Managing your money can be stressful at the best of times.
There’s a lot to think about when it comes to your finances, and sometimes the stakes can seem nauseatingly high, especially if you’re making big life decisions.
That’s why it should be no surprise that money and mental health are inextricably linked.
Fortunately, taking financial advice has also been shown to be an effective strategy for improving the relationship between the two.
That’s why working with a financial planner can help you improve your mental health.
Money and mental health can be a vicious cycle
The relationship between money and mental health is well-documented, with a variety of studies showing just how closely aligned they really are.
In 2019, mobile bank N26 found that 9.5 million adults in the UK had suffered from mental health issues as a direct result of financial anxiety.
Additionally, their research found that 18 million UK adults worried about money daily, with one-third (32%) of these individuals finding it difficult to sleep at night.
Worryingly, according to insurance provider Aviva, mental health and money issues have worsened over the course of the pandemic.
In their study, more than half of adults aged between 45 to 54 said they worried more about their financial situation than they did before the lockdown in March 2020.
Of this group, two-fifths (38%) said they were having trouble sleeping, an increase from the previous N26 study.
The wider issue of money and mental health is the way in which one can negatively affect the other, creating a vicious cycle that can be hard to break.
According to a study of 5,500 people with mental health problems by the Money and Mental Health Policy Institute, 86% of respondents reported that their financial situation had made their mental health problems worse.
They found that 18% of people with mental health issues also had problem debt, further contributing to their poor wellbeing.
As a result, it logically follows that to solve both issues, you need to tackle them concurrently.
Advised individuals are more confident
Meanwhile, according to a report by Royal London, individuals taking financial advice were more likely to feel confident and in control of their money than those who were unadvised.
Surveying 4,007 people, Royal London’s key findings were:
- 68% of advised respondents felt in control of their finances.
- 63% of advised respondents said they felt financially secure and stable.
- Just 32% of advised respondents felt anxious about their household finances.
This goes to show that those taking financial advice had a greater sense of confidence and security in their financial situation.
3 practical ways a financial planner can support you
Clearly, financial advice is an effective tool for improving that tricky relationship between money and mental health.
Financial planners can use a variety of methods to support you, designing a financial plan that will help you to achieve your financial goals.
Here are just three ways that a financial planner can help you.
1. Creating an emergency fund
One of the first things a planner might have you do is create an emergency fund in case of unexpected issues or expenditures.
Consider what would happen if your working situation suddenly changed and you were unable to work. Would you be able to support your family? Would you have enough money to pay your bills or your mortgage repayments?
Having an emergency fund ensures that there’s always money for you to live on, even in the worst-case scenario.
Often, experts suggest having around three to six months’ worth of expenses in an easy-access savings account in case you ever need to rely on it.
2. Creating a budget
A budget may sound like an overly simple and obvious solution, but it’s actually an indispensable tool for managing money.
When you work with a financial planner, they can create a budget for you by making a list of all your monthly income. This will include your salary, annual bonuses, and any income you derive from other sources such as investments.
Next, they’ll list all your expenses. This will include everything you spend money on, from household bills to the average amount you spend on takeaways or eating at restaurants in a month. They’ll then subtract this total from your income.
With this done, your planner will be able to show you a figure for exactly how much you have to live on each month. You’ll be able to see where you get your income from month to month, and where it goes.
Your planner might be able to help you to trim some of the fat off your budget, too. For example, you may have a gym membership or subscriptions to streaming services that you simply never use.
Having a budget gives you a visual way of seeing where you can cut out unnecessary spending, allowing you to prioritise the things that really matter.
3. Putting protection in place
As well as knowing how much you have to live on and keeping money set aside for a rainy day, a planner might also encourage you to consider protection options.
Having protection in case the unexpected happens can help ensure that you or your family are cared for, especially if you’re concerned that you don’t currently have enough in savings to support yourself in an emergency.
There are a range of protection choices out there, but a few that you might want to consider include:
- Life insurance
- Critical illness cover
- Income protection
Even if you never have to rely on your protection options, just knowing they’re there can give you the peace of mind that you or your family will have money to live on, no matter what happens.
In turn, the knowledge that you have this safety net could help to improve your mental health.
Work with us
If you’d like to improve the relationship between money and your mental health, then please do speak to us at Lightside Financial Planning.
We can design a financial plan that secures your wealth for you and your family, no matter your circumstances.
Email firstname.lastname@example.org or call 0151 372 0161 to find out how we could help you.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.