How to manage financial stress and problem debt

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If affects most of us at some point in our lives. From daily challenges like receiving an unexpected bill to more long-term obstacles such as being made redundant or dealing with a medical issue, financial stress can leave us overwhelmed, anxious, vulnerable or depressed.

'Stay positive. Remember, if you do experience financial stress, there are strategies to deal with it.'

Unsurprisingly, our level of financial wellbeing has a knock-on effect to overall happiness. According to a YMCA report, financial concerns are the biggest cause of stress for adults in the UK. It found a 52% difference in wellbeing between the most and the least financially-confident people in society: those happy with their finances found their wellbeing increased by 19%, but for those with serious concerns it dropped by 33%.

When left unchecked, financial stress can lead to problem debt. Being unable to pay one bill is a worry, but if they start to mount up it can soon feel like you’re losing control - and this can end up affecting all aspects of your life. Therefore, it’s vital to recognise signs of financial stress and know how to manage it if it happens to you.

How does financial stress affect people?

Financial stress affects people in different ways and may lead to lack of confidence, anxiety and frustration. As a result, sufferers may choose to avoid social situations and find themselves cut off or isolated - making everyday life harder to cope with and potentially falling into a downward spiral of depression.

StepChange Debt Charity, said the results of a client survey showed financial stress can also lead to noticeable physical symptoms: “Three-quarters of respondents experienced sleeping problems due to their debt, 64% experienced mood swings and 42% experienced changes in their eating habits.”

Stress-related problems can quickly escalate: this can have a knock-on effect to working life. “Over 50% [of people] found their work performance suffered as a result of problem debt, with the biggest problem being inability to concentrate at work,” said StepChange Debt Charity.

This is echoed by a survey of 10,000 workers across the UK, which discovered our biggest concern is financial worries - ahead of health or work-life balance. 70% of workers spend 20% of their day worrying about finances: this affects work relationships, may lead to absenteeism, and costs the economy over £120 billion a year.

Who is most at risk of financial stress and problem debt? 

According to StepChange, people who have had a major change to their life circumstances are between two and three times more likely to show signs of stress or financial difficulty than those who haven’t.

In addition, unexpected pressures on income – such as increases in housing, energy or childcare costs – can cause people to fall behind on essential bills or turn to credit to meet these payments. “People seeing increased costs are three times as likely to be falling behind on essential bills, and twice as likely to have used credit to pay essential bills,” according to the leading debt charity.

Strategies to avoid financial stress

It's important to anticipate periods of financial stress in your life: some you will be prepared for, some you won't.

Strategies to keep financial stress at bay include:

  • Plan a household budget: this can help you live within your means and avoid falling into debt.
  • Keep checking your account: although it can be tempting to ignore it, especially if things are tight, it's better to know where you're at and take action if necessary.
  • Start building up for a rainy-day fund: keep this in a seperate account, away from general savings (i.e. holidays, gifts or future plans), and only use it for emergencies.
  • Stay positive. Remember, if you do experience financial stress, there are strategies to deal with it.

What to do if you're experiencing serious financial stress or problem debt

StepChange Debt Charity said the most important thing is to get help, “Don’t ignore it – 50% of our clients say they waited over a year between worrying about their debts and getting any help. For many people, that year is a time when things simply got worse. The earlier you tackle the problem, the chances are, the easier it will be to deal with.”

They suggest taking the following steps:

  1. Get all of your paperwork together and work out how much you owe.
  2. Build a detailed budget to identify your income and essential outgoings, and work out what you can put towards paying off your debt.
  3. Work out where you can save money or boost your income: could you switch energy providers, are you entitled to claim benefits?
  4. Contact your creditors to explain the situation and see if they'll accept reduced payments.
  5. If you don't feel comfortable contacting creditors, or if they turn down your request, contact one of the free debt advice agencies that can provide independent advice and support on your options.

Useful contacts include StepChange Debt Charity, Citizens Advice and the NHS guide to coping with money worries.

Financial stress is one of life’s unavoidable challenges, but being prepared will put you in the best position to get back on track. Recognise the signs, don’t ignore the problem, know where to seek help and try to stay positive. 

Image credit: Elly Walton / Alamy Stock Photo

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