Fretting over paying the bills or worrying about having enough money by the end of the month isn’t uncommon at all – especially now that we're facing a cost of living crisis in the UK thanks to sky high energy bills and inflation levels.
In fact, a study conducted by the Mental Health Foundation in November last year found that 34% of those they surveyed felt anxious about their financial circumstances in the past month, and 29% had felt stressed. 10% also reported that they felt helpless about theirs.1
Financial anxiety can affect many aspects of your life. You may struggle to focus at work or at home, and you could become more irritable. Money worries may even lead to serious health issues, such as panic attacks and high blood pressure. So, don’t ignore financial stress.
Here are some tips that could help you to take back control.
Assess your financial situation
Before building any plan of action, make sure you know where you’re starting from with your finances. And that means reviewing your bank account and any savings pots you have (such as your emergency fund, which will be around 3-6 months' worth of expenses to cover things like unexpected car repairs, or periods of unemployment).
Some things to think about are: how much goes in? How much goes out? And where does this money go? This might help you to identify what you’re spending too much on and decide what you could cut back on. This could help to alleviate the stress of overspending and the fear of not having enough left over for unplanned expenses.
Set financial goals
Once you’ve assessed your financial situation, it could be helpful to set some financial goals, making sure that they're precise and measurable.
For example, instead of saying ‘I’d like to save more money’, you could change that to ‘I want to save £100 each month’. This will make it easier to see if you're sticking to your goal, and help keep you on track as you'll have something specific to aim for.
However, when setting these, be realistic – don’t try and set your savings goals too high if you know you have little chance of sticking to it.
Also, good financial goals should be aligned with your long-term objectives. So, ask yourself ‘what are you saving for?’. Once you've clarified that, see how much you need and how long it’ll potentially take you to make your dreams a reality.
Create a budget…
Although budgeting can be a Herculean task, it’s key to have when dealing with financial stress, since it gives you control over where your money goes.
Start by listing your monthly expenses (such as your rent or mortgage, gas and electricity, council tax, and groceries) so you know how much you have left over, then determine how much you'll put in your savings account each month.
Finally, decide what to do with any money you might have left over after doing this. Although you'll likely want to keep some in your bank account as a buffer, you could use some of it to buy a treat you fancy, or invest it to give it more potential to grow over the long-term. However, with investing your capital is at risk, meaning you could get back less than you put in.
… and stick to it
After creating a budget, you’ll want to stick to it. And a good way to do this could be by treating your savings like any other monthly outgoing, not an optional extra.
You might want to set up a Direct Debit or standing order to easily transfer funds into your savings fund at the start of each month. One way to look at it is that it’s better to spend what you don’t save rather than save what you don’t spend.
Also, sticking to your budget requires you to keep a close eye on your spending. So, at the end of each month, look at your outgoings and see what you can cut back on. Are you eating out at restaurants too often? Are you paying a lot for your broadband and could benefit from switching to a new deal?
Keeping track of your finances can be easy. You could put everything on an Excel spreadsheet or use mobile apps that help you analyse your spending and give you breakdowns of where you’re spending too much.
If you want to reduce financial stress, one thing you could do is try to avoid impulse buying. And we know that fighting your impulses is often no easy task, but there are many ways to control yourself from making unplanned purchases.
Let’s imagine you walk into a shop and see a pair of shoes you really like. Before splashing the cash, ask yourself the right questions: Do you need these shoes? Will your life without them be that bad? Could you not wait maybe a week or two to see if you still fancy them?
According to neuroscientists, you could beat impulse buying by delaying the purchase since the buzz your brain gets from shopping tends to decline with time. So, walk out of the shop for 10 minutes and see if you still like the shoes.
Ask for help
If you’re really struggling to take control of your finances, don’t be afraid to ask for help.
As an example, you could ask your family or close friends to give you some tips and help you budget – you may even find that they're having (or have had) similar concerns about their own finances but just haven't mentioned it. And if you're really stressed, you may also want to consider seeking professional help, and there may be free money management classes out there you could take.
And we know this isn't an option for everyone, but if you can afford to, you could even hire a financial planner who would review your finances, then implement strategies to get your finances on track. The fact you’ll have to report to someone might force you to adopt good saving habits.
Plan for the long-term
Fighting financial stress requires you to adopt a long-term vision. Remember you’re trying to bring your goals to life and this cannot happen without some planning.
So, once you’re happy with your budget and have developed a good savings routine, you could start investing to potentially help your finances grow over the long-term. However, if the very idea of entering the investing world is stressing you out, you could opt for a digital investing platform, like Wealthify, where your portfolio is built and managed by investing experts.
And if you think you need to have lots of money to invest, think again. With many of our Investment Plans, you can pay in as little as £1 at a time. In fact, drip feeding (where you invest little and often) could be an effective strategy as it could help you to pick up investments at bargain prices and ride out market dips (that it's normal to experience as an investor).
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Wealthify does not provide financial advice. Seek financial advice if you are unsure about investing.