Since 2013, the United Nations has celebrated the International Day of Happiness as a way to recognise the importance of happiness and wellbeing in the lives of people around the world.
This year’s International Day of Happiness falls on 20 March. While the old saying suggests “money can’t buy happiness”, there are lots of little things you can do to make yourself “happier” when it comes to your money and wealth.
So, to celebrate this special UN day, here are 10 simple steps you can take to increase your financial happiness.
1. Save a little bit more
It’s likely you’re putting some money aside each month – perhaps in an ISA, a pension, or another savings vehicle.
Increasing the amount you save – even by a small amount – can make a substantial difference to your wealth over time. For example, if you put just an additional £25 aside every month for the next 10 years in an account returning the current base rate of 4%, you’d have £3,679 in a decade.
While it may not be enough to retire on, the chances are you won’t miss £25 a month now, and you’ll have a nice windfall in the future.
2. Cancel some direct debits
When was the last time you carefully went through your bank statement? If it’s been a while, now’s the time to take a look.
Do you really need those TV streaming services, that meal subscription, or that gym membership? Do you read the magazines that drop through your letterbox every month? Or are you paying for your home or car insurance monthly rather than saving money by paying it upfront?
There can be great satisfaction in saving money by cancelling services you no longer use. And, if you can redirect that money to your savings (see point 1!) you could double the benefits.
3. Give a gift
The American Psychological Association reports that spending money on someone other than yourself promotes happiness.
It’s because when you behave generously, it creates more interaction between the parts of the brain associated with processing social information and feeling pleasure.
Each year, you can give unlimited gifts of up to £250, and they will fall outside of your estate immediately for Inheritance Tax (IHT) purposes. You also have an annual IHT allowance of £3,000.
So, gifting can boost your wellbeing as well as that of another, while also having tax benefits. It’s a win-win-win!
4. Switch your bank
February 2023 research by Ipsos suggests that Brits have mediocre levels of satisfaction with their bank.
Fewer than 60% of the customers of major banks such as NatWest, Santander, HSBC, and TSB would recommend their bank to friends or family, with Royal Bank of Scotland propping up the table.
If you’re fed up with your bank, switching has never been easier. The “current account switch guarantee” means your new bank will switch your payments, transfer your balance, and close your old account – often within seven days.
Many banks also offer financial incentives for you to switch. So, if your bank is getting you down, cheer yourself up by finding a new home for your current account.
5. Top up your rainy day fund
The last few years have taught us that we can never be quite sure what’s just around the corner. So, having a pot of money set aside that you can access in a pinch can provide real peace of mind.
Knowing you have a rainy day fund when your boiler breaks or your roof leaks means you don’t have to worry about finding cash or borrowing at high interest rates.
6. Contribute to your ISA early in April
Using your ISA allowance each tax year can help you to shelter more of your wealth from Income Tax and Capital Gains Tax.
Rather than waiting until the last minute to top up your ISA, think about boosting your happiness by making your contribution early in the next tax year.
HL looked at the return from investing £5,000 each tax year in the UK stock market from 1999 to 2022. In the first case, the investment was made on the first working day of the tax year, while the other saw the £5,000 investment made on the last working day. The same £115,000 has been invested over that time for both.
Source: HL. Includes 2021/22 tax year subscriptions for both.
As you can see from the chart, investing early provided boosted returns compared to investing late in the tax year. You also benefit from the peace of mind that you’ve made the most of your ISA allowance, rather than panicking to get your money invested as the deadline approaches.
Remember that the value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
7. Shop around for a better savings account
Recent analysis published by MoneyAge revealed that more than half of instant-access non-ISA savings accounts are still paying an interest rate of 0.5% or less, despite savings rates increasing in recent months.
Despite the base rate sitting at 4%, 1 in 10 accounts were paying less than 0.1%.
Shopping around for a better home for your savings is easy, and it can boost your wellbeing knowing your money is working harder for you.
An interest rate of 3% rather than 0.5% on a savings balance of £25,000 will result in an extra £625 interest a year.
8. Allow yourself to think about what you want to achieve in the next few years
Research reported by the BBC has found that people who have a clearer picture of their “future self” tend to save more.
Identifying what you’d like your future to look like plays an important role in financial planning. Your goals and ambitions can guide the decisions you make now in terms of saving and spending, so an easy way to boost your happiness is to allow yourself time to think about what your future self looks like.
9. Stop checking the performance of your investments
On any given day, stock markets rise and fall. Consequently, the value of your portfolio is constantly changing.
With access to news and information 24 hours a day, it’s never been easier to check in and see how your investments are performing. However, with this comes the stress and worry on those days when markets have fallen.
Instead, turn off the notifications and only look at the performance of your portfolio a couple of times a year. Doing this means you won’t be tempted into making emotional decisions that could damage your long-term financial security – and you won’t have the constant worry.
10. Work with an expert
Landmark research by Royal London found that people who worked with a financial planner felt less anxious about their finances and more in control of their money than those who didn’t.
The report found there were significant emotional benefits of working with an expert. So, if you want to boost your happiness, trusting a professional to help you to make sensible and strategic decisions can really help.
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This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.