According to the 2024 Pepper Money Specialist Lending Study one in three people say financial stress has had an impact on their mental health. The connection between managing debt and mental health has become more apparent, especially as people navigate the ongoing cost-of-living crisis. Further research found that over 8.38 million people have encountered issues like missed payments or County Court Judgements over the past three years.
This issue comes into even sharper focus around Blue Monday, often dubbed the most depressing day of the year, which falls on 20 January, a time when financial pressures from Christmas spending collide with the reality of winter bills. For many, this day epitomises the struggles of managing debt and mental health, showing the need for proactive support during this challenging period.
Pepper Money’s 2024 Specialist Lending Study shines a light on the growing connection between money worries and mental health challenges. The research highlights how financial pressures, like dealing with debt, are adding pressure on many people, underscoring the need for support and solutions to ease the stress and find financial stability.
The cost of living crisis and its impact on UK finances
With energy bills and food prices continuing to rise, 57% of people in the UK are finding their disposable income shrinking. As a result, many are relying on credit cards to cover basic essentials. This increased reliance on credit is leading to a growing number of households struggling to keep up with their day-to-day expenses. 20% of people have already fallen behind on at least one household bill, highlighting the financial strain many are under.
Alongside the challenges of managing household bills, securing a mortgage or staying on top of repayments has become a growing concern for many. 78% of people are worried about how the current economy could impact their mortgage options.
The challenge to save money is a big challenge for many Brits, with Pepper Money’s study showing that 41% of people are either saving less or not saving at all. Without a financial cushion, even a small, unexpected expense – like a car repair or a medical bill – can throw someone into a tricky situation. Relying on credit to cover these costs only adds to the debt cycle, and as financial stress builds, so does the strain on mental health. Financial worries and mental well-being are closely linked. Research from the Health Foundation showed that 63% of people who had no debt experienced low or no anxiety.
Generational differences in financial stress are significant, with younger generations facing distinct challenges compared to the older generation. The 2024 Deloitte Global Gen Z and Millennial Survey reveals that both Gen Z and Millennials report high levels of financial insecurity, with around 60% living paycheck to paycheck.
What can be done about finance and mental health?
One practical solution for managing debt is consolidation. For those with multiple high-interest debts, consolidating them into a single, more manageable payment can reduce monthly outgoings, helping to ease the financial pressure a little.
This can be achieved in different ways, including second-charge mortgages, which allow homeowners to borrow against their property’s equity without affecting their existing mortgage. By lowering monthly repayments, individuals can free up more disposable income, making it easier to cover essentials and work towards building savings.
Focusing on debt reduction, budgeting, and savings, can help people regain confidence in their financial future, reducing the load of debt in a responsible way.
The need for financial solutions that address both immediate pressures and long-term goals will continue to grow. Promoting smart management of debts can help individuals weather the financial challenges ahead with more peace of mind.
Mental health charities like Mind offer valuable resources to help people manage the emotional side of money worries. Speaking to a mental health professional can provide strategies for coping with anxiety and stress caused by financial challenges. Additionally, seeking advice from a financial advisor or a broker can help individuals take control of their financial situation, offering practical steps to manage debt and highlighting the options open to them that could ease the pressure.
Empowering yourself
Ryan McGrath, director of secured loans at Pepper Money, said:
Financial stress can have a significant impact on people’s lives, making it essential to approach money management proactively. By enhancing financial literacy and understanding how to budget, save, and manage debt, individuals can not only improve their financial stability but also reduce the anxiety that often comes with financial uncertainty. When people feel equipped to make sound financial decisions, it empowers them to face challenges with greater confidence and resilience.
Featured image via the Canary
