3 financial tips to ease the pressure of the cost-of-living crisis

With the disruption of the Covid-19 pandemic (hopefully) behind us, many of us are breathing a sigh of relief. In the UK, though, it appears we’re facing what some are calling a ‘second pandemic’, this time on our mental health – and it’s being worsened by the cost-of-living crisis.

Financial worries and stresses are one of the biggest conversations happening in society today. It’s hard to avoid given all the negative headlines and endless news coverage.

Roy McLoughlin, Associate Director at Cavendish Ware, and veteran in financial advice, reminds us that “we’ve had a cost-of-living crisis before, this isn’t the first time, and it won’t be the last.”

He does, however, acknowledge that the current economic situation is causing significant mental health issues in society today.

A worrying amount of mental illness starts with money problems, says Roy, and this is likely to get worse.

They can intensify existing mental health conditions too. According to the Money and Pensions Service, 57% of those who have experienced a mental health problem said that thinking about their financial situation makes them feel anxious.

Even 26% of people who have not experienced a mental health issue report the same concern, yet a fifth said they wouldn’t seek help.

“Money is not a dirty word; we need to go out there and talk about it to break down the barriers.  

“The worst thing you can do if you have money problems is supress them and not talk to someone about them. It’s very important not to hide this stuff. There’s no shame in debt.”

Roy, who is also an avid campaigner for accessible and affordable financial advice, also noted that more needs to be done to encourage people to save.

Covid-19 showed that the unexpected can happen, so to protect ourselves “we need to encourage people to put money aside or ensure they have a safety net in place, because that not only helps with the cost of living, but also in case there’s another emergency that comes along again,” he says.

So, how can we get ourselves in a better place with finances?

Adhering to the 80:20 rule – a principle that states that for many outcomes roughly 80% of outcomes come from 20% of causes – Roy believes small changes can make a big difference.

Furthermore, he highlights three methods we can use to improve our overall financial health:

Be aware of your spending

According to Roy, one tried and trusted method is a keeping a pocketbook, which help shows you what you can save in times when you think you might not be able to.

He says: “Take a pocketbook around with you for one month and write down everything you buy. Most people that do this find their perspective on spending completely change, because it focuses on the amount of stuff that you buy, which either you don’t need and/or you didn’t realise you were buying.”

With people these days being able to spend money with just a tap, it is now too easy and cash is fast becoming a thing of the past. And, sadly with that becomes a disconnect of how much we are spending, Roy adds “often we don’t even look at the amount”.

So, why not try the pocketbook out for a month to see how to improve your habits? They are plenty of smart phone apps that can help too.

Become a ‘top-line saver’

A top-line saver is someone who puts money away immediately after they get paid their salary, whether that be a direct debit or standing order. Anything left over you can spend that month and do with it what you please.

And the opposite, a bottom-line saver, is when one spends money that month and whatever they have left at the end, before their next salary payment comes through, they put away.

“Guess which one saves the most money? The top-line saver by a country mile," says Roy. “The bottom-line savers are generally those you end up in-debt. So, what we’ve got to do is create a society of top-line savers.”

If you’re feeling the ability to save is too far to reach Roy reminds us “it can be £10 that you’re saving each month, if you get into that habit and persevere then that £10 can turn into £20, and then £50, and then £100”.

“People have come to me six months later and have always said the same thing – I'm saving money yet I’m no worse off, I still get to go out and have a beer or buy a meal, it doesn’t have to change your day-to-day life and your putting money aside each month”.

He adds that when it comes to planning financially, financial advisers can help. Not only that, but online there is a vast amount of guidance online – such as Money Saving Expert – and plenty of organisations such as the Citizen’s Advice and Step Change that can provide support, adds Roy.

Additionally, the role of Employee Assistance Programmes (EAPs) available at work are also available to provide financial advice and mental health support.

“There’s great stuff on there and we should be talking about these more and taking steps towards doing something about the problem is always better than avoiding it,” he points out.

Have a safety net

Taking out a life insurance policy, which includes plans that protect our income or pays out if we’re diagnosed with a serious illness is one of the ways that people can ensure they have a safety net.

Recent research findings from Vitality show that 31% of Brits took out a life insurance policy to ensure that their family was provided for should they pass away unexpectedly. Meanwhile, a further 24% said they took one about because they wanted to be as prepared as possible.

Matthew Chapman, Commercial Director for Plus Financial and protection adviser, explains that often these funds provide essential financial support to those you leave behind, offering an “increased sense of security and the knowledge that their family will be taken care of in their absence”.

He adds, that “for many, that is priceless”.

Just take the situation of television broadcaster Simon Thomas, who, while working at Sky Sports as a football anchor, lost his wife suddenly to a rare form of leukaemia five years ago.

A life insurance pay-out for her – taken out following financial advice provided by Roy – gave him the time and space he needed to look after nine-year-old son Ethan rather than go back to work at a time when his mental health was under immense strain.

“One of the biggest worries I faced [money and needing to go back to work] became solved,” he recently told Vitality Chief Editor Adam Saville on a webinar.

“It changed everything for me and how I dealt with being able to move forward. It made it possible to actually say that I didn’t need to go back to work right away to be there for Ethan.”

With the cost-of-living crisis a worry for many, Chapman also emphasised the importance of not cancelling any cover you have and despite the current climate “especially if things are really tight, you’d be better off speaking to an adviser to see what your options are – such as adjusting your plan and benefits to reduce cost, rather than cancelling.”

If you have cover in place, it also might be a good idea to review your plans to ensure they remain suitable for your needs. “It’s always worth speaking to a financial adviser for help in this area,” Matt concludes.

Vitality's range of life insurance options can help protect you and your loved ones. Find out more about plans here.

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