Financial planning can help your mental health

Financial planning can help your mental health

It’s Mental Health Awareness Week, which runs until Sunday 21 May, and this year’s theme is “anxiety”. The current steep rise in the cost of living has increased many people’s anxiety levels. So, we thought we’d explain how financial planning can help your mental health, along with some useful tips to help you manage your money.

The Balance: Wealth team are members of the Financial Vulnerability Taskforce. Our team actively encourages good practice, and it’s our aim to ensure advice is always provided in our client’s best interests. When people are suffering from a mental health issue, they can be more vulnerable when it comes to making important financial decisions. We want to make sure everyone we support makes the right decisions for their situation.

Anxiety and financial worries

Anxiety is a commonly used term, and it’s normal for people to feel anxious occasionally about money. The aim of this year’s campaign is to raise awareness of the difference between feeling anxious and suffering from an anxiety disorder. If you are worried about your anxiety levels, please visit the Mental Health Awareness Week website for information.

Below are three common ways people can feel anxious about their finances:

  1. Money worries – people’s incomes don’t stretch as far as they used to, due to rising bills. Whether you have a diagnosed anxiety disorder or occasionally struggle with anxious thoughts, money worries can have a big impact on your wellbeing.
  2. Avoidance – if you’re struggling with your mental health, you might lack the motivation to manage your finances. This can lead to people worrying about potential bad news, avoiding opening bill letters or not putting measures in place to protect their money.
  3. Spending spree – this is another type of avoidance strategy; people simply spend what they have on some “retail therapy” to ease their worries. Sadly, uncontrolled spending can lead to people landing in serious levels of debt, adding to their anxiety.

Simple strategies to manage your money

Due to the present high cost of living, it’s not just low earners who are feeling the impact. Many middle-earners are increasingly being affected by interest rates and hikes in national insurance. People who’ve never previously had to watch their spending are now having to budget their disposal income. If you struggle with anxiety, this can worsen your symptoms.

Here are some easy tips to help you take control of your money:

  • Create a spending budget – knowing how much you’re spending each month and logging this in a spreadsheet will start to reduce money-related anxieties. This will give you the ability to plan how your money should be spent. If you earn less than you’re spending each month, this is likely to result in using up credit cards or unsecured loans, which can easily spiral out of control.
  • Pay off credit cards and loans – if you are relying on credit cards, it’s important to try and get these paid off as soon as possible, ideally, every month. High interest rates soon mount up, leaving you in greater debt which causes more stress. If you have a number of debts, it’s worth finding out if you can consolidate these into a secured loan. Always get advice from a financial professional before taking out a loan.
  • Make sure your loved ones are protected – getting the right level of cover in place will help to ease any anxieties in relation to “what if” scenarios. Life policies pay out a lump sum to your family if you were to die during the specified term. Critical illness insurance pays out a lump sum if you were diagnosed with a serious illness. Income protection pays out a regular income if you were incapacitated and unable to work.
  • Have an emergency fund – by creating a pot of emergency money, you will always have the reassurance that you can pay out for household bills. Many financial experts suggest this should be around three months of net income. Even if you start by saving a small sum of money each week, it’ll soon add up.

Put a financial plan in place

Most things in life work better with a plan. A financial plan will help you monitor your spend, and help you save towards any aims and aspirations you have for your life. When you have a clear plan for your finances, you will have greater peace of mind and will know how much your desired lifestyle costs. You can also start planning towards your future retirement with more confidence and use your financial plan to help reduce your debts.

If you are struggling with unsecured debts, you could also create a repayment plan to help pay these off. Whether this spans several months or years, a debt repayment plan will allow you to clear your debts over time. Start with the debt that has the highest interest rate and clear this one first. Then, using the level of interest rate as your criteria, work your way through each one, logging each payment as you go. This process will ease your anxiety.

Our financial planning team will help you feel less anxious about your financial affairs. By listening closely to our clients, we can advise suitable strategies. We will also review your financial plan regularly to check whether you’re on track to achieve your goals. Whether you’re new to financial planning or you’ve had an adviser and you want fresh advice, please speak to our financial planners.

For more information about financial planning, please get in touch.