Mental Health Awareness Week: Three steps to help take control of your finances
The cost-of-living crisis has had a significant impact on people’s finances, with latest statistics revealing that UK household debt has breached £2trn for the first time.
With more Brits borrowing money and relying on credit, anxiety around money has also swelled.
The Mental Health Foundation revealed that one in 10 UK adults feel hopeless about their financial circumstances given the current environment.
And with mental health and financial wellbeing inextricably linked, money and debt-related worries are often a key contributor towards poor mental health.
For those struggling with their mental health, tackling financial worries head on can be a daunting task, but it is vital to do so sooner rather than later.
Rio Stedford, personal finance expert at wealth manager Quilter shares three steps to help you take control of your finances:
1) Talk to someone and seek help if you need it
Money worries can be incredibly overwhelming, and our personal finances can often be viewed as a sensitive, private topic, but it is vital to open up and ask for help if you need it.
While discussing your worries with a trusted friend or family member can be helpful, there is also a wide array of financial guidance and support available which can be very beneficial. The government backs several key services such as MoneyHelper, as well as charities such as StepChange and Citizens Advice – all of which offer free support.
2) Create a budget and stick to it
The cost-of-living crisis has seen our everyday spending increase significantly, and you may be left feeling overwhelmed. If this is the case, it is important to get back on top of things.
Creating a budget can make a big difference when it comes to taking control of your finances as it will allow you to see exactly how much you spend, where you spend it, and if there are any areas you could cut back. There are many free online budget planners that will help you get started.
While creating your budget, review your expenditure and reprioritise. For example, many subscription fees have increased in the last few years so take this opportunity to see if they are still meeting your needs. Often you will be able to switch to a better deal to help reduce costs, so it is worth taking the time to shop around.
3) Manage your debts and boost savings where possible
Having an emergency cash savings pot to fall back on is very important, particularly when our finances are stretched more than usual. However, before you look to start saving, make sure any debts are paid off first, beginning with those with the highest interest rates. Debt can have a negative impact on your mental health, so you should address these issues as soon as possible to help reduce stress.
Once you have settled any debts, look at ways to boost your cash savings where possible. The cost-of-living crisis may make it more difficult to put money aside but having some cash in reserve (even saving a small amount each month) is critical as it provides a buffer to fall back on should you need it.
If you have an adequate pot of cash saved, you may wish to consider investing for the longer term. With inflation still at very high levels, cash savings will effectively decrease in value over time. An ISA can be an excellent tax efficient option for your savings, and you can choose between saving in cash or investing in stocks and shares.
For those who are able to put some money away for the longer term, a stocks and shares ISA is a great way to take the first step into investing which will provide a better long-term return than you will be able to achieve with cash savings. There are many off the shelf, ready-made diverse portfolios to choose from that will align with how much risk you are willing to take, so it is worth exploring the options available to you.
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