Financial Anxiety Shrinks Mental Capacity

Universal Basic Income: Would It Make Us Happier? In this episode, David Lloyd is joined by Chris Budd and Tom Morris to explore this hotly debated idea, UBI, but through a financial wellbeing lens rather than a political one.

Along the way, there’s community joy, reused tea bags, Maslow’s pyramid, behavioural psychology and what all of this might mean for parents supporting their children, as well as those approaching retirement.

Welcomes and Introductions

Chris Budd – Founder of Ovation Finance, author of The Four Cornerstones of Financial Wellbeing, trustee of a hospice and, as someone else once described him, the “grandfather of financial wellbeing.”

Tom Morris – Managing Director of Ovation Finance. Award winning, Bristol-based, chartered, B-Corp certified and employee-owned.

Fancy a chat with Tom Morris and the team at Ovation? Contact details here

Tight Ass Tommo

Tom’s money-saving tip this week involves former England cricketer Jack Russell. Rumour has it he would hang up his tea bags between uses and reuse them later.

Whether for sustainability or savings, the lesson is clear: small habits can save money. (Although David points out his mum was doing this decades ago.)

Chris’ Good News

Before diving into economics, the team share their regular feature: Joy Baiting – the antidote to online “rage bait.”

Tom shares a story from a local mini rugby festival: 500+ children aged 6–12, countless volunteers organising parking, food stalls, refereeing and coaching — all creating a joyful community event.

This Episode

So… What Is Universal Basic Income? In this episode we look at a non-political Exploration.

Universal Basic Income (UBI) is the idea that every adult receives a fixed income from the government, regardless of their circumstances.

It’s:

• Not means-tested
• Not dependent on employment
• The same amount for everyone
• Simple in theory to administer

Importantly, the discussion here is not about politics or affordability – but about what UBI tells us about the relationship between money and happiness.

For context, if the UK paid everyone roughly £400 per month, it would cost around £200 billion a year — more than the NHS budget.

So yes, it’s expensive. But what about the wellbeing implications?

Maslow’s Hierarchy and Financial Security

Maslow’s hierarchy of needs suggests we must satisfy basic needs — food, shelter, safety — before we can pursue higher goals like belonging, esteem and creativity.

If someone is anxious about survival, it’s extremely difficult for them to move “up the pyramid.”
Financial planners see this constantly — particularly with people approaching retirement. Until clients feel secure, they struggle to explore purpose or joy.

So the question becomes:

Would guaranteeing a basic income help people move up Maslow’s pyramid – or make them lazy?

Does Financial Stress Motivate — or Paralyse?

There are two competing views:

• View 1: Financial pressure motivates people to work harder.
• View 2: Financial pressure creates anxiety that paralyses people.

To explore this, Chris consulted behavioural finance expert Neil Bage, who pointed him to the Yerkes-Dodson Law.

The Yerkes-Dodson Law

A little anxiety improves performance.
Too much anxiety harms performance.

Financial stress often sits firmly in the “too much” category. When people are overwhelmed by money worries:

• Their mental capacity shrinks
• They focus only on short-term survival
• Decision-making deteriorates

Research shows that when people worry about paying bills, cognitive performance drops significantly.

Real-World Examples

David shares two personal examples:

• As an actor, nerves enhanced performance.
• As a novice pianist recording an exam, anxiety completely undermines it.

The difference? Confidence and perceived control.

Similarly, financial anxiety can either sharpen focus – or overwhelm entirely.

Chris recounts how severe financial stress led his father to stop opening bills altogether — anxiety became paralysing rather than motivating.

What Does the Research Say About UBI?

Several trials have been conducted:

Canada (1970s)

• Reduced mental health diagnoses
• Very few people stopped working
• Those who did were mainly new mothers and teenagers choosing to study

Finland (2017–2018)

• 2,000 unemployed people received ~£500 per month
• No obligation to work
• Improved wellbeing
• Reduced mental strain
• Some started businesses or provided family care
• Overall economic impact: minimal

Ongoing UK and Welsh trials

Still awaiting results.

So… Does It Work?

From a wellbeing perspective: yes.

UBI appears to:

• Reduce anxiety
• Improve mental clarity
• Improve wellbeing
• Enable better decision-making

From a purely economic perspective:
There’s no strong evidence yet of significant economic growth benefits.

Why Isn’t It Implemented?

• It’s politically divisive.
• It’s extremely expensive.
• It would require dismantling and rebuilding the welfare system.
• Some argue it should be means-tested rather than universal.

But the economic arguments may be missing a key point:

The wellbeing benefits are significant.

A Lesson for Financial Planning

Financial planners often help clients answer:
“How much is enough?”

But perhaps they should also help answer:
“What’s the minimum we need to avoid falling into anxiety?”

Final Thoughts

Universal Basic Income may or may not be politically viable. But the psychology is clear:

A guaranteed level of financial security reduces anxiety and increases wellbeing.

And that principle applies whether you’re:

• Designing public policy
• Supporting your children
• Or planning your own financial future