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One of the leading causes of stress, anxiety and depression is financial instability. Whether you are struggling with debt or not earning enough to make ends meet, any form of financial stress can really take its toll on your wellbeing and the wellbeing of those around you.


Financial stability is not just a matter of making ends meet each month. It is about having savings that you can use when there is an emergency, such as a vet bill or the loss of a job. When there is an emergency, without this financial safety net, things can quickly go from bad to worse. More often than not, debt problems escalate without those involved realising just how bad the situation has become. When you are struggling to make ends meet and constantly on the lookout for a solution to the problem at hand, the bigger picture can escape you. For those looking at the situation from the outside, it can be clear just how bad things have become, but when you are in it, it can take a while to truly see what has happened.

Looking at the bigger picture

One of the first steps in debt management is facing the problem head-on. The advice from the government and debt charities, such as StepChange, is to collect details of all outgoings and any income and compile this information into a spreadsheet or app. This includes everything from household bills to the cost of pet food, and all income including wages, benefits and pensions. If you have any debt, such as credit cards, payday loans or arrears on household bills, add up the total amount owed and calculate the total amount of interest you are paying each month. Having all this information on one page in front of you will give you a better idea of your situation and if your outgoings exceed your income.

If you are struggling with debt, facing the full extent of the problem in this way can feel overwhelming, but it is a powerful first step in taking control of the problem. It will also enable you to talk to someone about a solution, and there are many solutions that could work for you, including but not limited to, a debt consolidation loan, an individual voluntary arrangement (IVA) or equity release.

Living paycheck to paycheck

Finding financial stability isn't just about getting out of debt. Even if you have no debts, if you live paycheck to paycheck you can feel financially vulnerable. All it takes is one direct debit coming out of your account before payday, or an unexpected cost like your car breaking down, and suddenly you are in a precarious position. This is where many people seek the help of a payday loan or dip into their credit card balance to help make ends meet. For every pound you spend over budget, you are eating into the next month's money, which can feel like you are constantly trying to catch up. Payday loans, in particular, can be an appealing solution as the cost of borrowing a small amount for a short time can be as little as £10 or £20. However, when you add this up across the year you realise the true cost of using these loans to make ends meet and the longer you leave the repayment the steeper the interest rate is.

How much should I save each month?

The 50/30/20 rule of thumb when it comes to savings is a relatively simple concept but can seem impossible to those unused to saving or those on a low income. The concept is that 50% of your income will go towards the cost of living, such as the mortgage or rent, bills and food. 30% should go towards discretionary spending, which is anything that you can live without, but choose not to. That leaves 20% of your net income that can be saved. The idea is nice, but not everyone has 50% of their income available for discretionary spending and saving. Quite often nearly 100% of the income will be taken up with essential living costs. However, even saving just 1% each month will add up across the year and could be the difference between taking out another payday loan and having a little peace of mind. Having financial stability means having a safety net of savings so that you are prepared for those emergency moments. Look back across the past year and add up the total in unexpected costs, from bank fees to car maintenance, vet bills to energy price rises. You might not be able to anticipate the cost of emergencies, but you can use the past as a guide. Dividing the total cost of the last year by 12 will give you a starting point, so you know the ideal minimum amount you should save each month. Alternatively, you could apply for a credit card with 0% interest, or a logbook loan, to help you in the meantime, and give you a chance to establish some savings, but be cautious when using it, especially if you are unsure if you can repay the balance.

What does financial stability look like?

There is no set definition of what financial stability is, and it will be different for different people, depending on their background, their expectations and their aims. For some, financial stability is simply making ends meet and having money in the bank for emergencies. Others define stability as not having to worry about money. As a rule, it is about being prepared for any situation. You should have enough in savings and investments to support you should you lose your job or decide to change careers. The guideline for this is 3-9 months of living expenses. The guideline for retirement saving is 10-15% of your income, but this includes employer and government contributions. And finally, there is saving for personal expenses, such as a wedding, a new car, or your children's education.