Feature Photo by Andrea Piacquadio
I talk a lot about sustainability, but what does this really mean? If we look up the term in the dictionary, we’ll find that “sustainability is the ability to maintain or support a process (any process) over time”. More often than not, we associate the term with environmental sustainability – considering how much we’ve heard and read about it in the last 10 years – but sustainability can go beyond that.
In fact, the concept of sustainability is commonly categorised into three pillars: economic, environmental, and social—sometimes referred to as profits, planet, and people.
economic sustainability
Within this breakdown, “economic sustainability” usually emphasises the conservation of natural resources that serve as inputs for economic production, encompassing both renewable and exhaustible resources. Nonetheless, when we take this concept on an individual level, financial sustainability involves managing and utilising money to sustain and cover one’s life and expenses effectively. As I often talk to you about environmental sustainability and how you can use your money to make your mark on this planet, I thought I’d also talk to you about financial sustainability, and the schemes there are, and ways that can help you conserve your money…
If you’re signed up to my mailing list, then you know just how much I love a discount and how I always strive to bring you the best discounts out there – this week’s article is all about my very best money-saving suggestions.
WHAT IS FINANCIAL SUSTAINABILITY ABOUT?
Financial sustainability should be a top priority for governments all over the world so that they can ensure the financial security and sustainability of their citizens. This concept involves achieving and maintaining a balance between personal income and expenses to meet needs, desires, and aspirations within a sustainable budget. Young generations, in particular, should be specifically targeted due to issues like uncontrolled credit, debt, lack of money management, and rising unemployment rates within this demographic.
financial debt
It is crucial for consumers of all ages (but especially younger people) worldwide to be able to distinguish among various resources to effectively fulfil their needs and objectives while managing their personal finances. Young people, especially Generation Z and X are currently being heavily targeted by marketers and advertisers, leading to excessive consumption and spending on a wide array of products such as shoes, clothes, fast food, technology, sports gear, sweets, self-care and toys. This trend results in youth accumulating financial debt, impacting not only them but also their families and the entire community. Therefore, financial education and personal finance management are vital for promoting responsible living.
Financial sustainability is a crucial concept that revolves around the ability to maintain a healthy financial position over the long term. The fundamental aspect of financial sustainability is living within one’s means. This involves spending less than what is earned, avoiding unnecessary debt, and being mindful of expenses to ensure economic stability. Although this all might be a given for some of us, it’s not for everyone, and without the crucial information required, there’s no way for the new generations to start learning and applying this to their daily lives. There are however, a few things that can be implemented in everyone’s lives to make sure that our economic situation is sustainable in the long run, regardless of income.
BUILDING AN EMERGENCY FUND
Having an emergency fund is essential for financial sustainability. This fund acts as a safety net in case of unexpected expenses or emergencies, helping individuals avoid going into debt to cover unforeseen costs.
Even if you possess a high-limit credit card, having an emergency fund is still beneficial. It is essential to keep this fund separate from your daily cash flow to ensure it is available when needed. If you’re looking to open your first emergency fund, consider utilising a basic savings or money market account, and connect it to your main bank account, so that the funds can be accessible within a day but not instantly. When picking your savings account, keep in mind that some savings options offer a modest annual return. Be mindful of any minimum deposit or balance requirements and compare offerings to avoid annual fees.
Save an amount equal to three to six months of expenses. The necessary emergency fund size varies based on factors like the number of dependents, a working spouse, or financial support from family. Those with a single income, self-employment, and family responsibilities might aim for up to eight months of expenses. And finally, always refill the fund after withdrawals. Even if you rarely face sudden expenses, having a safety net provides peace of mind for any unforeseen financial needs.
Sustainable Savings Accounts
There are huge gaps in how transparent savings providers are when it comes to reporting their environmental impact and policies – but I’ve done a bit of research and there are a few banks you can save with, with the piece of mind that your money isn’t funding climate change.
- Nationwide Building Society: This bank primarily supports residential mortgages and does not finance or lend to the fossil fuel industry. It publicly discloses the carbon emissions linked to its mortgage, commercial real estate and registered social landlord lending. Moreover, it has established science-based goals to decrease these emissions. Furthermore, Nationwide is currently offering £200 for switching to its services, along with an 8% regular saver!
