How to maintain your mental wellbeing as financial stresses bite

As the psychological impacts of the pandemic continue, stressors have become more about money than health. But there are many ways of counteracting these effects to protect your financial and mental wellbeing. 

Research shows people in the UK are now more worried about their finances (38%) than catching COVID-19 (33%)1 as the cost-of-living crisis takes hold. 

The study, published in March 2022 by University College London (UCL), shows the percentage of people concerned about finances has reached its highest level since the start of the pandemic. It also shows fewer people feel in control of their finances (56%), compared to October 2021 (63%). 

Happiness and life satisfaction have fallen alongside this. The proportion of adults who feel in control of their mental health fell to a worrying 49%, from 54% six months ago. 

Daisy Fancourt, lead author of the report, says: “These findings could suggest that our return to more ‘normal’ living hasn’t had all the mental-health benefits people expected. Concerns about money have been increasing, with people now more concerned about finances than about COVID-19. This suggests that new psychological stressors are becoming dominant for individuals.” 

What causes financial stress? 

The root causes of these psychological problems are mounting. COVID-19 brought two years of reduced incomes and stress for many people. A significant number are still recovering, but also now face other stressful situations such as the Ukraine war, raging inflation and volatile stock markets. 

Harriet Shepherd, Financial Wellbeing Manager at St. James’s Place, says that, although inflation affects those on lower incomes most, anyone with high outgoings can be impacted severely. This applies across the wealth spectrum. 

“That squeeze impacts other elements of your life, including overall wellbeing and mental health,” says Harriet. “For example, those who relied on debt may have been forced to rely on it even more, leading to a potentially dangerous debt cycle.” 

How can financial wellbeing be improved? 

Poor financial wellbeing comes from not feeling in control of or confident about your finances. Harriet says the way to improve financial wellbeing is to do something about it – take action to regain a sense of control. This could be anything from creating a household budget to taking financial advice. Improving knowledge and education also gives you more confidence to make financial decisions. 

“That’s why, if you have negative emotions around your finances, it’s time to talk to a professional – whether that’s a debt counsellor, financial planner or other kind of adviser,” says Harriet. 

“Your adviser can field any of your questions such as: am I still on track for my retirement plan? Should I do anything now, such as cut spending? What should I do if my financial or family situation has changed? How can I stop inflation eroding my savings? No question is too small or stupid. 

“If you don’t have an adviser, you can have a first meeting with no obligation. Even if you think you have the solution to your problems, confirmation that you’re doing the right thing brings reassurance, which is key to wellbeing.” 

Another reason it’s essential to get advice is that the answers to such questions will vary significantly depending on your life stage and situation. For example, younger people may need to consider reducing their outgoings and debt in response to high inflation. Families might need to check their financial goals, such as saving for school fees and university, are still on track. 

Established investors may need to review their investments and planned retirement dates. And retirees might want to review their income to ensure they have enough to cover their outgoings now and if high inflation continues.  

We’ll take time getting to know your situation and goals before talking you through various scenarios and providing education and recommendations. 

Is it worth getting financial advice? 

The earlier you speak to an adviser, the better. A report by the International Longevity Centre found receiving professional advice between 2001 and 2006 boosted wealth by £47,706 in 2014/162. Using an adviser 20 or even 30 years before retirement could make an even bigger difference. 

Financial advisers add this value by helping you use the right tax wrappers; avoid scams; get the confidence to save and invest; and tailor your portfolios to match your goals. They can also help you make logical decisions and avoid costly mistakes in uncertain times. 

This is why financial advice isn’t simply about numbers on a page. It can help you map out the future you want and significantly improve your financial wellbeing and mental health. 

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.  

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is generally dependent on individual circumstances. 

Sources: 

1 COVID-19 Social Study, University College London (Funded by Nuffield Foundation, UKRI and Wellcome), March 2022.

2 What It’s Worth – Revisiting the Value of Financial Advice, International Longevity Centre, November 2019. Based on 2014/2016 calculations. Receiving professional financial advice between 2001 and 2006 resulted in a total boost to wealth (in pensions and financial assets) of £47,706 in 2014/2016. 

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