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Can Budgeting Help Improve Mental Health?

Why budgeting is self-care

Vanessa Tsai
Written by  Vanessa Tsai
5 min read
Updated: 30 Oct 2023

If you’re feeling stressed or anxious about your finances, the last thing you may want to do is sit down and take a closer look at them. But that's often one of the most helpful steps you can take to get back on track.

Money can seem like a purely practical matter, but there’s no escaping the fact that it’s directly tied to your mental health. If you’re feeling stressed or anxious about your financial situation, this can weigh on other aspects of your life.

Although many factors are out of your control – cost of living, anyone? – there are steps you can take to regain some power and peace of mind. That’s where budgeting comes in.

Sure, its benefits on our financial wellbeing are well known, but it can also have a wealth of positive effects on your mental health.

It’s not necessarily about how much money you make, either – although admittedly, it can feel like that at times. Budgeting is about how to manage your money in a way that helps reduce your financial uncertainties and, in turn, helps to repair the relationship between your money and mental wellbeing.

It’s about what you CAN do with your money, not what you can't

Budgeting can seem like a negative thing to do. It may make you feel restricted in what you’re able to do. Even saying you’re "on a budget" may feel embarrassing to admit, especially if no one else seems to be.

So, it’s time to view budgeting in a new light. It’s not a restriction or a punishment – rather, it gives you more financial freedom and control over your money. A budget can help to make your money work in the best way possible for you.

If you’re not used to having a budget, it can take some time to adjust. Indeed, you might initially feel it’s a bit tiresome to have to list everywhere your money is going, as well as keep track of every purchase you make, even if it’s less than £1.

But by actively engaging with a budget, it can help to build a more empowered mindset about your money. After all, you’re allocating your hard-earned money to the most important areas of your life, and you’ll have a much better idea of where that money is going.

And a budget doesn’t have to be totally inflexible either. If something unexpected comes up – maybe your car needs fixing, or you have to chip in for a leaving gift at work – you can take a look at your budget and reallocate funds where necessary.

Overall, a budget is all about helping you roll with life’s punches.

Woman doing budgeting at home

Budgeting helps you be more intentional with your money

When dealing with financial worries, it can trigger any complicated emotions you may have to do with money. You may struggle with impulse buying, especially if you turn to retail therapy to alleviate low mood. On the flip side, you may feel guilty spending on essentials, even when it’s absolutely necessary.

So, budgeting lets you take a more intentional, planned approach to spending. With a budget, every pound has a purpose – and it’s totally up to you to decide where it goes.

As well as vital (if unexciting) spending on necessities like bills and rent, a budget can let you factor in treats and pick-me-ups. What’s more, because you’ve accounted for those things in your budget, you can spend the money guilt-free: all with the knowledge that your money can safely cover that expenditure.

It encourages you to build healthy financial habits

Just like exercising, journaling, cooking healthy meals and other recommended self-care measures, by incorporating budgeting into your regular routine you can learn to make it a healthy habit. Plus, every time you check your bank accounts, it becomes less stressful as you’re actively taking steps to manage your money.

Find a rhythm that works for you – whether it’s daily, weekly or monthly – and try to stick to it. You can take a deeper look at your accounts on payday each month, where you check the balances across all your accounts and allocate your salary according to your budget. Then, you can do smaller sit-downs to monitor your outgoings, such as check-ins at the end of the week, or a few minutes every day.

True, in terms of self-care hacks, it’s not quite as instantly gratifying as winding down with a bath or chilling on the sofa with your favourite comfort film. But the short-term and long-term benefits add up, leading to increased financial and mental wellbeing in the future.

Budgeting opens up the conversation about money

Not being able to openly discuss the topic of money can leave you feeling like you’re shouldering a giant burden all by yourself. And if you’re unsure of your own finances, you might find it more difficult to be truthful about your situation. For instance, you might struggle with saying "No" to plans you can’t afford, or feel shame whenever the topic is brought up in conversation.

Because a budget encourages you to actively engage with your finances on a regular basis, you’ll have a much clearer understanding of your personal situation. Armed with this knowledge, you won’t be so afraid to set your boundaries and say with confidence, "Sorry, that’s not in my budget. Can we do something else instead?"

You may also find that it’s easier to have frank, honest conversations about money with family and friends.

It can give you peace of mind

At first, this might seem odd. Surely having to account for every penny coming in and out of your bank balance will make you more stressed? And after non-negotiables, you might not have a lot of disposable income (or ‘fun money’) to play with.

But nothing’s scarier than not knowing at all. By being more aware of your situation, you’ll have a better idea of how to fix things. And by improving your financial literacy, you can reduce your financial stress and uncertainty – no matter what your personal situation may be.

What’s more, a budget lets you plan ahead and work towards a more secure future, one day at a time. It’s there for both the rainy days and to help plan for the good times.

Financial wellbeing and mental health go hand in hand. To that end, budgeting can be an effective way of improving both in one go.
Kara Gammell

Next steps: where to start?

If you’re sold on the power of budgeting, the next step is to make one and stick with it. As with all things, that’s easier said than done – but a basic budget should be straightforward to set up.

You don’t have to be some sort of analytical Excel wiz, either. There are plenty of resources available to help you build one – here are a few ways you can get started:

  • Money pots – If you use a banking app on your phone, chances are that it has some nifty in-built tools that can help you put your money into different categories of spending

  • Free or paid apps – There are plenty of dedicated apps for budgeting. Paid versions may have more advanced tools, but they largely work in similar ways: a place where you can easily keep track of all your accounts, inflows and outgoings all under one roof

  • Write it down – Go old school and write it down in a notebook. Not to mention, the physical act of writing can help you to be more mindful about your money

When you’re starting out, a simple budget will likely consist of your main spending account balance(s), your monthly salary, and all the areas where you’ve allocated your money. You’ll then track your spending across all those different categories.

As you get more confident with budgeting, you can also begin factoring in other accounts, such as savings accounts, pensions, or any investments you may have. You can also experiment with budgeting tricks to help boost your savings (such as the ‘Pay yourself first’ method).

For more practical tips on budgeting, read our guides on How to start budgeting and Five ways to help you budget better.

Remember, if you’re feeling down about your financial situation, you’re not alone – nor do you have to suffer alone, either. For helpful tips and articles, you can visit CALM’s (Campaign Against Living Miserably) Money Worries web page. And if you need help or want to talk to someone, you can call CALM’s helpline on 0800 58 58 58. Lines are open 5pm to midnight, every day of the year.