How to get help with your finances as inflation soars, causing 'anxiety and depression'

More than half of adults have experienced anxiety and a quarter felt depression because of rising bills, new research reveals.

Young people are far more likely to struggle to cope, and those with a job are more worried than those out of work about inflation and other financial pressures.

Overall, around half of adults are staying at home more to save money, in a form of self-imposed financial lockdown, according to the survey by the Personal Finance Society.

Money worries: Young people are far more likely to struggle to cope as bills rise, research finds

Money worries: Young people are far more likely to struggle to cope as bills rise, research finds

The findings chime with previous research showing that the majority of people say their financial situation affects their mental health.

And a separate new study indicates that people with high anxiety and who feel they have no control over their money are the least likely to have enough savings and other assets to be resilient.

‘How we feel is inexorably bound up with our finances,’ says Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, about the latter research.

‘While some people are benefiting from a virtuous circle of feeling positive about their secure position, others are locked in a vicious circle, where their financial woes are feeding the misery that amplifies their money problems.’

The PFS said its study on financial pressures and mental health exposed a deep generational divide, with three quarters of 25 to 34-year-olds suffering anxiety about rising bills compared with a quarter of over-65s.

It also found that overall:

– Some 60 per cent of people in work are experiencing anxiety or worry as a result of rising bills, compared with 43 per cent of those not working

– A fifth of people are eating less healthily to reduce costs, and 43 per cent say they are buying fewer takeaways and 39 per cent fewer clothes

– People are most worried about energy bills, despite the support announced by the Government.

 More people are experiencing depression and anxiety whilst eating less healthily and going out less. There’s a risk of turning a cost of living crisis into a public health crisis too

‘British people are struggling to cope not just financially, but mentally with rising bills,’ says Caroline Stuart, president of the PFS, a professional body for financial advisers.

‘More people are experiencing depression and anxiety whilst eating less healthily and going out less. There is now a risk of turning a cost of living crisis into a public health crisis too.’

The PFS surveyed more than 1,500 people, weighted to be representative of the British adult population, in late October.

The Hargreaves Lansdown study, carried out with forecasting firm Oxford Economics, looked at two emotional measures – whether people are anxious, and whether they feel negative and disconnected from their money.

It found that ‘Those with high levels of anxiety were less likely to have enough savings to be resilient (43 per cent compared to 64 per cent of those with low anxiety), to have enough money left at the end of the month (35 per cent compared to 52 per cent) to have enough saved in their pension (30 per cent compared to 46 per cent) or be resilient when it came to property ownership (22 per cent compared to 35 per cent).

In addition, the study reported: ‘People who feel they have no control over their financial position are likely to have less savings (47 per cent have enough to be resilient compared to 67 per cent of those who feel they have some control).

‘Meanwhile 37 per cent have enough cash left at the end of the month (compared to 55 per cent), 33 per cent have enough in their pension (compared to 49 per cent) and 37 per cent are resilient when it comes to home ownership (compared to 24 per cent).’

Making ends meet? According to Hargreaves Lansdown's research, only 35% of those with high anxiety had enough money left over at the end of the month

Making ends meet? According to Hargreaves Lansdown’s research, only 35% of those with high anxiety had enough money left over at the end of the month

Coles says either anxiety or money problems can come first, but they can easily feed a vicious circle.

‘When we’re short of cash, we’re bound to be more anxious about our finances, and then when we’re more anxious, it can make it incredibly difficult to face our money problems.

‘It’s easy to feel overwhelmed and because you have so many things to worry about, you don’t know where to start.

‘It can also be isolating, because you’re embarrassed about the problems you face, which can make it incredibly difficult to know where to turn.’

Regarding feeling out of control of your money, Coles says this can also start from either the emotion or the financial situation.

Your circumstances may have put you in a difficult position and you can’t see any way of making things better, or your emotional health has disengaged you from your finances and left you in trouble, she explains.

‘Either way, one feeds the other, because not being in control of your finances means things are only going to get worse.’

