No matter how good you are with money, it’s likely you’ll experience some financial stress from time to time. From unexpected expenses to rising bills, even the most prepared can lose sleep over money matters.
In this guide, we’ll be sharing how you can prepare yourself both financially and emotionally for life’s financial worries.
Identifying financial stress triggers
Though you can’t predict what will affect your finances in the future, there are some common stress triggers that pop up for most people:
- Unexpected expenses: this ranges from vet bills and home repairs to car breakdowns.
- Reduction in income: this could be long periods of absence, parental leave, redundancy or lower income months for self-employed individuals.
- Economic changes: typically events out of your control such as the rising cost of living, recessions and job market insecurity.
- Life changes: this could be marriage, divorce, having a child, caring for elderly loved ones, moving house, switching jobs or retirement.
Finding yourself out of pocket or without a clear financial plan can leave you feeling lost, anxious, isolated, guilty or even depressed.
While it’s normal to feel stressed about your finances from time to time, constant worry or strain that affects your day-to-day living isn’t. Though it may be hard to see the light at the end of the tunnel, there are ways you can manage your financial stress and come out the other side.
What can you do?
Gain some clarity
The first step to managing financial stress is to identify your biggest issues or goals and prioritise them. For example, you may have credit card debt that’s playing on your mind, a habit of overspending and the desire to build an emergency fund. Tackling them in order of urgency and one at a time can help you on the path to regaining financial control.
If you’re feeling overwhelmed, a quick way to reduce your mental load is to automate any regular payments. You can set up standing orders and direct debits for your mortgage/rent and bills. You can even do this for savings accounts to keep yourself accountable.
To get into better financial habits you may want to take a closer look at your incomings and outgoings. This will give you a clear picture of your finances, allowing you to create a budget and set some realistic goals.
Make contingency plans
Although it’s easier said than done, saving money for different situations is one of the best ways to prepare yourself for unexpected expenses.
To help you prioritise, you can create pots for different situations and set yourself a target for each one. Aside from an emergency fund, having pots for home maintenance, holidays or even a fun fund can help you prioritise your saving goals. Some bank accounts even let you create pots in your mobile app, making it easier than ever to get started.
If your income doesn’t allow you to save, then you can either look for ways to boost your income (where possible) or address your current budget to see if there’s anywhere you can cut back.
If you need some help saving, you can read our guide on how to create an emergency fund.
Cover yourself
Although insurance and protection products are an additional expense, they could offer some much-needed peace of mind.
They act as a financial safety net for when you need it the most. For example, if you lost your job, mortgage protection could help you keep up with your mortgage payments. Or if you were off work due to illness, income protection could help you pay your bills and general living expenses.
Speaking to an insurance broker is one way you can find out if insurance is right for you. Alternatively, you can browse for quotes on comparison sites.
Manage any debt
Debt can be all-consuming, especially if it’s affecting your ability to cover your living expenses. If you’re struggling with debt, you’re not alone. If you need time to process and make a plan to address it, you can apply for the government’s Breathing Space scheme. This will give you up to 60 days of temporary protection against your creditors.
In the meantime, you can seek free professional advice from a debt charity like StepChange. Some steps you can take yourself include prioritising paying off any high-interest loans or consolidating your debt (combining all debts into one payment).
Look to the future
Once you’re in a comfortable position with managing your day-to-day expenses, it can pay to look to the future. Think about any life events or big plans you have coming up and what you need to achieve financially to make them happen. For example, are you hoping to move house or renovate? Perhaps retirement is on the horizon and you’re dreaming of travelling abroad?
There are ways to help you get there. Savings accounts, investments and pensions are all ways you can start saving regularly towards your goals. Workplace pension schemes can be effective ways to build your retirement fund as employers can top up your pension off their own back. If your workplace doesn’t offer one or you’re self-employed, you may consider opening a personal pension.
Build mental resilience
Aside from taking practical steps to address your finances, it’s also important to find coping strategies to help you manage any emotional strain. Daily practices like mindfulness, getting outside and practicing self-care can give you some respite.
When you’re feeling overwhelmed or bogged down by your financial situation, speaking to someone you trust can be a great help. Loved ones can offer the emotional support you need to gain clarity on your financial situation whereas professionals can give you practical advice to help you make an active change.
There are many charities that offer free financial advice on everything from debt to dealing with redundancies. We’ve also linked some websites below that offer free useful resources.
Getting additional support
Cost of living support from Gov UK
Money & mental health support from Mind
Debt and money resources from Citizens Advice