Why talking about your finances can help your mental wellbeing

During Samaritans Awareness Month, we look at the important link between financial and mental health and why it means that talking to a financial adviser can boost your mental health.

July marks Samaritans Awareness Month when the mental health charity runs a campaign urging people in distress across the UK to ‘Talk To Us’. Speaking to the Samaritans can make a huge difference to your wellbeing – and in this article we explain why talking to a financial adviser can also make a difference, due to the intricate link between financial and mental health.

A pandemic followed by a cost of living crisis has made for a fraught few years which have added stress and anxiety in people’s lives. The Centre for Mental Health estimated up to 10 million people in the UK are likely to need new or extra mental health support as a direct result of the Covid-19 crisis, while two-thirds of therapists told the British Association for Counselling and Psychotherapy that cost of living concerns are causing a decline in people's mental health.

“People's stress levels, particularly post pandemic, have been higher and with rising costs. I have definitely sensed more anxiety in conversations with people who are looking at their finances and thinking things aren’t going well,” says Richard​ Price, Independent Financial Adviser at Ascot Lloyd. “During the pandemic we had a big increase in calls from people worried about their finances. They were watching their portfolios go down and it was really important to remind them of their long-term position rather than getting sucked into the short-term shocks.

“We were managing their fears to keep them invested in the markets because, long term, it does always pay to stay in the markets. But when the markets are going down and it's all doom and gloom in the media, you can understand why people are worried. The news always focuses on the negative whereas a financial adviser provides a balanced outlook, so people who run their own portfolios tend to be more influenced by fear and panic which can lead to poor decisions.”

Intricate link

Financial concerns are closely linked to somebody's overall mental health. Research by the Money and Mental Health Policy Institute found that 46% of people in problem debt also have a mental health problem, while 86% of people experiencing mental health problems said their financial situation had worsened their mental wellbeing. Often, however, your financial situation is not as bad as you think it is and talking to a financial advice expert can put your mind at ease.

“I went out to a meeting recently with a client who is only recently retired. At this early stage of retirement you are out of your comfort zone because for the first time you are spending your capital without income from a job coming in, which takes some getting used to,” says Price. “His wife, in particular, was very stressed about their finances, partly due to all of the scary stories about the cost of living in the news. She worried they wouldn’t have enough money to live on.

“During the meeting we ran through cash flow models with them to project, on a very conservative basis, their financial plan right up until they’re 95, including how much they’d need to maintain their lifestyle. The models demonstrated they would be fine with the retirement plan we’d designed for them and I could just see the great peace of mind this gave her. If you review something on a regular basis, with a professional, the chances of getting a good positive outcome and being able to achieve what you want are greatly increased, and these ongoing reviews provide stability, insight and clarity which can really enhance your mental wellbeing.”

Withstanding the peaks and troughs

Reinforcing the long-term view provided by a financial adviser is especially important. A robust, long-term financial plan is well diversified and designed to withstand the peaks and troughs which are expected in all markets over time. When the troughs do come along, as they have done over the past couple of years, it’s easy to feel panicked and anxious amidst the blizzard of negative headlines in the news, but data consistently shows the value of remaining invested.

In a study looking at data stretching from 1930 to 2021, Bank of America found that if an investor missed the S&P 500′s ten best days each decade, their total return would have been just 28%. If, on the other hand, the investor held steady through the ups and downs, their return would have been 17,715%. J.P. Morgan Asset Management looked at 20 years of the S&P 500 between 1st January 2003 and 30th December 2022 and found if you missed the ten best days in the stock market your overall return was cut in half.

Economic cycles range from 28 months to more than 10 years. Stock market cycles have typically anticipated economic cycles by 6–12 months on average. The cycles are familiar—the economy expands and contracts and the markets rise and fall. Our emotions often get swept up in the recurring ebb and flow.

“People are less exposed to the more positive information out there, which is why it's important to gain more holistic insight from a financial adviser. We work closely with a number of fund managers and are able to relay their insights about the market and the current opportunities to our clients. It gives them comfort because they've got up-to-date information from people who really understand the markets, as well as reassurance that their financial plan remains on track.

“It’s normal to worry about money but often you needn’t do so, particularly if you’ve put the effort into developing a long-term financial plan with an independent financial adviser. Picking up the phone and calling your financial adviser, even just for a little reassurance, can do wonders for your wellbeing so please don’t hesitate to get in touch when you’re feeling stressed or anxious.”

If you or your loved ones require any financial planning support, please contact your Ascot Lloyd Financial Adviser or book a free callback with a member of the team.