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13th October 2022
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Amid soaring living costs, financial health is a top concern for many people. Following World Mental Health Day on 10 Oct, we look at the link between financial planning and mental wellbeing.

If the biggest cost of living squeeze in several decades is keeping you awake at night, you’re certainly not alone. With inflation having soared to double digits this year, energy costs rising even faster and wage growth failing to keep pace, nearly two-thirds of UK adults have felt stressed, anxious or depressed about the squeeze on their finances, research by MetLife UK found.

For those already in retirement, it can feel even more daunting. Less able to find extra sources of income, such as taking on additional hours at work, and with a simultaneous dip in the equity and bond markets causing investment portfolios to contract of late, many are facing both reduced income and higher living costs. While the government has stepped in to limit increases in energy bills this winter, they will still be considerably higher than normal.

Money worry is a common cause of stress and anxiety which only increases during periods, such as now, when people feel less in control of their finances due to the impact of external events including Russia’s war in Ukraine. Common symptoms of mental health problems, like memory loss and impulsivity, can make it even harder to keep on top of your finances without feeling overwhelmed – a vicious cycle that can exacerbate money issues further.

A pandemic-level threat

Money and mental health are intrinsically linked. Some 86% of people with mental health problems told a Money and Mental Health survey that their financial situation had made their mental health worse. And more than half (57%) of people who have experienced a mental health problem in the past three years say thinking about their financial situation makes them more anxious, according to research from the Money & Pensions Service.

Mental health conditions were already increasing even before a pandemic came along, followed by a cost of living crisis of proportions not seen in nearly half a century. One in four people will experience a mental health problem of some kind each year in England, and the amount of people with common mental health problems rose by 20% between 1993 to 2014, according to Mind. The WHO has said conditions increased by 13% in the decade to 2017.

Outside of work, financial pressure outranks relationships and parenting as the most common cause of stress. Though the impact of the cost of living crisis on people’s mental health will not be quantifiable for several years, signs in the health system are already pointing to a notable uptick in problems. The Royal College of Psychiatrists recently warned that the cost of living crisis poses "a threat of pandemic proportions" to mental health.

A plan for better wellbeing

While financial difficulty can hinder our mental health, strong financial planning can drastically improve it, providing feelings of security, protection and control. Of course, a common reason for creating a robust financial plan is to secure a successful retirement income, but the knock-on effect on wellbeing is as undeniable as it is overlooked.

This means amidst all of the ways in which we can manage and improve our mental wellbeing, good financial planning should be near the very top. Yet 45% of UK adults don’t feel confident in doing so, according to research by the Money & Pensions Service. And in MetLife UK’s study, 30% of UK adults said they did not have any friends or family members to turn to, to provide good financial advice, leading to additional feelings of worry and stress. A proactive relationship with a qualified financial adviser may therefore provide invaluable reassurance.

“Financial planning can be one of the most effective ways of reducing anxiety,” says Gavin Foster, Independent Financial Adviser at Ascot Lloyd. “The scale of the cost of living crisis can feel overwhelming, but there are small, practical steps that can be taken, to help you feel protected. A solid plan can provide a strong sense of security and composure that can be good for your mental health, especially during periods when everything else seems so uncertain.”

There is an evidenced correlation between financial hardship and higher rates of suicide,  during times such as recessions. A study by the University of Oxford and the London School of Hygiene & Tropical Medicine showed that the last global financial crisis 15 years ago led to more than 10,000 extra suicides in Europe and North America. Suicides had been declining in Europe until 2007, but by 2009 there was a 6.5% increase, a level sustained until 2011. 

“When people are struggling or worried about money, it can clearly affect your mental health,” says Ken McIntosh, Independent Financial Adviser, Ascot Lloyd. “Too often, poor financial planning can lead to bad mental health. Just a simple check-in with an IFA, to see if you're okay and doing the right thing, can have a major impact on your mental wellbeing.

“When you watch or read the news it can be easy to fall into the feeling of doom and gloom, but when you have got a firm plan, guided by a trusted expert in financial advice, you can feel much more in control of what's going on. Having a flexible plan in place also gives you more options when times are difficult, such as the ability to adjust ISA or pension contributions.”

Peace of mind

Rob and Cath, a retired couple who are long-standing clients of Ascot Lloyd's Independent Financial Adviser Mark Rodgers, found their relationship with Mark has boosted their mental wellbeing, as it’s given them the peace of mind when it comes to their finances..

“Mark knows what we expect out of life and gives us the best advice,” said Cath. “We trust him and trust leads to contentment, which is priceless. [It has given us] a better quality of life, mentally and physically.” Rob added: " With Ascot Lloyd, I have peace of mind because I know my money is going up each year. It's going up more than I'm spending actually. [It's invaluable] going to bed each night and not worrying about money.” Investment involves risk.

One crucial aspect of retirement planning which is frequently overlooked is lifestyle. With so much thought going into when we want to retire and how much we’ll need to do so, people often neglect to give the same consideration to how they will fill their time. Though often stressful, a job is a key source of fulfilment and purpose, which underpins our mental wellbeing. Its absence can therefore leave a gap which impacts mental health if left unfilled.

“They say satisfaction with retirement drops significantly after a few years and it's because people haven’t put a plan in place about how they're going to occupy themselves,” Gavin Foster adds. “Playing golf every day might be fun for a year or two, but eventually you may be looking for more fulfilment, and so that also feeds into our financial planning support.”

Keeping in regular contact with a financial adviser may help you feel in control and reassured about your financial position, boosting your wellbeing. If you or your loved ones require any financial planning support, please contact your Ascot Lloyd Financial Adviser or book a call back with a member of the team.


Our Financial Advisers are available on the phone so please contact us if you have any questions.


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