- The Co-operative Bank: This bank upholds strict ethical criteria for the businesses it provides services and financial assistance too, particularly focusing on small and medium-sized enterprises. It avoids engaging with companies involved in fossil fuel exploration, extraction, or production as well as unsustainable natural resource harvesting.
- Triodos: This bank chooses not to finance or invest in fossil fuel initiatives and concentrates its lending on renewable energy projects. It also excludes organisations involved in coal mining, coal plant construction, energy production from fossil fuel power plants, and oil and gas extraction. Triodos also openly shares a list of its UK and global loans on its website to maintain transparency with the public.
For more information, check out this article called “The Best banks and bank accounts in UK in 2024”, by Which?, which ranks banks and bank accounts based on scores based on customer responses, and what the experts think.
SAVING AND INVESTING
Saving and investing are key components of financial sustainability. By setting aside a portion of income for savings and investments, individuals can work towards achieving their financial goals and building wealth over time.
Investing plays a crucial role in economic sustainability by stimulating growth and development in various sectors of the economy. From providing businesses with the necessary capital to expand their operations, create jobs, and innovate to helping individuals build wealth over time through assets like stocks, bonds, and real estate, it allows us to secure our financial future and contribute to overall economic stability.
Of course, getting to understand investments can be complicated. But there are many ways you can start this hard process in easy ways. Lots of banks, like Monzo for example, have steps and guides that can help you start investing (as little as you wish) as a beginner.
MANAGING DEBT
Effectively managing debt is crucial for financial sustainability. This includes paying off high-interest debt, such as credit card debt, and being strategic about taking on new debt to avoid financial strain in the future. Debt management goes beyond making payments; it involves a strategic approach to eliminating debt while reducing interest costs. Effective debt management includes evaluating your financial status, establishing a budget, prioritising debts, and implementing strategies aligned with your financial objectives. With a structured plan, you can take charge of your finances and aim for a debt-free future.
Debt management tools
I’ve come across a lot of different tools that can help you do just this, manage your debt.
- Vertex42 offers free business, budgeting, and financial templates, including a debt snowball calculator, recommended by financial experts for its customisation options.
- PayForEd caters to individuals with student loans, breaking down college and university costs into manageable segments to help students and families comprehend post-graduation debt.
- me provides a straightforward and user-friendly interface for debt repayment, focusing on simplicity without unnecessary features.
- it is an online platform offering a variety of tools for debt management, allowing users to choose from preset payoff plans or create customised strategies tailored to their financial situation.
CREATING A BUDGET
Developing a budget is a practical way to track income and expenses, prioritise financial goals, and make informed financial decisions. A budget helps individuals allocate resources effectively and stay on track towards achieving financial sustainability.
Many of us have relied on spreadsheets for years now, but thankfully there are a lot of apps out there that are making it much easier to budget without the hassle of inserting number after number into a spreadsheet…
These budgeting apps, many of which are cost-free for the basic version, track outgoing spending and make it easier to identify where cutbacks can be made. From Plum, a savings and investment app that allows you to link bank and credit card accounts from other providers to present a true picture of your spending; to Emma, where you can sync compatible crypto accounts with providers as well as bank accounts within the app; MoneyHub app which allows you to connect and view all of accounts you so that you can see all of your finances in one place and helps you to start setting yourself budgets that you can actually stick to, and Monese, which not only helps you budget and save but can help you improve your credit score as well!
Continual learning and adaptation
Financial sustainability is an ongoing process that requires continual learning and adaptation. By staying informed about personal finance topics, seeking opportunities for growth, and adjusting financial strategies as needed, individuals can enhance their economic well-being and sustainability in the long run.
The most important aspect is to keep on learning and staying up to date with everything that is going on in your country (and the world) when it comes to money. I follow Abigail Foster on Instagram, an accountant who really does give out precious and easy to understand info so that you can level up your money knowledge – an insider tip, sign up to her broadcast Instagram channel for that extra content! Another fantastic channel to follow is Ola from All Things Money who gives out a lot of personal finance tips and information!
If you have any tips and suggestions, please do let me know by commenting below the article and I’d love to share them with you all 😉