Whether it’s worrying about meeting rising household bills, or a volatile stock market’s impact on your pension, it’s hardly surprising many of us are feeling pretty negative about our finances right now.
It’s a really tough time for millions of people, and particularly for those who were already struggling to make ends meet before the cost of living crisis. You may worry about what crisis will hit next, and money worries are likely to be affecting some people’s mental health. If this applies to you, find out how to get help in our article Are money worries affecting your mental health?
Whilst there’s no escaping the current challenges many of us are facing, there may be some strategies we can use to help cultivate a more positive money mindset during the cost of living crisis.
1. Focus on the fact that this crisis will pass
History shows that, given time, today’s economic woes should eventually be overcome. Most periods of history have experienced enormous challenges, ranging from great depressions and pandemics to a global financial crisis. All have passed, and life has carried on, but they may have felt all-consuming at the time as people struggled to manage their lives and the impact on their finances.
At present, we are facing high inflation and a cost of living crisis, amongst other things, however, the Bank of England has said that inflation is expected to fall back towards its 2% target within three years.
Inflation fell steadily last year, and has continued to ease in 2024, reaching 3.2% in the 12 months to March, the lowest rate in two and a half years. The fall was largely due to falling food prices and decreasing costs of food and drink at restaurants and cafes.
2. Accept uncertainty
None of us can say for certain what’s going to happen tomorrow, or next year in the world economy. The past few years have proved extraordinarily challenging, and it’s often natural to fear the worst. However, it’s important to accept that uncertainty is a fact of life. In fact, the only certainty is that things can and will change over time. Knowing that you’re not alone in struggling with uncertainty, and accepting that very little in our lives is certain can be helpful in coping with anxiety, whether about your finances or other aspects of your life.
Our articles 10 everyday activities that can help you stay in the present moment and An introduction to mindfulness could help you to focus on taking things one day at a time.
Compare cheap car insurance quotes
Car insurance renewal premiums have a habit of increasing every year, even if you haven’t made a claim. Compare car insurance quotes from over 110 UK providers – you could save up to £490* per year.
*51% of consumers could save £490.26 on their Car Insurance. The saving was calculated by comparing the cheapest price found with the average of the next four cheapest prices quoted by insurance providers on Seopa Ltd’s insurance comparison website. This is based on representative cost savings from June 2023 data. The savings you could achieve are dependent on your individual circumstances and how you selected your current insurance supplier.
3. Maintain and develop positive habits
You may be forced to stop saving or investing for your future to make ends meet, but if you are fortunate enough not to be in this position, beware that stopping contributions into pensions and ISAs could prove an expensive mistake in the long term.
One of the basic principles of investing towards retirement is to put your money to work as soon as possible. Investments, whether they be stocks and shares, bonds, property or cash, need time to grow, so the longer you leave your money invested, the more chance you have of making gains. Also, by drip feeding your money into your pension on a monthly basis, you buy more shares when their price is low, and fewer when they rise in value. This can help to smooth out volatility, and mean that you effectively pay the average price for your investment over time.
Another positive habit that’s worth maintaining or developing is regularly reviewing your bills, budget and spending habits. This may seem stressful when the cost of living is soaring, but making this part of a monthly routine can give you a sense of control over your finances and help you to feel more positive. You can use our money comparison tools to save on, for example, everything from mobile phone costs to car insurance and pet insurance.
4. Focus on your goals
You may be tempted to react to short term market volatility by selling your investments in your personal pension or stocks and shares ISA. However, this only serves to cement losses and means you’ll potentially miss out on gains when markets eventually recover. After all, as the old adage goes, it’s about time in the market, not timing the market, when it comes to long term gains.
To avoid making any knee jerk reactions as a result of what’s going on, try to focus on your long-term financial goals, such as living comfortably in retirement, or saving for your children’s higher education. If you are thinking of changing something in particular, such as selling an investment that’s sunk in value, ask yourself whether this approach helps you to meet your goal. If the answer is no, then this could be a sign that your decisions are being influenced by what’s going on in the world in the short term rather than your personal goals and your approach to risk.
Meanwhile, it’s worth noting that if your goal is to build a savings buffer, now is a good time to see if you can get a better deal elsewhere on your cash as interest rates are rising. Check savings websites such as SavingsChampion.co.uk or price comparison sites such as Moneyfacts.co.uk, or uSwitch.com to see if you can find an account paying higher returns to move to.
