Financial wellness embodies many things, but essentially it boils down to being able to pay all your bills, avoid debt and have some money left over for savings or a rainy day. However, it seems that the financial wellness of those who rent may be suffering as a result of a lack of assets and an inability to plan long term.
These findings are the result of the first UK Household Financial Wellness Index from Momentum UK, and show that the inability to get onto the housing ladder can have a noticeable impact on financial wellness - the index revealed that those with a mortgage had a score of 71/100 for financial wellness, which rose to 74/100 for those who are lucky enough to own their home outright. However, private renters scored only 62/100.
This score is a product of renters' weaker financial footing: renters (including housing association tenants and local authority renters) are half as likely as homeowners to feel that their income will cover their monthly expenses, and are also half as likely to feel comfortable with their current standard of living. Renters' weaker financial circumstances also mean that there is less left over to cover emergency spending or to build up a vital savings pot: renters are half as likely as homeowners to have a rainy day fund and twice as likely to have to borrow money to cover an unexpected expense.
It may be easy to assume that these results are a product of weaker financial management, but according to the research, renters were found to be just as likely to budget and manage their day-to-day spending as homeowners. It therefore appears that the cost of renting is the prime factor in their financial instability.
And such instability can have long-term consequences: the research found that renters are twice as likely to have no savings, insurance products or pension savings in place, which could lead to trouble if the main breadwinner was to die or be unable to work, or if retirement approaches and there isn't enough money saved to provide for it.
"The financial hardships being faced by renters are making it impossible for them to build the deposit necessary to get their foot on the property ladder," commented Ferdi Van Heerden of Momentum UK. "Soon we will see a situation where only those who already own or inherit property will be able purchase a home."
If your financial wellness is in the doldrums and you would like to give it a boost, now is the time to get organised!
Making a budget and sticking to it is crucial - take a long, hard look at your incomings and outgoings and see if you can shave off some expenditure. You may be surprised at how much you can save by forgoing that daily takeaway coffee! Once you have a new, improved budget, you should be able to start tackling any debt you have. If you have a lot of credit card debt, you may want to look at a 0% interest balance transfer card. Just make sure you steadily pay all the money back before the interest-free term ends to avoid accruing any extra interest.
Once your debts are clear, you can really start dedicating yourself to saving some money, which you could put towards that all-important house deposit. A Help to Buy: ISA could be the perfect way for you to gradually build up that vital fund (find out more by reading our article, but if you want to be able to have access to your money just in case, then you may prefer to look at an easy access savings account instead.
Boost your financial wellbeing by getting rid of outstanding credit card debt - take a look at the top 0% interest balance transfer credit cards
Check out the best Help to Buy: ISAs
Find the perfect easy access savings account
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