leaving university with massive student debt, the high cost of housing, or the impossible task of saving for older age, the narrative is the same. A sense of unfairness, future hardship and impossible barriers to high financial wellbeing.

When you are faced with what looks like an impossible task, it’s easy to get overwhelmed and feel powerless to improve your situation.

In a 2003 study called “Do Pretty Women Inspire Men to Discount the Future”, young men and women were asked to choose between a cheque dated tomorrow, versus a cheque dated for a larger amount that could be cashed at a later date.

Each participant was asked to rate photographs of people and cars. The pictures of people were taken from hotornot.com, the website where people submit photos of themselves and are rated for attractiveness on a 10-point scale.

If you’re not yet financially independent, and you have dependants, you’ll need to ensure that you have enough life insurance to support them and to repay any debts if you die prematurely.

A policy which pays out a lump sum is usually best to pay off any debts like a mortgage. If you are an employee you might have life insurance provided by your employer, known as ‘death in service’ benefit. But if you don’t have such cover, or it isn’t enough for your needs, or you are self-employed you’ll need to take out extra life cover.

We all want to worry less about money, be able to cope with any financial shocks, to afford treats and fun things now and to be financially secure when we finally stop working and earning.

Conventional advice is that to achieve anything, you should have a written goal, a plan for achieving it and regularly monitor progress to check that your daily habits and actions are getting you nearer to your goal.

situation, as well as a tool to help you work out the value of professional advice.

Understanding Money

Finimize (in which I am an investor) provides millennials the financial news in < 3 mins in the form of a daily email or via their interactive app. Visit their website or the app store.

Having high financial wellbeing means money doesn’t cause you stress and worry, you can make choices to enjoy life from day to day and you are financially secure when you can’t or no longer wish to work for money.

Here is my 5 point checklist of actions you can take to maximise your own financial wellbeing in 2019 and beyond.

My daughter fell in love with Latin when she was just 11 and won her school’s Latin scholar prize most of her later years. When we discussed whether she should go to university and if so what she would study, it became clear that studying Classics would feature in her decision. 

The British Library describes Classics as:

What’s the most valuable asset you own? Is it your house, your car, or perhaps the value of your pension scheme? 

Unless you are approaching retirement, the most valuable asset you own is likely to be you! Or to be more precise, the cumulative value of your potential future income from working – your human capital.

Wealth is created by gradually converting your human capital into financial capital whether that’s in the form of investments, property, pensions or physical capital.

How much of your monthly income do you spend on living?

Beyond the essential living costs like housing, food, energy, clothes and transport, there is also likely be the ‘extras’ that make life both comfortable and enjoyable, like socialising, hobbies, designer clothes and holidays.

Where some people get into a problem financially is that they spend too much on the lifestyle ‘extras’ so they never manage to build much in the way of a short-term cash reserve or long-term wealth.

In summer 2015 I purchased a new Ford Fiesta car for £11,500 cash, to use for local trips and also for my eldest daughter to learn to drive in.  We have been very pleased with the car and have kept it in good condition.

I was recently contacted by the local main dealer who supplied the car, suggesting that they could offer me a great deal on a new Fiesta, at a slightly higher trim level than our current car.

Out of interest I asked the dealer to let me have his best deal, including taking my existing car in as part exchange.