The Role of Debt in Mental Health

Health is an all-encompassing term, but you likely think of your physical and mental health as being the top priorities in your life. However, health can extend beyond just the physical and mental aspects. Do you ever think about your financial health? Do you catch yourself wondering how you’re going to get all of your bills paid on time? If so, you’re not alone. Debt’s role in mental health is well understood.

If you’ve ever had anxiety about paying bills or looking at your bank accounts, you know firsthand how much of an impact debt can have on how you feel mentally. Add on a global pandemic, and what you get is a higher number of people struggling to manage their finances.

Below, we will discuss how financial debt can affect your mental health. We’ll also cover some ways to manage any debt you have and how to cope with financial distress.

How Financial Debt Affects Your Mental Health

Carrying a crippling amount of debt undoubtedly plays a role in your overall mental health. Student loan debt, credit card debt, mortgages, and auto loans are some of the most common types of debt.

There are plenty of reasons why Americans find themselves struggling with their finances. The cost of living is increasing, unemployment rates are high, and dealing with the ongoing COVID-19 pandemic are all factors that play a significant role in your mental health.

Here are some specific ways in which debt affects your mental health:

• Additional stress: Chronic stress can negatively impact your cardiovascular system and affects parts of your brain associated with Alzheimer’s. Added stress can also put individuals at risk of developing mental illnesses.
• Developing physical health issues: Because debt can cause anxiety and depression, this can increase the frequency or intensity of headaches, influence sleeping habits, and impact your ability to focus. Mental stress can lead to physical health issues like frequent colds or infections.
• Developing behavioral symptoms: Debt can cause individuals to experience appetite changes and nervous behaviors, and lead to procrastination.
• Increased usage of substances: Some people with debt will turn to alcohol or drugs to temporarily alleviate their negative feelings.
• Increases in poor spending habits: Folks with mental health issues may resort to overspending, further leading to guilt, depression, and even more debt.

The relationship between financial debt and mental health has been heavily researched and is well-documented. Debt can quickly become unmanageable and overwhelming, and it has also been linked to higher suicide rates, according to one study.

Money issues between couples can also lead to relationship instability. Your physical and emotional security is more at risk when you’re dealing with a high amount of debt.

For example, suppose you and your partner decide to invest in something like a summer home or timeshare. While it may seem wise at the time of purchase, it can contribute to you taking on significantly more debt in the future. Interest rates on timeshares can be as high as 15% or more. While this is only one example, you can incur other types of debt based on what investments you make.

4 Possible Ways to Manage Debt

If you find yourself struggling with debt, you may wonder what actionable steps you can take to manage it. Below, we’ll discuss some of the steps you can take to help yourself or someone you know who’s in financial hot water.

1. Self-Help With Realistic Budgeting

While this tip may seem obvious, some people may not know how to accurately assess how much money they can afford to spend. Based on consumer recommendations from the Federal Trade Commission (FTC), follow these steps:

• Develop a budget: Write down all of your income sources, followed by your fixed expenses. Then, list various costs like groceries, clothing, and entertainment. Once you have this information, you can set a realistic budget accordingly. Consider using online resources or apps to create a budget for yourself.
• Contact your creditors: Try to work out a modified payment plan by telling your creditors that you struggle with debt. Contacting your creditors can help avoid debt collectors coming after you.
• Deal with debt collectors: Understand the federal laws surrounding debt collecting. Collectors cannot contact you before 8 a.m. or after 9 p.m., or while you are working if your employer does not allow it. They cannot harass you, lie, or use unfair means to collect a debt from you.
• Manage home and auto loans: Understand the difference between unsecured and secured loans, as they can lead to different outcomes. Secured loans are tied to an asset, like your home or vehicle. Unsecured debt can be in the form of credit card debt or medical bills. Consider contacting your lenders before these assets are taken away from you by repossession or foreclosure.

These will all help you manage your debt and make it less overwhelming.

2. Use Debt Relief Services

Plenty of organizations, such as credit counseling or debt settlement firms, can help you navigate a stressful financial crisis. Make sure to do your research on these organizations before contacting them, as you don’t want to risk opening yourself up to lose more money.

Experts in the financial industry can help you formulate plans to negotiate with creditors to ensure you’re managing your debt. You can verify a company’s trustworthiness by checking with your local consumer protection agency.

3. Consider Debt Consolidation

By contacting a debt consolidation company, you’re doing your best to improve your current financial standing. There are many debt consolidation organizations you can contact to find a debt consolidation loan to reduce your debt, lower your interest rates, and save on monthly expenses.

4. File a Bankruptcy Claim

No one wants to think about bankruptcy, but it may help you manage your debt more effectively. It’s crucial to understand the implications of filing for bankruptcy, as the effects are far-reaching and long-lasting. To decide whether filing bankruptcy is in your best interest, it’s important to read up on what bankruptcy is and how it may or may not benefit you.

3 Tips for Coping With Financial Distress

Here are some coping strategies to alleviate negative feelings associated with managing overwhelming debt.

1. Get Outside Help

No one expects you to manage a stressful financial situation on your own. Consider speaking with a licensed counselor or therapist to talk through your problems.

Additionally, some financial counselors can help you better manage your expenses and guide you through the debt management process. If you notice any of the common mental health effects associated with debt, be sure to reach out and get help as soon as possible. You deserve help!

2. Make One Financial Decision at a Time

Take time with making financial decisions. Avoid spending impulsively the best you can, and enlist the help of your friends and family. An outside perspective may be what you need to decide if it’s worth buying that coffee at Starbucks rather than making coffee for yourself at home.

If you have severe debt, understand that it won’t all go away at once. Your ultimate goal is to make small and achievable goals over time to lower the amount of debt you owe.

3. Prioritize What You Can Control

While it may seem as though the debt you’ve incurred cannot be changed, you are somewhat in control of what you can pay. As mentioned above, making small payments is something to be proud of! Try to identify what debt needs to be prioritized and paid off sooner rather than later.

For example, if your house is nearing foreclosure, that should be a priority. If your car could be repossessed, try to make those payments first. Do some basic reflection to learn what debt you should prioritize.

Nobody wants to be drowning in debt. However, use the coping strategies listed above to help manage some of the stress associated with paying down debt.

Debt’s Role in Mental Health Management

Carrying a crippling amount of debt can be quite overwhelming and may feel unmanageable at times. The good news is that you don’t need to go about paying off your debt and dealing with that stress alone. Your family members, friends, and even co-workers can guide you through this challenging time. Use some of the tips and suggestions above to manage your finances and better understand debt’s role in mental health

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