How to cope with financial anxiety

 

We are nine weeks into the New Year and you may be feeling worried about the state of your finances, given the Christmas hangover and the impending financial commitments looming in front of you. You may be feeling anxious about how you will meet all of those commitments whilst paying off your existing debts. If that is you, then continue reading to discover our tips on how to cope with financial anxiety.

Money plays a significant role in our lives, so we cannot run away from it. Instead, if we have a troublesome relationship with money, we need to regain control and practice ways to reduce anxiety surrounding it.

Practical coping mechanisms for financial anxiety

Face your financial reality

Take a detailed look at your income, expenses, debts, and savings. Understanding your financial reality provides a foundation for creating a realistic plan to manage and improve your situation.

Establish a Budget

Creating a budget is an essential tool for managing money and reducing financial anxiety. List all sources of income and categorise your expenses, including fixed costs like rent and utilities, variable expenses like groceries and entertainment, and debt repayments. Allocate specific amounts to each category, ensuring that your spending aligns with your income. Read our blog post for further information on this.

Prioritise Debt Repayment

If you have outstanding debts, prioritise their repayment within your budget. Develop a strategy for tackling high-interest debts first, as reducing interest payments can significantly improve your financial outlook. Set realistic goals for debt reduction and celebrate small victories along the way.

Build an Emergency Fund

One of the key sources of financial anxiety is the fear of unexpected expenses. Building an emergency fund provides a financial safety net for unforeseen circumstances, reducing anxiety associated with the unknown. Aim to save at least three to six months’ worth of living expenses. If you are in no position to do this, have a look at applying for a credit card but only do this if you are happy for the searches to be done on your record and that you can meet the minimum repayment requirements. Having that safety net sat in the drawer at home can give peace of mind in case an unexpected expense comes up.

Establish Financial Goals

Set clear and achievable financial goals to provide direction and purpose. Whether it’s saving for a holiday, buying a home, or retiring comfortably, having specific goals creates motivation and a sense of control over your financial future.

Stay Informed

Educate yourself about personal finance to make more informed decisions. Understand the basics of investing, savings accounts, and retirement planning. The more knowledge you have, the more empowered and in control you’ll feel about your financial situation.

Celebrate Small Wins

Acknowledge and celebrate your financial achievements, no matter how small. Whether it’s sticking to your budget, paying off a credit card, or reaching a savings milestone, recognising your progress boosts confidence and helps build a positive relationship with money.

Mindset coping mechanisms for financial anxiety

• Call upon the rational side of your brain. Sometimes the financial burden that we face is not your fault. The cost of living crisis, spiralling costs, life changes such a redundancy and illness are out of our control and propel us into financial difficulties
• Focus on what you can control
• Stop catastrophising. Worries can become all consuming but worrying will not make anything better. Situations are temporary so focus on practical ways to reduce the debt
• Breathe and get outside. It is well known that time in nature can help ease anxiety, so get outside and breathe

Tackling and coping with financial anxiety involves a combination of practical strategies and a mindset shift. By facing your financial reality, creating a budget, seeking professional advice when needed, and practising mindfulness, you can take control of your financial well-being.

If you find yourself in a state of financial anxiety and cannot see the light at the end of the tunnel, then we may be able to help. Contact us to speak to one of our highly trained advisers who may be able to help or point you in the right direction.