From financial literacy to sustainable saving, we spoke with the experts to discover how we can tackle our money worries

Money. It’s something we all worry about. No matter how much you budget and save, there’s always something that comes up to throw a spanner in the works. And for those living payday to payday, building up a buffer to fall back on when times get tough isn’t always possible.

Challenging times

The Bank of England announced in late 2021 that inflation was set to exceed 4% - double the 2% target. Recent figures have shown price rises of an average of 3.2% over the past 12 months due to a global rise in demand for oil and gas, bottlenecks in the supply chain for building materials and electronic components, and problems recruiting for the service industry and supply chain jobs post-Brexit.

With energy bills set to rise as much as 30% in 2022, as gas and electric prices continue to soar. The £20 Universal credit boost came to an end in early October 2021 - meaning many saw a drop of around 25% week-on-week (single people under the age of 25) or 15% (couples with one partner aged 25 or over). Around 5.2 million people have been affected by the return to pre-pandemic universal credit payments.

With in-work poverty hitting record highs in the UK, one in six working households is living in poverty. It’s no wonder that so many of us are worried about our current financial situation, as well as our future prospects.

Personal impact

It’s estimated that an average family of four will pay £1,800 more to accommodate higher bills. With many facing stagnating wages as some employers remain reluctant or unable to increase salaries following uncertain times during the height of the pandemic, many of us are left with the daunting prospect of trying to cover the rising costs of living.

According to the latest figures from The Money Charity, as of September 2021, the average household has a credit card balance of £2,030 and will have seen a 1.3% increase in the cost of their rent. First-time buyers are taking an average of nine years to save enough for a deposit. It’s no wonder that a new report has revealed our mental well-being is significantly worsened by money worries. Those without financial stability score 37% lower for mental wellbeing, a recent report between Mental Health UK, The Money Charity, and Claro has revealed.

For those experiencing ill mental health, money has an overwhelming impact. 86% of those experiencing mental health problems say that their financial situation has made their mental health problems worse.

Knowing what we can do to start getting a handle on our financial worries can feel impossibly tough. We share six quick tips (with advice from financial and mental health experts) on where you can get started.

1. Financial literacy at every age

Financial literacy is, in essence, how well we are able to understand concepts around our money. Ranging from saving and investing to understanding debt and how we manage it, the more financially literate we are, the higher our sense of financial wellbeing and trust in ourselves (and how we manage our money).

Our financial knowledge (understanding of basic concepts of money management), behaviour (e.g. long term planning, savings, and how we control our finances), as well as awareness and attitude towards money and how we manage it, all affect our overall financial literacy. As The Money Charity’s Michelle Highman explains, financial literacy is a foundation life skill we all need.

“Financial capability is one of the foundation skills for life, especially in an economy like the UK’s, which has many competing financial services and many kinds of debt that can entrap the unwary. People of all ages need basic financial skills and confidence to engage with and make the most of their money.”

But how can we increase our financial literacy? It doesn’t have to be complicated. Getting started with articles, videos, blogs, and podcasts can be an easy entry into what feels like a daunting topic. With a plethora of free resources out there covering topics from managing debt and building good credit, to saving for retirement and building an emergency fund for unforeseen expenses, the real problem can be sifting through everything out there. Make sure any media you are consuming comes from a verified, reliable source, offering objective and unbiased information and guidance.

The Money Charity is a great place to get started to find more advice and information on everyday money, planning, saving, debt, financial resources, and more. They also offer workshops and training for adults, children, and young people.

Money Saving Expert is another great, free online resource that helps break down current market offerings on which bank accounts will offer you the best savings or interest rates, how to compare specific bill costs, as well as when it’s worth making overpayments or saving for the future.

2. Create a working budget

A whopping 39% of UK households have no budget to track their incomings and outgoings. Creating a budget is the first step towards good financial planning, as it helps you to proactively get a grasp on your financial situation, track where your money is going, and decide what the next steps are for you.

