For Stress Awareness Month, we ran a webinar for staff at Westminster City Council on financial stress and mental health. I hosted the session in conversation with Dr Olufemi Sallyanne Decker, Associate Professor in Banking and Finance at the University of Greenwich and one of our non-executive directors here at London Mutual Credit Union.
The webinar brought together two perspectives: Sallyanne’s, from how people behave around money, and mine, from working at the credit union. One thing came through clearly from both sides: financial stress is far more widespread than people realise, and far less a reflection on the person feeling it. For anyone who couldn’t make it, here are the points from our conversation that stuck with me.
Money stress comes in three shapes, not one
“Financial stress” tends to be used as a catch-all, but it takes three different forms.
- The first is the obvious one, where you can’t cover the rent.
- The second is uncertainty. The numbers work this month, but you have no idea what next month looks like, and the not-knowing is what gets you, even when the bank balance is fine.
- The third, which Sallyanne thinks is more common than people realise, is feeling out of control.
Plenty of people who can afford their lives still feel stressed about money because they don’t open their statements, don’t know what they spend, and have a low-level sense that something might be quietly going wrong.
Each form needs a different response. If your problem is uncertainty, building a savings buffer makes a real difference. If you feel out of control, a buffer won’t help until you’ve also got into the habit of looking at what you spend. They sound similar from the outside but they ask different things of you.
Feeling out of control is the form I think we can all recognise in ourselves at different stages of our lives, myself included.
Takeaway: Money stress shows up in three different forms. Working out which one is yours is the first step towards doing something about it.
Why some people seem unfazed by money and others aren’t
We’ve all had friends like the one I had at university, who was completely unfazed by money. While I was counting days to the next student loan, he was the most relaxed person in the building, and our financial situations were broadly similar. I see the same pattern at the credit union, where two members in similar circumstances will often relate to money in completely different ways.
Sallyanne’s view is that almost none of this is about the numbers. It’s about the mindset you bring to money, and our mindsets get laid down young, by what we saw at home growing up. Researchers who study how people think about money tend to sort us into four broad groups:
- Vigilants budget, watch, and value money without obsessing.
- Avoiders dread the topic and don’t open statements.
- Status seekers treat money as a marker of who they are.
- Worshippers believe enough of it would make them happy.
Most of us are mixtures of these, but each one carries its own version of stress: the vigilant becomes anxious, the avoider stops opening the post, the status seeker overspends, the worshipper never feels they have enough.
This framework explains why generic financial advice so often fails. A budget designed for a vigilant doesn’t work for an avoider, and vice versa. Most financial education assumes everyone is a vigilant who just needs better tools. The people it speaks to least well are the avoiders, who probably need it most.
Worth asking yourself: Which of the four sounds most like you, and which sounded most like the household you grew up in? They are often not the same, and the gap between them is usually where the difficulty starts.
The point I keep coming back to
Anyone who works at a credit union sees people making worse financial decisions when they’re under pressure than when they’re calm. They take loans they don’t need, miss chances to switch to a better deal on a product they already have, sign up for things they later regret. The clearest predictor I’ve seen is stress, not income or financial knowledge.
What’s actually going on, Sallyanne explained, is something researchers call mental bandwidth: your capacity to weigh options, plan ahead, and make decisions that serve future-you rather than just present-you.
Stress eats into that capacity. The more stressed you are, the less of it you have, which means the moment you most need to think clearly about your money is the moment you’re least able to. We talked about a common case: someone opting out of their workplace pension to free up cash now, without thinking about what that costs them in twenty years. Habit takes over because habit doesn’t require thinking. The short-term wins out, even when the long-term cost is huge.
The way out is to give yourself a bit of slack: time to think, space to act, and a small amount of savings as a buffer. Money in itself solves very little, but what it buys you is the ability to make good decisions about everything else.
The FCA’s most recent Financial Lives survey found that 49% of UK adults show signs of being financially vulnerable, and one in four has low financial resilience. Together, that is almost half the country.
Takeaway: A small savings buffer does more than cover emergencies. It protects your ability to think clearly. Even £20 a month starts buying you back some headspace.
How a small slip becomes a spiral
When financial difficulty does take hold, it has a way of building on itself. You’re going through a rough patch, the budget is tight, and when you order a pizza you put it on Klarna instead of the debit card, telling yourself you’ll square it up later when things are easier. Buy Now, Pay Later starts to feel like a sensible way to ride out a tight month.
The next thing you know you’ve got three or four small balances running, you’ve missed a payment on one of them, and your credit score has taken a hit. The money side gets worse, how you feel about yourself gets worse, and the two feed each other.
