Financial Wellbeing – Developing a healthy money mindset

Financial Wellbeing - Developing a healthy money mindset



Why is this important?

According to the Money Advice Service, around 1 in 5 adults say they’re drowning in debt and that it’s having a significant impact on their mental health. Worrying about money can
occupy a significant amount of headspace and can feel really overwhelming. It can also
inflate our problems or make them seem impossible to overcome, which perpetuates our
worry further.

A common strategy for coping that lots of us end up leaning towards is ignorance and
avoidance. If we ignore the problem, it’ll go away eventually, right? Maybe in some
situations, but financially it definitely won’t. Getting on top of our financial situation can
seem like attempting a Rubix cube, so many of us just avoid it entirely.
Whilst everyone’s situation is different, a common characteristic of developing a healthier relationship with our finances is getting our mindset right. We recently hosted a Financial
Wellbeing webinar considering how people can improve their mindset and subsequent
relationships with money. This guide summarises some of the key takeaway messages.

Common barriers to managing money:

  • Lack of knowledge
  • Debts
  • Lack of confidence
  • Not establishing the ‘why’

All of these barriers have solutions, the key thing is your mindset. Knowing our long-term
goals and asking ourselves ‘why?’ increases our motivation and can lead to a more
positive mindset.

Limiting thoughts about money

Limiting thoughts are those that have the potential to restrict us. Examples might include
“I’ll never get out of debt” or “I don’t make enough to save” and they can prevent you from
developing a healthy relationship with money.
Recognising these thoughts and challenging them is the first step to overcoming them –
can you think of any examples of limiting thoughts you hold about your own situation?
What is the evidence it’s true? Is there a different way to think about it? How can you
change it?

In terms of money management, where should people spend more or less time or money?

The main thing is to take control. When we feel out of control and overwhelmed, we experience greater stress levels which will make managing money harder.

A good exercise is if we think about the consequences of our current money management on our long terms goals, for example “if I carry on doing what I’m doing where will I be 1 year from now, 10 years, 20 years…” and so on. Writing it down can help bring it to life and trigger thoughts and motivation to improve the situation.


Ways to manage the stress associated with money worries

Talk to someone. When you’re facing money problems, there’s often a strong
temptation to bottle everything up and try to go it alone. Many of us even
consider money a taboo subject, one not to be discussed with others. Talking to
a trusted friend or loved one can often be a relief and can also help you put
things in perspective or think in a different way.

Take inventory of your finances. As daunting or painful as the process may
seem, tracking your finances in detail can help you to regain a much-needed
sense of control over your situation. Go easy on yourself when doing this, don’t
use this as an excuse to punish yourself for any perceived financial mistakes but
focus on the aspects you can control as you look to move forward.

Make a plan and create a budget. You might think about doing this with the
help of someone you trust, or an advisor from a free service like the Money
Advice Service. They also have a free budget planner which is a quick and easy
to use tool to help you take control of your money.

Our top three money advice tips:

  • Build an emergency fund. No matter how well you plan, there are always things out of your control that can go wrong. If you don’t have savings for this, you run the risk of relying on others to help, or worse, falling into debt. Our experts recommend starting with a goal of £500, then £1000 and build it from there. Ideally, you should aim to
    save enough to sustain you for 3-6 months if you were to become unable to work.
  • Create goals. Take some time to think about what you would like to achieve in the long term. This is your “why”. In terms of saving money, imagine where you want to be in the future and give yourself a timeframe. Then, work out what you need to get there. Are you on track? If you’re not, what changes can you make to bridge the gap? Having clear and personal goals helps us make better decisions when managing money.
  • Get advice. Information on money management can be overwhelming and, let’s face it, not that exciting! Financial advisors can help you to get a better handle of your situation by providing regulated, expert advice. If you’d prefer a no-cost option, resources like the Money Advice Service, or Hatch can provide free and trusted financial advice.