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Money and our mental health: A seven-step strategy to relieve financial anxiety

Seven-step strategy to relieve financial anxiety

If your financial woes are starting to affect your health, it is time to take control of your money. Alice Haine of Bestinvest has set out seven steps to help you get back on track and boost your well-being in the process:

Step one: Admit there is a problem

The first step is to admit there is a problem and talk to those closest to you. By being open and honest about your financial woes with family or trusted friends, it allows your loved ones to offer emotional support and help you address the issues, such as cutting down expenditure in the household.

Step two: Tackle the stress

From a health point of view, the NHS encourages those suffering financial stress to stay active whether that’s seeing friends and family, taking regular exercise to boost your mood and keeping your CV up to date to help you look for a new job, if you have been made redundant, or find a role with a higher income to help you meet your financial obligations.

You should also strive to pay bills on time if you still can, even if that means dipping into savings. Other NHS tips include not drinking too much alcohol, eating regular, healthy meals and making sure you stick to your daily routine, such as going to bed and getting up at the same time.

Step three: Face the debts head on

Rather than shying away from your money concerns, tackle them head on. Start by identifying the specific issues weighing on your mind whether it is a rising credit card bill, looming bill payments or poor performing investments. To do this, write down your biggest money challenges – keeping the list short to avoid feeling overwhelmed.

Step four: Take control of your finances

Next, create a monthly budget – a vital way to control and understand the state of your finances. It can be as simple as writing down your outgoings on a piece of paper so that you know exactly how much money you need to pay your vital bills every month. Include the ‘must-have payments’ such as rent or mortgage costs, utility bills, council tax, insurance and food, car payments, commuting to work costs, phone and broadband, saving and investments etc. Then add in the ‘like-to-have payments' such as going out, gadgets, holidays, subscriptions to streaming services, gym memberships and so on. Add it all together and see how much you spend every month.

Then, deduct that figure from your net income - the amount you take home every month after paying taxes. This quickly tells you whether you are spending within your means. If you are spending more than you earn, your first trick will be to cut expenses from your like-to-have list to help reduce your outgoings. If the situation requires more aggressive action, scrutinise the must-have list to see if you can trim expenses there.

The benefit of this exercise is to have a clear idea of the state of your finances and what needs to be done to resolve any shortfall. Plus, writing it all down might make you realise the situation is not as bad as you had feared.

Step five: Be honest with your creditors

If you have missed any bills or fear you might do so soon, contact the providers and ask for their help. Ignoring letters from credit card or utility providers about your debt will only exacerbate the situation. By being open and honest, your creditor will offer options to reduce payments in the short-term and develop an affordable repayment plan to help you catch up on missed payments.

Step six: Get help

If you want independent guidance on repaying any debts or managing your money, contact organisations such as Citizens Advice, the Debt Advice Foundation and StepChange Debt Charity for free advice. They can offer confidential support on getting out of debt as well as help with budgets and debt management plans tailored to your situation.

As well as dealing with the practicalities of paying your bills, it is also important to seek help to manage stress. Organisations such as Mind and the Samaritans both offer confidential telegraph support lines to talk through problems. Mind can also offer strategies to stop overspending and how to understand your relationship with money.

Step seven: Set out a fresh financial strategy

Once you’ve got to grips with your immediate situation, set out a fresh financial strategy for the future to ensure you don’t fall into the same cycle of financial stress and poor mental health again.

If overspending is your issue, make it harder to access your cards so that you cannot shop online easily, develop strategies to delay purchasing such as taking a 24-hour break before you buy after spotting something you like.

On a bigger scale, set up your finances so that you have enough in your current account every month to cover essential bills, as well as access to emergency funds to cover surprise expenses.

Then set out short, medium-term and long-term goals for your savings, taking advantage of low-cost, tax-free options such as ISAs and SIPPs, available through Bestinvest. The online investment platform for private investors also offers free financial coaching, where qualified financial planners outline what you could do with your money, while fixed-fee financial advice packages are available to helps users to decide what they should do with their money.

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