Sallyanne’s explanation of why this loop is so sticky drew on the psychology of shame. Bad feelings make you avoid the problem; the avoidance makes it worse; the worsening problem produces more shame; and people end up hiding it with the same behaviours that got them there in the first place.
The first practical step, then, is to look. Opening the app and reading the statement is often enough to break the loop, because once you’ve seen the numbers, the worst of the avoidance is over. Most members I’ve spoken to who’ve turned things around will tell you the hardest move was the first one, and it was almost always just looking at the numbers properly for the first time in months.
What actually helps
Sallyanne opened with a piece of advice about physical health, not money. Stress is a whole-body thing, she said, and the financial side gets harder if the rest is falling apart. The basics matter, in other words: sleep, food, movement. Obvious once said, but easy to overlook if you’re already running on empty.
Four other things to take on board.
Build a budgeting system, not a budget.
Sallyanne’s framing, and one of those lines that’s stayed with me. Most of us make a budget, write it down, and forget about it within a fortnight. A system is what makes a budget run on its own: separate accounts for bills and spending money, savings moved across before you see it, direct debits set up so you don’t have to keep deciding.
The members I see who are properly on top of their finances have built a system that does the work for them. Most of them couldn’t tell you what they spent last week, because they don’t need to.
Slow your decisions down.
Don’t buy on the first visit, sleep on it, and put a bit of time between the urge and the action. Sallyanne’s most extreme version got a laugh on the call: physically freeze your credit card in a block of ice. I assumed she was joking. She wasn’t, and apparently it still works once thawed. I’ve not gone that far, but the principle holds. Make it harder to act on the urge and the urge passes more often than you’d expect.
Get specific about goals.
Members who tell us they want to save more generally don’t. Members who tell us they want to put aside £80 a month towards a deposit by next October generally do. “I want to go on holiday one day” doesn’t drive any behaviour. “I want to go to Spain next September and I need to save £120 a month to get there” does. Being specific is the single biggest predictor I’ve seen of whether someone follows through.
Change what you think a budget is for.
I told Sallyanne on the call that for a long time I felt guilty whenever I spent money on myself: a holiday, a night out, a thing I wanted but didn’t strictly need. There was always a small voice telling me I shouldn’t have, and it doesn’t go away if you ignore it. It just makes the spending less enjoyable.
A budget isn’t a tool for denying yourself things; it’s a form of permission. If you’ve covered your bills, set aside savings, and put money aside for going out, then going out doesn’t have to come with guilt. The budget already did the worrying so you don’t have to.
The same numbers, but a different relationship with them.
Three things worth doing this week:
- Open the banking app you’ve been avoiding, and have a proper look.
- Pick one specific savings goal with a date attached and a monthly figure.
- Set up a separate pot or account for it; most banks let you do this in a couple of minutes.
Why salary deduction can help with financial stress at work
Salary deduction is at the heart of how the credit union works with employer partners like Westminster Council, and most of our long-standing savers got there through payroll, not through standing orders or willpower.
It pulls together four things at once. You’re paid first, before any of your bills, which feels empowering rather than depriving. Today’s pay gets connected to a future goal you care about. You decide once and the system keeps going. And because the money never lands in your current account, there’s nothing to spend.
Members in their first year of payroll saving usually tell us the same thing: they were nervous about it at first, and then they stopped noticing it altogether. You don’t miss what you never had, and that one fact probably explains why payroll-deducted savings work better than almost every other voluntary method we’ve seen.
For employers, this is the practical answer to employee financial stress: not financial education sessions that the most stressed staff are least likely to attend, but a mechanism that quietly does the work for them. Westminster Council members who save through payroll are the proof.
Where to start
Two reputable, free starting points:
MoneyHelper is the government-backed service. Good budgeting tools, no sales pitch.
MoneySavingExpert is Martin Lewis’s site. Practical guides in plain English.
A note on social media. Financial influencers have helped open up a conversation that used to be closed, which is a real shift. But opening a conversation is one thing; taking advice from it is another. Most of what circulates on TikTok and Instagram is not regulated financial advice and does not come from people qualified to give it. For any decision that could cost you real money, the source needs to be regulated.
If you work for Westminster Council, you can find out more about what we offer as your staff credit union here.
The point worth taking away
Financial stress is not a character flaw, and it is not something you have to deal with on your own, but the worst thing you can do with it is nothing.
The first conversation, whether with a partner, an employer, a credit union, or somewhere like MoneyHelper, is usually the one that lifts the most weight. It will not fix everything. But it almost always changes how the whole thing feels.
