If the number one stress in your life is money-related then you’re not alone because research found that financial stress is the top concern for UK employees. The good news? It can actually be relatively easy to reduce your stress levels if you know how to make a few simple tweaks.
Know the cause
It’s hard to fix a problem without knowing what the cause is. There are many ways money can cause stress, but they often fall into three types of stress:
A) Stress about not having enough to cover today
- Not being able to pay bills on time
- Feeling overwhelmed by debt
B) Stress about not being prepared for the future
- Worry about your children’s financial future
- Not feeling prepared for retirement Not sure how you would cover a big unexpected expense
C) Stress about not feeling in control
- Difficulty keeping track of everything
- Shame that you are stressed about money when others seem to have it sorted
All of these are understandable and common reasons to worry. But that doesn’t mean you have to continue worrying. Work out which of these areas is causing the most stress for you and see if our suggestions below can help relieve some of the stress.
If you answered a) - stress about not having enough to cover today
If your stress is mostly about the fact that you feel like you don’t have enough money to make it through the month, it’s time for the ‘B’ word. Budget.
Whilst not a ground-breaking solution to your problem, changing your attitude towards budgeting can hugely improve your confidence by giving you clarity about where your money is going, and plan where it needs to go. It can help you see if there are any areas where you could make the most of your income. Our spreadsheet template can help you set one up, and we have plenty of other tips to help find an approach that works for you.
If your outgoings are higher than your income, we’ve got a handy guide to help you find ways to cut costs. Sometimes savings might come from unexpected places, like renegotiating bills or consolidating debts at a lower rate.
If you answered b) – stress about not being prepared for the future
Most of us don’t like unknowns. Worrying about the future is human nature – but there are steps you can take to prepare yourself for the ‘what ifs’ in life, as well as long-term goals like a nice retirement.
Start by working out how much you might need. For emergency funds, the Money and Pensions Service recommends having three months’ worth of your bills set aside. Look at your current monthly bills and multiply by three to work out what you should aim for in your emergency fund. If this feels impossible, start by working towards a £100 emergency fund, and then towards a £500 fund. You don’t have to do it all at once – it could take a couple of years to build up your emergency buffer. Work out what you can afford to put towards your emergency fund each month and set up a standing order so that it happens automatically on pay day. Don’t stress if you have to dip into this fund if something unexpected comes up – that’s exactly what it’s for!
If you have dependents, consider life insurance and income protection so your family is provided for if you are unable to work through ill health, an accident, or you pass away.
For long-term security, you’ll want to use a pension calculator to find out how much you might need in retirement. If you’ve opted out of a workplace pension, see if you can afford to start contributing again. The benefits are huge, as you’ll get money from your employer as well as government tax relief. If you’re already contributing, the calculator will show what kind of income you can expect in retirement – if you’d like more, then it might be worth asking your employer if you can increase your pension contribution.
If you answered c) - stress about not feeling in control
Sometimes your stress is because money feels too hard and overwhelming. If you want to tackle this stress you’ll need to know exactly where you stand.
Worrying about paying bills on time can be a major contributor to money stresses. Take back control by automating as much of your finances as possible. Use our budget template to make a note of all the days you have money coming in and going out. A quick conversation to your utilities provider to set up a direct debit or a quick interaction with your online banking to set up a standing order could save you hours of stress every month going forward.
Setting up a second account can also help you separate your bills from your spending money. If you have an account just for the things you know you will have to pay, like electricity, phone, mortgage or rent, you won’t have to do mental math every time you purchase something. Every payday, transfer enough money to this account to cover these expenses and your Direct Debits and Standing Orders can do the rest of the work for you! This means the money in your everyday account is yours to spend. No more standing in the shops, looking at the price tag of a purchase, wondering when your council tax is due.
As with any type of stress, talking helps. Money worries won’t disappear just because you push them to the back of your mind. If you’re anxious about your finances, tackle your concerns head on and talk about them.
Almost everyone feels uncomfortable about their finances and this makes it really difficult to talk about. The good news though is that almost everyone feels uncomfortable about their finances, so your friends and family probably can sympathise with the position you are in or the concerns you have. If you have a partner, open up to them before your money worries spiral. If you live alone, share your concerns with someone you trust. Your friends or family will be able to look at your problem objectively.
Some extra tips
Planning to overhaul your finances and reduce stress is a great idea, but it’s all too easy to be overoptimistic about the amount you can pay towards debt or boost savings. It’s better to consistently achieve a small target, than to be beating yourself up because you didn’t reach an ambitious one.
Remember that the goal is to change your habits, not drain the fun from your life. When you set your savings goals, set the rewards you will give yourself at the same time. If you successfully walk to work for a week, saving £15 you would usually spend on the bus, it’s ok to buy yourself a £3 coffee in celebration! If you get to the end of winter and have saved £100 more than you thought you would on your energy bill, it is ok to congratulate yourself with a £30 video game.
Don’t beat yourself up
You’re not a bad person if things don’t go to plan. Look at what went wrong and see if you can plan for next time this happens. Regularly review your progress and if you find things aren’t quite working, adapt.