Top tips for managing financial anxiety
Financial anxiety is a prevalent issue in the UK that affects many individuals, including lawyers. According to Wealthbrite’s Financial Wellbeing in Law study, lawyers at all stages of their careers actively worry about money - 80% of trainees and 78% of 10+ PQE lawyers admitted they worry about money on an everyday basis.
Carla Hoppe, founder of Wealthbrite, shares her tips for managing financial anxiety.
So what is financial anxiety and how can it show up?
Financial anxiety is used to describe the feelings and behaviour that a person has when they are consumed with worry, stress or concerns about their financial situation. It can show up in lots of different ways but when stress or anxiety become persistent and pervasive it can have damaging results.
You may be suffering from financial anxiety if you’re struggling to sleep at night worrying about money or perhaps you are struggling to stay motivated and positive at work. You may find that your worries and stresses about money have triggered a bout of depression or avoidance behaviours such as drinking more than normal or avoiding friends and family.
Many of these feelings or behaviours are common amongst a variety of mental health concerns so it’s important to identify the underlying cause of your symptoms and behaviours.
If you conclude that money concerns are the root cause of your struggles, here are 5 ways to manage your anxieties to feel more in control of your situation:
1. Identify the source of your financial anxiety
Understanding the specific factors or issues contributing to your financial anxiety is crucial. Common causes of financial stress in the UK include high levels of consumer debt, concerns about job security, housing costs, and retirement planning. By identifying the sources of your anxiety, you can tailor your strategies and seek appropriate solutions.
2. Create a detailed budget
When you don’t have a good handle on what’s coming in or going out, costs can creep up on you and you may find you run out of money or worry about paying your bills. 77% of lawyers tell us they either simply don’t budget at all or struggle to stick to one and 1 in 5 admitted to using credit to pay for everyday essentials.
Budgeting can feel restrictive to some, like going on a diet where they are told to cut things out. We like to think of budgeting as your chance to create an intentional spending plan that gives you the control you need to make informed money choices. Use your budget to create financial goals and to help make decisions about how and where you spend the money you earn. To get started download Wealthbrite's free budgeting tool here.
3. Build an emergency fund
Creating a safety net or buffer for bumpy or unexpected costs can take a weight off your shoulders financially. Whether it’s paying down a deposit on a new flat for rent or the annual car insurance costs, we all have one-off payments that come around and if they haven’t been planned for can cause short term financial difficulties and may end up costing even more than you planned if you have to use expensive sources of credit.
Although 70% of lawyers told us they were saving on a monthly basis, only 42% of trainee lawyers we surveyed said they would be able to cover an unexpected cost of £850 without relying on borrowing or credit. The uncertainty of not being able to make ends meet or dealing with unexpected costs can be a huge source of anxiety. Use your budget to work out how much you need for annual one-off amounts and what your regular monthly outgoings are. While 3 - 6 months' living expenses is the recommended amount for an emergency fund, we recommend building up savings without dipping into them to grow your confidence and build up your rainy day fund from there.
4. Address debts and seek support
Debt is a significant contributor to financial stress in the UK. Statistically, UK law graduates leave with £43,000 of debt and for those that also self-fund the LPC or SQE, levels of student debt going into the profession can be much higher. Once in the profession, some may be tempted to use credit in efforts to keep up with appearances - 48% of lawyers told us that they feel pressure to spend beyond their means. If you are struggling with debt, explore options to manage and reduce it effectively. Consider contacting organisations like StepChange or Citizens Advice Bureau for free debt advice and support. They can help you create a debt management plan and negotiate with creditors on your behalf.
If you are struggling with the impact of interest rate rises on your mortgage repayments, Government relief may be available to you. Find out more about support for mortgage interest (SMI) here.
5. Don’t be afraid to talk to someone
If you find it challenging to navigate your financial situation alone, seek advice from someone who can help. You don’t necessarily have to disclose financial details but just sharing your concerns with someone else can help you feel less alone and supported.
A financial coach can act as an accountability partner working with you to shape your thinking and actions around money. Coaching is a great way to learn more about your money mindset and discover opportunities for you to reach your financial goals. Find out more about Wealthbrite coaching here.
If you are a solicitor that is in financial crisis you may be able to access support from the Solicitors’ Charity who have a mandate to provide financial, emotional and practical support to help people get back on track. You can also contact the NHS for specialist support if your financial situation is affecting your mental health.
Remember, everyone's financial situation is unique, so it's important to find strategies that work best for you.
More about Wealthbrite
Carla Hoppe is the founder of Wealthbrite, a financial wellbeing company that works in the legal sector.
Wealthbrite provides financial education and financial coaching to help employees build financial confidence and resilience.