The latest episode of our podcast YU Chat focuses on the importance of financial resilience, and how much impact it can have on our overall wellbeing. If you haven’t already, have a listen!
We chatted to Marlene Shiels OBE, who is the CEO of Capital Credit Union based in Edinburgh. She told us about the changes they have seen over the last few decades in general attitude to money, credit and debt, and how that is affecting not only our potential for financial security, but also having a detrimental impact on mental health.
Once upon a time, if there was something we wanted to purchase, we saved up until we could afford it, and sometimes that meant we were never in a position to buy that item. With the growing popularity of first payday loans, and then buy now, pay later, we are now able to have anything we want and worry about paying for it later.
While this may give us an immediate buzz of instant gratification that makes us feel good, what we’re actually doing is putting ourselves at risk of high-cost debt that can easily spiral out of control. In the long-term, this can lead to increased stress and anxiety when it comes to making repayments that we may not be able to afford, guilt and shame that we’ve ended up in this situation, and low self-esteem and reduced confidence in our own decision-making. It can also negatively affect sleep, our ability to work effectively, and may ultimately mean we cannot afford the things necessary to stay well, like housing, heating, food and hot water.
This trend towards instant credit can be especially problematic for those living with mental health challenges. Research has shown that people with mental health issues are three times more likely to be behind on at least one key payment than those without mental health problems.[1] It can also affect financial decisions - for example, easy access to credit can make it easier for someone with bipolar disorder to indulge in the impulsive spending that can be characteristic of a manic episode. Or someone who has depression may lack the motivation to tackle a debt problem, allowing it to grow and worsen.
That’s why financial resilience is so critical. We wouldn’t think twice about protecting ourselves from illness or from being hit by a car – money shouldn’t be any different. To be financially resilient is to try to protect ourselves in all aspects of life, and it is the key to being able to weather financial storms that may come our way.
Marlene tells us in the podcast that 21 million people in the UK have less than £100 in savings. This may not be surprising, given that so many people are left with little disposable income after paying for the essentials, but it is creating a precarious situation where many people have nothing to fall back on in an emergency or if life circumstances change (e.g. redundancy, divorce, illness etc). This makes us more likely to turn to credit in these scenarios, which increases our risk of further borrowing and greater debt, which becomes harder and harder to pay off.
The key is to take steps as soon as possible to build financial resilience, which can eventually lead to security and stability. Some things to try include:
Create and grow an emergency fund
You don’t have to start big, but putting away even a tiny amount every week is the beginning of a financial cushion that may help protect you in tough times. It also starts the habit of saving money regularly so that it becomes normal practice without having to think about it – this makes you far more likely to stick with it
Create a budget
Knowing your income and outgoings puts you in a strong position to know what your spending priorities are, what you can afford and what should wait. There are many free tools online – this guide is a good place to start.
Set realistic goals
Don’t try to do too much too soon. Set a short-term or small goal (perhaps save a certain amount this month or spend less on a particular outgoing) that is achievable. Not only will reaching this target make you feel satisfied and rewarded, but it will also have put you in a stronger financial position than you were before – every little helps
By doing so, you can lessen the mental burden that money can become, allowing you to feel less stressed, less anxious and more in control of your financial situation and your future.
If you are not in a position to do any of the above because you are overwhelmed, or have debt that you are finding too challenging to manage, there are organisations who can help you get some breathing space:
If you’d like to find out more about Capital Credit Union and how they work, check them out here
Photo by micheile henderson on Unsplash
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