3 tips to help deal with financial anxiety

Nine million UK adults say that money is a daily worry for them. That’s no surprise considering the last year or so we’ve had. Lots have found themselves needing to borrow money to pay the bills after redundancies or being placed on furlough.

And thanks to the impacts of the pandemic, women could be faring worse.

Financial stress can not only impact our mental health, but also our relationships and even our physical health. But you can take control of your money without having to make big changes. We focus on the small things you can do to feel more empowered when it comes to your finances.

Although this article gives you tips to focus on, this isn’t personal advice. If you’re not sure if something is right for you, ask for financial advice. Pension and tax rules can change and their benefits are dependent on your personal circumstances.

1. Have a cash buffer for emergencies

The government recently announced the Coronavirus Job Retention scheme will come to an end on 30 September. With women more likely to have been placed on furlough, there’s a risk that we’ll be facing more job uncertainty.

If job security is a worry, building up your emergency cash buffer can help. We usually suggest keeping an easy-to-access emergency cash fund. There’s no magic number or one-size-fits-all approach, but we think there’s a simple way to work out what’s right for you.

In general, we think you should consider holding at least three to six months’ worth of essential expenses as cash in your emergency savings.

If you’re retired, then you should consider holding more. We think it’s sensible to hold around one to three years’ worth of essential expenses if you’ve finished working. The amount in your cash buffer will depend on your individual needs.

Keep in mind, it’s important to continue building your cash buffer when you do return to having an income.

2. Give yourself a pot of fun

Being financially fearless shouldn’t mean giving up the things you love to save more.

If you enjoy treating yourself every so often (however that looks), separate these purchases into a pot of fun. That way you know you can dip into this whenever you want to. It’s a way of removing the guilt that some of us could feel when we do have to touch our savings.

HL client Sue Rayment uses a percentages rule when it comes to her savings. 10% of her income goes into her emergency savings pot where she has saved 6 months of basic living costs. But 10% also goes into a pot that she sets aside for things that bring her happiness.

Sue says, “I love spending my pot each month! For me this is for things like beauty treatments or products and holidays.”

Adjusting how we perceive our savings can make a positive impact on our financial mindset and remove some of the anxiety around spending when you’re under pressure to save.

3. Get ahead with your pension

We’re no strangers to the implications of not focussing on retirement. But for women the stakes are higher. The average woman could expect to have £100,000 less in her pension at retirement than the average man. We’d have to work an extra 40 years to make up the difference. But it’s not all gap and no solution.

If you’re a long way off retiring and you’re worried about your pension, there are things you can do to ease some of your worries as you approach retirement.

Make sure you’re paying as much as you can afford into your workplace pension. Even if you increased your contributions by an extra 1% of your income, you could be on your way to closing the pension gap by the time you retire. And if you’re self-employed, don’t neglect your personal pension altogether. Although almost three out of five self-employed people in the UK have a pension, only a quarter are actively contributing to it.

If you’re approaching retirement and you’re worried about not having saved enough into your workplace and/or personal pensions, there are still things you can do to ease anxiety.

First, check and see when you’re likely to receive your State Pension. Next, consider deferring it. Under the new State Pension, for every nine weeks you defer your pension, you boost it by 1%. After a year, if you’re on track to receive the full State Pension amount, you could increase your pension by £541 per year.

But remember, you usually can’t access your private pension until the age of 55 (57 from 2028), and your State Pension from at least age 66 if you haven’t yet reached State Pension age.

If you’re in retirement and you still have concerns about your pension income, you can speak to services like PensionWise. Or you can use the AgeUK calculator to see if you’d be eligible for Pension Credits or additional help if you’re on a low income. Our financial advisers can also tailor a plan to you.

Keep the conversation going

A recent survey of UK adults found that almost one in six don’t want to talk to others about money because it causes stress and anxiety. More worryingly, the majority of 18 to 24-year olds worry about money at least once a week. And over a third feel uncomfortable talking to their loved ones about it.

By not having these conversations, we run the risk of not being able to overcome financial stress. And more importantly, get the help we need.

But you can be a force for change.

Talk to the people around you – your family and friends. It might be uncomfortable at first but having open communication about money might make a lifetime of difference to someone.

If you’re not sure where to start, you can sign up to our Financially Fearless content and share our monthly tips and articles as an ice breaker.

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