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Money and mental health

by Jeff Salway – Financial journalist and mental health counsellor
Last updated 24th September 2024
8 min read

It’s never been a secret that financial worries can have a big impact on our general wellbeing. It’s also true that mental health issues can make it harder to engage effectively with our finances.

The relationship between money and mental health is well-established. But it’s become even clearer over the past few years, with the COVID-19 pandemic and the cost-of-living crisis underscoring the link between financial worries and mental health problems.

There are things we can do to mitigate the impact of our finances on our wider wellbeing, and there are sources of support available for both money and mental health issues.

We’ll come to that shortly. But first it’s worth taking a closer look at how the relationship between money and mental health affects so many people in so many ways.

 

Stuck in a loop

The relationship between money and mental health issues is often cyclical: money problems are a common trigger for mental health problems, which in turn can lead to those money problems deepening further. It works the other way too. Managing your finances can be very challenging if you have certain mental health conditions.

The pandemic was a case in point. Many were hit hard by the effects of job cuts, reduced incomes, and a loss of access to support when lockdowns were put in place.

Those who experienced sudden and significant drops in household income suffered the biggest increases in mental illness, the National Centre for Social Research estimated[1].

Cost-of-living pressures have made matters worse. Research in early 2024 by the Financial Conduct Authority (FCA) found that 43% of UK adults experienced anxiety or stress due to the rising cost of living, while more than a fifth said they had lost sleep as a result of money worries[2].

Almost half of people in problem debt also have a mental health problem, according to the Money and Mental Health Policy Institute (MMHPI). It also found that 39% of people with a mental health problem said their financial situation had made those mental health problems worse. They are 3.5 times more likely to be in problem debt than people without mental health problems[3].

There are several ways in which poor mental health can make it hard to manage finances, from budgeting and shopping around for better products to dealing with specific problems.

For example, someone with severe anxiety or impaired cognitive ability may struggle to deal with companies on the phone or to navigate the websites and apps that many businesses now rely on. Security processes and multiple passwords can present a real barrier for some people.

If someone finds it too distressing to make potentially difficult phone calls or to communicate through other means, financial issues that urgently need addressing can quickly turn into bigger problems. For example, if you default on a bill payment but you’re not able to explain why or to discuss alternative arrangements, interest charges may well be added onto the repayments.

Some mental health conditions also feature characteristics that can make it difficult to manage money, such as impulse control and compulsive spending.

There are also clear reasons why money problems can cause or exacerbate emotional or mental health crises.

Every single one of us is potentially vulnerable to money-related stresses that can impact our mental health.

In fact, money worries are often connected to life events that tend to be emotionally challenging, from buying or renting a home to dealing with the assets left behind when a loved one dies.

And it’s not always about having too little or no money. The challenges of managing household finances can sometimes be overwhelming even for those that are comfortably off. People earning more than £90,000 a year had nearly the same level of financial worries as those with annual income of between £10,000 and £30,000, one survey found[4].

What to do – and what not to do

All of us will experience some degree of money-related stress at points in our lives. The severity and impact of those challenges will depend on a number of factors, such as our circumstances, financial situation, and our mental and emotional wellbeing.

So, there’s no single way to prevent finances from affecting your mental health, or to ensure that poor mental health doesn’t impact your finances.

But there are some important dos and don'ts to keep in mind. For example:

Don't ignore it

Money worries tend to cause anxiety – and the instinctive response to anxiety is often to avoid the problem. Humans are primed to respond to risk (or perceived risk) in the same way that animals do when faced with danger: fight, flight, or freeze.

So, it makes sense that we can feel paralysed by the problems in front of us, or we want to escape our problems. But it’s particularly damaging when it comes to money issues.

Avoiding things means that we never learn how to deal with them. More importantly, it only tends to make the problem even bigger. It might mean new charges being added to unpaid bills, services being cut off, important appointments missed, or even legal proceedings being brought against you.

Of the UK adults surveyed by the FCA in 2024, 7% said they had been put off dealing with financial worries (such as by ignoring letters), and 9% had avoided speaking to their financial providers about their finances or debts[5].

