Money and mental health - six ways to improve financial resilience

30 January 2023

4 minute read

Barclays Director of Savings and Investments Clare Francis explores ways to improve finances now and in the future.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

Please bear in mind that tax and pensions laws can change and that their effects on you will depend on your individual circumstances. We don’t offer personal advice.

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Narrated by the author Clare Francis, please click below to listen. Alternatively, please read on.

Managing money is harder when you are suffering from mental health problems. Worrying about money can make your mental health worse, and it’s not only those in financial difficulty who are finding things harder.

The deepening cost of living crisis and the pressure of a looming recession can make things feel even more challenging than normal.

Making time to regain control can be a huge step forward in gaining some clarity and peace of mind.

Here are six steps you can take to improve your financial resilience now and in the future

  • Review your finances annually - A new year is a great time to review and reset – look at all your outgoings and identify areas where you could make savings. Check there are no direct debits going out for things that you no longer use. When annual subscriptions come up for renewal ask yourself if you really want to continue paying and cancel it if not. Similarly, when your car or home insurance is up for renewal, don’t just accept the renewal price – shop around as you’ll probably be able to save money by changing insurer.
  • Take a look at recent bank and credit card statements and create a budget plan - Even if you’re fortunate enough not to be worrying about how you’ll make ends meet each month, having a clear picture of what’s coming in and going out is really useful and can help free up cash you could then put to better use elsewhere. You’ll probably be amazed at the amount you fritter away on non-essentials without realising it.
  • Build up your savings - It’s really important to have savings to fall back on in case of an emergency or unexpected expense. With incomes so squeezed at the moment, it may seem hard to save, but even putting a small amount away each month will help. If you manage to free up some cash by giving yourself a financial review, saving regularly might be easier than you think.
  • Think to the future too - When it comes to improving your financial resilience, you need to look to the future and not just focus on the here and now. And to give your money the best chance of increasing in value, it’s worth considering investing as opposed to leaving everything in a cash savings account. While stock markets do fall as well as rise, over time they tend to produce better returns than cash.

And the sooner you start investing, the longer your money has to grow. For example, if you invest £5,000 each year from the age of 18 and assume it grows by 5% a year, it would be worth over £700,000 by the time you reach 60.

But if you wait until you’re 30 to start you’d only have about £350,000 by the time you hit 60.

  • Be tax savvy - There are various ways you can minimise the tax you pay and one of the simplest is to use an ISA when you save or invest. You get an ISA allowance every tax year and it’s currently £20,000 meaning you can put up to that amount into an ISA before 5 April 2023, which is when the tax year ends.

You’ll then have a new ISA allowance when the next tax year starts on 6 April. The benefit is that any returns you make on money held within an ISA are tax-free, whereas if you save or invest outside of an ISA, you may have tax to pay.

  • Keep track of your investments - Investing is best-suited for the long-term because of the risk that you could lose money if the stock markets fall. With time on your side your investments can hopefully recover. However, you shouldn’t just forget about your money once it’s invested.

It’s worth checking your investments once or twice a year to make sure they’re performing as you’d hoped. It’s also important to try and spread your money around so it’s invested in different types of companies and geographical regions as diversifying in this way will reduce the overall risk you’re taking and lessen the chance of you losing money.

Remember you’re not alone

The most important thing to remember if you’re worried about your finances is that you’re not on your own. Not only will there be other people going through something similar, but there’s also lots of help available. As well as the resources already linked to in the article, we also have more information and guidance on the Money Worries hub on our website.

Alternatively, if you have significant debts and feel you need more help, contact one of the debt charities, such asStep Change,Citizens Advice, orNational Debtline.

Please remember, stock markets can fall as well as rise and you may get back less than you invested. Also, tax rules can change and their effects depend on individual circumstances. This article is not intended as financial or investment advice, so if you don’t feel confident about making your own financial decisions, please seek independent financial advice.

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