For couples, creating both a personal budget and a shared budget to help manage joint financial commitments is key. This can help you to ensure that not only are your personal finances on track but your future financial goals (short, medium, and long-term) are aligned, too.

Money Helper, a government-backed site, has an easy to use budget planner tool that can help you get started.

3. Be mindful of your finances - no matter how much you earn

Even higher than average earners aren’t safe from financial worries. As Claro experts explain, earning a lot of money can actually mask underlying poor financial behaviours. While we may not recognise these behaviours immediately, they can have a long-term impact on us.

“Simply because someone earns a high income does not mean they will automatically have a greater level of financial confidence or financial literacy,” Claro’s Rachel Harte explains. “As there is enough income coming in, it could lead to less emphasis being placed on managing finances well. For example, they may feel less inclined to make sure they are getting the best deal on certain purchases, they may keep less of an eye on ongoing payments [or] pay for things they don’t use anymore.”

But what can we do if we find ourselves falling into these traps?

Rachel explains, “I would encourage more emphasis to be placed on having a longer-term financial plan to ensure that they can maintain the lifestyle they enjoy throughout their life, and that they have provisions in place in the event of circumstances changing. Having a longer-term financial plan will help to build financial confidence, awareness, and knowledge.”

4. Practice sustainable saving

Whether you’re looking to start saving from zero or are searching for an easier way to build your financial buffer, there are simple tips that can make it easier to save. As explained by Life Coach Directory’s Katie, using apps like Acorns of Qapital automatically round up your change and save it without you noticing can be a good place to start. Some bank accounts offer this service as well, so it’s worth double-checking what’s available out there.

Putting your savings into harder to access accounts that require you to give leave your money in them for a set amount of time or write in advance to access your funds can also help to deter you from dipping into your savings unless you really need it.

5. Get the conversation started

Many of us are embarrassed to talk about money. Whether it’s from fear of ‘falling behind’ friends earnings, or a sense of politeness, it can lead to feeling like we can’t talk about our finances. It’s no wonder 30% of us say money is one of our greatest causes of anxiety.

If you’re not sure where to get started, Counselling Directory has some simple guides on how to talk to friends about money worries, as well as tips on how you can take the stress and anxiety out of talking about your finances with your partner.

Chartered Psychologist and founder of AskDoc, Dr Juliet Anton, explains more about the importance of being open about our finances.

“It can be hard to manage your own mental health at the best of times, but when we bring money into the situation and concerns grow about how we are going to live one day to the next, this can take a significant toll on our mental health and wellbeing. When we start to worry about our finances, our priorities may begin to change, and this could lead to some of our needs, or our family needs being placed on a back seat. As a result, this could lead to the family not feeling security and stability, which in turn leads to symptoms of anxiety and depression.

“It’s important to speak openly and honestly to those around you especially with whom you trust, whether that be parents, your partner, or friends. Seeking advice from a financial expert who can share their advice on your financial situation will also be helpful in bringing clarity to your situation. Avoid keeping things to yourself despite the stigma of how another person may judge you as keeping things to yourself means you won’t be able to see an alternative perspective, which could lead to a solution to your financial problems. Keeping things to ourselves only gives us one perspective, our own perspective, and this will only let worries grow further.”

6. Consider working with a financial coach

Working with a financial coach can be a good way to work through any specific questions you may have about day-to-day money management, longer-term advice, or more complex issues.

A financial coach can help you to better understand your relationship with money, as well as identify any gaps in your knowledge. By talking with someone outside of your friends and family, it can help offer unbiased advice and a sounding board that you may feel more comfortable opening up within a confidential setting.

It’s important to remember a coach isn’t a financial advisor. They aren’t there to tell you how or where to spend your money. Instead, they help you to find limiting self-beliefs, as well as a gentle sense of accountability.

To find out more about how a financial coach could help you, visit lifecoach-directory.org.uk