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 have felt depressed because of rising bills, new research reveals.

Young people have a much harder time coping, and those in employment are more concerned than those who are unemployed about inflation and other financial pressures.

According to the study by the Personal Finance Society, about half of adults are staying at home more to save money, in a form of self-imposed financial lockdown.

The findings align 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 levels 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 linked to our finances,” Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said of the latest research.

“While some people benefit from a positive circle where they feel positive about their safety, others find themselves in a vicious circle where their financial problems feed the misery that exacerbates their money problems.”

The PFS said its survey of financial pressures and mental health revealed a deep generational gap, with three-quarters of 25- to 34-year-olds fearing rising bills compared to a quarter of over-65s.

It also found that in general:

– About 60 percent of those in work experience fear or worry as a result of rising bills, compared to 43 percent of those who don’t work

– A fifth of people eat less healthily to cut costs, and 43 percent say they buy less takeaway food and 39 percent less clothes

– People are most concerned about energy bills, despite the government’s announced support.

“British people are struggling not only financially but mentally with rising bills,” said Caroline Stuart, president of the PFS, a professional body for financial advisors.

‘More people suffer from depression and anxiety while eating less healthily and going out less. There is now a risk that a cost of living crisis will also become a public health crisis.’

The PFS surveyed more than 1,500 people at the end of October, weighted to be representative of the UK adult population.

Hargreaves Lansdown’s study, conducted with the 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 anxiety levels were less likely to have enough savings to be resilient (43 percent compared to 64 percent of those with low anxiety), to have enough money left over at the end of the month.” (35 percent versus 52 percent) to have enough savings in retirement (30 percent versus 46 percent) or be resilient when it comes to owning real estate (22 percent versus 35 percent).

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

Meanwhile, 37 percent have enough cash at the end of the month (compared to 55 percent), 33 percent have enough in retirement (compared to 49 percent) and 37 percent are resilient to home ownership (compared to 24 percent). ‘

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

Coles says anxiety or money issues can come first, but they can easily feed a vicious cycle.

“If we are short of cash, we will no doubt be more concerned about our finances, and if we are then more anxious, it can become incredibly difficult to cope with our money problems.

“It’s easy to feel overwhelmed and because you have so many worries, you don’t know where to start.

“It can also be isolating, because you feel ashamed of the problems you face, which can make it incredibly difficult to know where to go.”

As for feeling out of control over your money, Coles says it can also start from the emotion or financial situation.

Your circumstances may have put you in a difficult position and you don’t see a way to improve things, or your emotional health has disconnected you from your finances and got you into trouble, she explains.

“Anyway, one feeds the other, because if you can’t control your finances, it will only get worse.”

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

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

Hargreaves says the barometer is built around five pillars of financial behavior: managing 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 your finances under control

We’ve rounded up the following tips from the PFS, Hargreaves, and others on how to get started, where to get help, and what to do if you’re panicking about investment losses or worried your retirement is falling short.

1. Control your expenses

“Discover penalty-free bartering from water, energy and service providers and see if you can get it cheaper elsewhere,” says the PFS.

“Look at long-term savings accounts or funds and switch to new ones with a higher interest rate.”

It suggests creating a monthly budget for 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 convert your monthly budget into an annual budget and set medium-term goals, such as switching jobs, and long-term goals, such as buying a house and building a pension pot.

>>>See this is money cost of living and bills section and below for help.

2. Take it step by step

Work out your priorities, tackle the first, and move on from there, Coles says.

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

She says having a little left over at the end of the month will help you move on to the next step.

“For someone with expensive debts, this could be to pay them off. For someone without emergency savings, it can mean building them up, and for someone whose retirement is far from the job, it’s worth giving priority to that too.’

3. Ask for help and don’t be put off by setbacks

It can make a huge difference to talk about financial and mental health issues with someone you trust — friends and family, and your GP who can point you in the direction of local support, Coles says.

She also suggests using resources such as charity mindthe NHS website Every Mind Mattersand the free service Mental health and money advice.

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

“If you have adversity, just take your time and start over. You don’t have to be perfect to go in the right direction.’

4. Do not make hasty changes after investment losses

It’s easy to be fooled, but volatility is an inevitable part of investing and investors should always be prepared to experience the ups and downs, said Rob Morgan, principal investment analyst at Charles Stanley.

Keeping everything cash is safest in the short term, but holding too much in the longer term can be a bad decision.

“Inflation, which represents the rise in the cost of living, is likely to erode its purchasing power gradually. By compiling more volatile stock returns and ignoring short-term noise, you give yourself a better chance of achieving long-term financial goals.’

“It’s often the case that the market falls faster than it rises, which is psychologically challenging, but as long as you have a long-term view, you shouldn’t worry too much.

“If it’s feasible, you can expand your investment to take advantage of lower prices.”

Morgan says one way to counteract market ups and downs and take stress about timing out of the equation is to trickle money into investments at regular intervals, such as once a month.

He adds, “Selling out of fear can be the worst thing you can do. Big drops can be followed by big gains, so you risk losing on both sides.

“Being out of the market also means that you no longer collect income – and possibly reinvest – that will give you investments.”

5. Arrange your pension

First, research your existing pensions. Broadly speaking, you should ask schemes for the following:

– The current fund value

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

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

– If there are guarantees – for example a guaranteed annuity – and if you would lose them if you moved the fund

– The pension prognosis at retirement age.

You need to add the forecast figures to what you expect to get in state pension, which is currently £185.15 a week or about £9,600 a year if you qualify for the full new rate. Request an AOW prognosis here.

If you are tempted to merge your old pensions, take a look at our decision tips.

If you’ve lost track of old pension pots, the free government pension tracking service is here, and there are even more tips on finding pensions here.