Financial worries can have a profound effect on your wellbeing.
Research has shown that people struggling with bills or debt are far more likely to experience stress, anxiety, and poor mental health. For example:
- If you're feeling anxious, you may lack the motivation to manage your finances effectively.
- As a way of escaping potential bad news, you may avoid facing up to financial problems. This can lead to bills mounting up and problems spiralling.
- If you’re feeling depressed, “retail therapy” may help improve your mood in the short term but could easily result in you spending money you can’t afford.
Getting your finances under control could be one of the best ways to improve your mental health. Here are five steps you can take.
1. Manage your day-to-day finances
Understanding how much you spend each month is an essential step towards getting your finances under control.
Having a clear idea of the money coming in and going out of your account on a regular basis could help to remove a key source of anxiety.
If you’re spending more than you earn, and using credit cards to cover the shortfall, debts can snowball. Paying high interest rates on your outstanding balance could easily leave you feeling strained.
Put together a simple spreadsheet that lists your regular monthly outgoings. Then list all your monthly income. If you’re still working, this will likely consist of your salary but may also include pension or investment income.
With everything clearly laid out, you’ll have a good idea of your monthly disposable income.
2. Put a plan in place to clear unsecured debt
If you’re paying interest on credit cards or bank overdrafts, now’s the time to put a serious debt repayment plan in place and stick to it.
Start by clearing the debt on which you’re paying the highest interest rate and work through your debts one by one until you clear them.
Taking steps to face the debt head-on and putting a plan in place to pay it off can be a big boost to your financial and mental wellbeing.
3. Have an emergency fund
Another common cause of stress and anxiety is “what if?” scenarios – typically, unexpected events that create a financial problem where you need to find money quickly.
Ensuring you have a well-stocked emergency fund can help avoid additional stress if you suddenly have to cover unforeseen costs.
As a rough rule of thumb, your emergency fund should total three months’ net income. Your circumstances may require you to save more – if, for example, you’re self-employed or have a lot of financial dependants.
4. Protect your loved ones
You can’t always deal with a “what if?” scenario from an emergency fund. Being unable to provide for your family, due to circumstances beyond your control, may be among the greatest causes of concern.
There are some simple steps you can take to address this concern and put your mind at rest.
Life insurance
The idea of considering your own mortality is always difficult, but it’s important to ensure your family are financially secure in the event of your death.
It will be a stressful time for them. Having adequate life insurance in place could provide immense peace of mind to you and your family, helping to reduce or entirely eliminate one big area of concern – both immediately and later, should there be cause to claim.
Make a will
The next step you should take is to ensure that, when you pass on, your assets are distributed promptly and in accordance with your wishes.
Both you and your spouse or partner should make a will. It’s also important to review and update your final wishes as life evolves and your circumstances change.
It’s one of the most straightforward financial processes, yet a survey by Canada Life showed that one in four people over 55 don’t currently have a will in place.
Income protection
The final step to help reduce your anxiety around protecting your loved ones and your lifestyle is income protection.
This will ensure that, in the event you are incapacitated and unable to work for an extended period, you’ll receive a regular income so that much of your day-to-day spending is covered.
5. Make plans for your long-term future
Having a clear idea of your future plans can help put your mind at rest and give you the confidence that you’re on the right track.
Possibly the biggest future event you’ll face is your retirement, so it makes sense to plan for this. No matter how near or far your expected retirement date may be, it’s never too soon to start taking steps to ensure you’ll enjoy a comfortable retirement.
One good starting point is to ask yourself three questions:
- When do I want to retire?
- What do I plan to do once I’ve stopped working?
- How much will it cost to maintain the lifestyle I want?
Once your plan is in place, you’ll need to review it as your circumstances change. It’s good financial practice and gives you regular reassurance that you’re in control.
Working with a financial planner can really help here, as they will review your plan regularly and help you keep on track.
Get in touch
Effective financial planning doesn’t just improve your bank balance – it can also strengthen your emotional resilience, reduce uncertainty, and give you greater confidence about the future.
To find out how we can help support your mental wellbeing, please get in touch. Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Note that life insurance and financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
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