Avoidance can bring a feeling of relief in the short term, but it might be the least helpful thing you can do.

Seek support

So, deciding to address your money worries is perhaps the most important step you can take. It may well involve getting some form of help from elsewhere, or at least sharing the worries you have.

It’s a subject that can be hard to bring up, even (or especially) with family or friends. There are often feelings of shame and inadequacy and worries about being judged. But the reluctance to share our problems can make matters worse and deepen the mental stress of the situation.

Being more open about money worries can reduce stress and help clear your mind so that you’re able to begin taking practical steps.

When you’re ready to get help, there are several organisations you can turn to for either emotional or financial support.

Getting financial help

The best place to start depends on the nature of the problem. If it’s related to some form of product or service, the company providing it is the first port of call. Financial and other organisations are obliged to support vulnerable customers in a range of different ways. Let them know of any difficulties you’re experiencing sooner rather than later. They may well be able to help in ways that you’re unaware of.

If you’re in debt, free advisory services such as Citizens Advice(www.citizensadvice.org.uk opens in a new tab), National Debtline(www.nationaldebtline.org opens in a new tab), and the StepChange Debt Charity(www.stepchange.org opens in a new tab) can provide both information and solutions. The government’s MoneyHelper(www.moneyhelper.org.uk opens in a new tab) website is another source of reliable, impartial information.

If your money problems are more complex but you have the means to pay for support, consider working with a financial adviser. You can find an adviser near you on Unbiased(www.unbiased.co.uk opens in a new tab) or VouchedFor(www.vouchedfor.co.uk opens in a new tab).

Emotional and mental health support

For some people, managing their finances better will mean addressing wider or more deep-rooted issues. For instance, someone struggling to control their spending compulsions will only get so far with debt advice alone.

There are free sources of support for mental health and related issues from organisations – including the NHS, Samaritans(www.samaritans.org opens in a new tab), Cruse Bereavement Support(www.cruse.org.uk opens in a new tab), Rethink Mental Illness(www.rethink.org opens in a new tab), and Mind(www.mind.org.uk opens in a new tab), as well as more locally available services.

Counselling and therapy services are available on the NHS, and many areas of the UK have local services providing access to free or affordable counselling.

Again, if you’re in a position to pay for professional help, a qualified counsellor or therapist can help you get through difficult periods, break unhealthy patterns, and address any underlying psychological issues that are contributing to your financial stress.

Some employers also provide access to financial wellbeing services and counselling as part of their employee benefits packages.

Don't suffer in silence

Money is one of the most common sources of stress in life. From dealing with debts and struggling to cover household essentials to not having enough savings and worrying about family members with financial problems, money – or the lack of it – can affect us in all sorts of ways. And when we’re stressed about money, it inevitably impacts our relationships, our physical health, and our mental wellbeing.

If you’re already dealing with mental health issues – from mild depression or anxiety to psychotic and trauma-related disorders – those money worries can quickly become overwhelming and incapacitating.

You’re not alone. People all over the world and in all walks of life have to deal with financial stress and uncertainty in some form. There’s no shame in struggling to make ends meet or keep your finances on track. It’s normal to worry about money.

So, if your mental health is being affected by your finances, don’t ignore it. Talk about it, get help, and be kind to yourself.

Resources

Financial

Emotional and mental health

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Sources

[1] https://dera.ioe.ac.uk/38382/1/Finances-and-mental-health-during-the-COVID-19-pandemic.pdf
[2] https://www.fca.org.uk/publication/financial-lives/financial-lives-cost-of-living-jan-2024-recontact-survey-findings.pdf
[3] https://www.moneyandmentalhealth.org/wp-content/uploads/2021/12/The-Facts-updated-2021-3.pdf
[4] https://www.peoplemanagement.co.uk/article/1744199/10-financial-wellbeing-facts-employers-salary-finance
[5] https://www.fca.org.uk/publication/financial-lives/financial-lives-cost-of-living-jan-2024-recontact-survey-findings.pdf

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