Get Financially Fit

How does money affect mental health?

Sep 22, 2023

It’s something that affects us all: our money and mental health. When your finances feel like they’re getting out of your control, it can have a significant impact on your mental (and physical) wellbeing. 

Loqbox has some mental health and money advice, plus some great tips on optimising your financial wellbeing. Improving your mental health and money management is totally achievable — here’s how to start today.

How does money affect mental health?

Let's face it, even if the best things in life are free, money still matters. Financial stress can take a toll on our mental wellbeing — and have an impact on your physical health too — leading to anxiety, depression, even weight changes. We will often put money problems first (for instance, our  debt), and mental health second (the stress that debt causes). This can lead to us feeling overwhelmed, hopeless and like we’re stuck in a never-ending cycle. 

Constantly worrying about bills, loans and living costs can consume our thoughts, making it hard to focus on anything actually solving any of the money problems you’re having. Even though we understand that ignoring money issues has a tendency to just make them worse in the long run, this seemingly endless downward spiral can make you feel trapped in a Catch-22.

And it works both ways. If you are experiencing mental health issues, they can directly impact your financial situation. Feeling low or depressed can drain your energy and motivation to stay on top of things, like your bills and rent. Or when you’re down, you may feel the need to overspend on treats to make yourself feel better. But depending on the severity, you may not be well enough to work at all.

These changes in behaviour can lead to unexpected problems if they aren’t dealt with quickly. So, what can we do about money and mental health to stay on top of them both?

Mental health and money advice

If you’re wondering how to improve both your mental health and money management skills, here are some handy tips to help you balance your money worries and mental health for a happier future:

Be honest with yourself about finances

Ignoring money problems won't make them disappear. Usually, it just makes them worse. Procrastinating about it won’t help, so set yourself a 30 minute timer, take a deep breath, grab a cuppa, and gather all of your financial information.

Then lay it out on a table in front of you (or into a neat folder on your laptop), so you can confront it head on. Sometimes even just looking at it all in one place can make it seem more achievable.

Reach out for support

Having money worries can be an isolating experience, but remember, you're not alone. Talk to your trusted friends, family, or a financial advisor about your concerns (the latter may not be available to everyone, but if you’re struggling with debt specifically, StepChange can help you with some free and confidential debt advice)

Sometimes, just talking it out can give you an immense sense of relief. There are many people with similar worries to you. You’re probably not the first, and you won’t be the last. There’s help out there, so go and grab it.

Start small

Once you’ve identified the main issues that are giving you money worries, set realistic and achievable financial goals to solve them. 

Breaking them into smaller milestones will give you a sense of progress and accomplishment as you start ticking things off the list.

Create a budget

A budget can help you build a realistic road map towards your goals. You can read about different budgets here. It’s best to find one that suits your circumstances and your needs. 

Often budgets work by breaking your income into percentage chunks. One chunk goes towards what you need, another to your goals, and then the rest is for what you want.

Take the 50 20 30 rule: 50% is for what you need (like bills and rent) and 20% is for your goals (like paying off debts). That leaves 30% for what you want (things that bring you joy). Just because you’re solving money problems doesn’t mean you should forget about your self-care. A budget can give you a guilt-free war chest for your guilty pleasures!

Keep an eye on your credit score

Your credit score is a number, generated by your credit report, that indicates how ‘creditworthy’ lenders consider you to be. You can use your credit score as a tool to work out how likely it is you’ll be accepted for a credit application, and the likelihood of being offered better interest rates on your borrowing. 

Your credit scores are calculated by the main three credit reference agencies in the UK: Experian, Equifax, and TransUnion. You can find out how to check your credit scores with each credit reference agency for free and without impacting them here.

If you’re having financial problems, there’s a chance they’ll be reflected on your credit score. But knowing how credit scores work is important for maintaining your financial wellbeing. It can shine a helpful light on your finances. You might even be able to save more and get better deals with higher credit scores. Find out how to improve your credit score here.

Create a safety net

Life can be unpredictable. Many of us have learned the hard way when it comes to our finances. But having an emergency fund can act as a safety net during tough times. An emergency fund should be at least three to six months' worth of your living expenses. Having these savings behind you will do wonders to ease your money worries and mental health.

Of course, if you’re already having money problems you may not be in a position to save money — and that’s perfectly OK. It just means you’ll need some time and planning to get to that point, it’s a positive thing to have a goal to work towards. 

For instance, before you save anything you should always try to clear your debts first. Because the interest that you pay on your debts is usually far higher than what you can earn on your savings (in AER). So clearing your debts first can give you more saving power in the long run. 

Celebrate your wins

Celebrate your financial wins, no matter how small they are. Keep track of your accomplishments and reflect on the positive changes you've made in your mental health and money management.

Every milestone that’s ticked-off is another step forward towards taking care of your financial wellbeing. Let the last success motivate you towards the next.

Seek professional help

While we can give you useful money management tips and advice, (and help you build your credit score), if your money worries are becoming overwhelming, you should consider reaching out to a mental health professional. They can provide valuable guidance and support to help you cope with stress and anxiety.

Remember, it's okay to take things one step at a time. Improving your mental health and money management is a journey, and progress might be gradual. Be patient and kind to yourself along the way.

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