5. Make the most of available help
It’s more important than ever to check you’re getting all the financial help you’re entitled to, and by doing so, you’re taking a positive step towards improving your financial situation.
Fortunately, there has been some positive news recently with Chancellor Rishi Sunak announcing that the October discount on energy bills will be doubled to £400. The requirement to pay back this payment, which will be spread over six months,has been scrapped. Read more in our article Every household to receive £400 to help towards energy bills. More than eight million low-income households on benefits such as Universal Credit, Tax credits and legacy benefits will receive a one-off £650 payment on top of the £400 payment.
It’s simple to check if you might be able to claim benefits. Try one of the online benefits calculators such as those provided by Entitledto.com and Turn2us. You’ll need to provide details of your income and any savings, as well as how much you spend on major outgoings such as your rent or mortgage.
If you don’t qualify for additional support with energy bills because you aren’t in receipt of benefits, you may still be entitled to money off your bills under the Warm Home Discount scheme. This is a one-off discount on your electricity bill paid on your behalf to your energy supplier between September and March. Found out more about the different kinds of support available in our article The energy bills crisis: what can you do about soaring costs?
Further cost of living payments will be made this year. In 2023-24, those receiving means-tested benefits will receive £900, pensioner households will receive £300, and individuals on disability benefits will receive £150.
The £900 payment follows a £650 grant for people in receipt of means-tested benefits that was paid in two instalments last year. For those eligible, payments will start in the spring and be made in three instalments. You can read more in our articles Cost of living payments: who will get the £900 and when will this be paid?
6. Take a break from the news
Turn on the news, pick up a paper or look at social media and it’s easy to feel overwhelmed with negative money news at the moment. Either inflation is at another record high, energy bills are set to rise again, or stock markets have taken a tumble. The worries this may cause can make you more prone to making poor decisions around your finances.
Don’t be afraid of taking a break from the news, and remember that if something truly important has happened, it’s likely that you’ll find out about it.
Famous investor Warren Bufett manages to tune out the news, for example, by living in Omaha, Nebraska, as he says that being far from Wall Street has helped him to keep perspective. You can read our article 8 ways to manage your news consumption for some useful tips on staying informed while keeping stress to a minimum.
7. Build your understanding
Instead of focusing on negative headlines, a worrying economic period can actually be a good time to develop your general understanding of how best to manage your money. Some money books that can help to steer you in the right financial direction can be found in our article 10 money books to help you to get the most out of your finances. Check out our section, too, on Pensions and Retirement Planning to get to grips with your longer term financial planning.
If you’re aged 50 or over you can receive free guidance from the Goverment’s Pension Wise service on your choices at retirement. Call them on 0800 138 3944 to book a free appointment, or you can book through their website. Find out more about tailored pension advice below.
You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guide on How to find the right financial advisor for you.
If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.
The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
8. Find expert inspiration
Take a deep breath and remember that feeling anxious about your finances is entirely normal, especially during these difficult times, but that it’s also easy to lose perspective. However, decisions made when emotions are running high are rarely good, and often the best way to be successful with your money over the long term is to tough it out. Read more in our article Four ways to weather stock market storms.
Taking note of what professional investors say to achieve long term gains may help you to keep a cool head when there’s stock market turbulence. Here are some quotes you might find useful:
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioural discipline that are likely to get you where you want to go.” – Benjamin Graham
“Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” – Warren Buffet.
“Courage taught me that no matter how bad a crisis gets…any sound investment will eventually pay off.” – Carlos Slim Helu.
9. Share your concerns and seek help
Part of cultivating a positive money mindset is being comfortable enough with family and friends to share your worries, and that includes any concerns you have around your finances. Spiraling living costs are a concern for all of us, and it can be a relief to get any concerns out in the open.
For example, you may have particular concerns around debts. The last few years have placed huge financial pressure on many of us, and if you were already struggling with debts, staying on top of these can be really stressful. It may seem that they are impossible to deal with, but sticking your head in the sand will only make matters worse. Find advice on how to tackle these in our guides on Dealing with debt.
Fortunately, there is plenty of help available from a variety of charities and organisations if you’re having difficulty managing repayments and are worried that you won’t manage to repay your debts. For example, get in touch with Citizens Advice on 0800 144 8848 (England) or 0800 702 2020 (Wales), or StepChange on 0800 138 1111 if you need someone to talk to.
Rest Less Money is on Instagram. Check out our account and give us a follow @rest_less_uk_money for all the latest Money News, updated daily.