Hargreaves runs a savings and resilience barometer with forecasting firm Oxford Economics.

This is based on data from the Wealth and Asset survey by the Office for National Statistics – which draws its information from 10,000 households – plus other data from official sources.

Hargreaves says the barometer is structured around five pillars of financial behaviour – controlling your debts, protecting your family, saving for a rainy day, planning for later life and investing to make more of your money.

How to get on top of your finances

We have drawn together the following tips from the PFS, Hargreaves and others on how to get started, where to go for help, and what to do if you are panicking about investment losses or worried that your pension is falling short.

1. Control your spending 

‘Explore swapping water, energy and service providers without penalty and seeing if you can get cheaper elsewhere,’ says the PFS.

‘Look at long-held savings accounts or funds and move to new accounts with higher interest.’

It suggests creating a monthly budget covering utilities, fuel, food and drink, presents and special treats, and being ‘brutally honest’ about how much you could save.

The group says you can then turn your monthly budget into an annual one and set medium-term goals like switching job and long-term ones like buying a home and building up a pension pot.

>>>See This is Money’s cost of living and bills section and below for help.

2. Take it one step at a time

Work out your priorities, tackle the first one and go from there, says Coles.

‘It’s easy to feel overwhelmed, so don’t aim to sort everything at once. This will depend on your circumstances, but as a general rule of thumb it’s worth looking at your spending first, and whether there are any costs you can cut or any extra help you can get to make ends meet.

She says if this gives you a little bit left over at the end of the month it will help you move to the next step.

‘For someone with expensive debts this might be to start paying them down. For someone without emergency savings it could mean building those up, and for someone whose pension is way off track, it’s worth prioritising that too.’

3. Ask for help and don’t let setbacks put you off

It can make an enormous difference to talk about financial problems and mental health with someone you trust – friends and family, and your GP who can point you in the direction of local support, says Coles.

She also suggests using resources such as the charity Mind, the NHS website Every Mind Matters, and the free service Mental Health & Money Advice.

Coles adds: ‘None of us are perfect money robots. We all make mistakes, and we all have times where things don’t go to plan.

‘If you hit a setback, just take your time and start again. You don’t have to be perfect to be moving in the right direction.’

4. Don’t make changes in haste after investment losses

It’s easy to be rattled, but volatility is an inevitable part of investing and investors must always be prepared to ride the ups and downs, says Rob Morgan, chief investment analyst at Charles Stanley.

‘Keeping everything in cash is the most secure thing to do in the short term, but keeping too much in the longer term could be a poor decision.

‘Inflation, representing rises in the cost of living, is likely gradually erode its spending power. Through compounding more volatile stock market returns, and ignoring short-term noise, you give yourself a better chance of meeting long-term financial goals.’

‘It’s often the case that the market falls more quickly than it rises, which is psychologically challenging, but as long as you have a long term view you shouldn’t be too concerned.

‘If feasible you can look to add to your investment to take advantage of lower prices.’

Morgan says one way to counter market ups and downs, and remove stress about timing from the equation, is to drip feed money into investments at regular intervals like once a month.

He adds: ‘Selling out in fear can be the worst thing to do. Large falls can be followed by large gains, so you risk losing on both sides.

‘Being out of the market also means you are no longer collecting – and potentially reinvesting – any income your investments are paying.’

5. Sort out your pension

To get started, investigate your existing pensions. Broadly speaking, you need to ask schemes the following:

– The current fund value

– The current transfer value – because there might be a penalty to move

– Whether the pension is in a final salary or defined contribution scheme

– If there are any guarantees – for instance, a guaranteed annuity rate – and if you would lose them if you moved the fund

– The pension projection at retirement age.

You should add the forecast figures to what you anticipate getting in state pension, which is currently £185.15 a week or around £9,600 a year if you qualify for the full new rate. Get a state pension forecast here. 

If you are tempted to merge your old pensions, check out our tips on how to decide.

If you have lost track of old retirement pots, the Government’s free pension tracing service is here, and there are further tips on finding pensions here.

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