Money and Mental Health: The Hidden Emotional Toll of Debt

Being in debt isn’t always a bad thing. Debt can help you secure a college education, get a car, buy a home, or pursue other financial goals.  

At the same time, managing debt properly can build up your credit score and unlock more financial opportunities.

But too much debt can jeopardize your financial security and even harm your mental health.  

Since May is Mental Health Awareness Month, let’s break down the hidden mental and emotional costs of debt, as well as the steps you can take to protect your mental well-being.

How Debt Affects Mental Health

Having a manageable amount of debt is completely normal and not a sign of financial distress.

But when your debt is stretching the limits of your budget or you’re struggling to pay your bills, you may experience mental health struggles.  

Here are some ways that debt can negatively impact your mental health:

Stress and Anxiety

When your debt is causing financial problems – such as when you can’t make your payments on time or you’re struggling to afford essentials – you may experience prolonged and repeated episodes of stress.

Stress can trigger a “fight or flight” response in your mind and flood your brain with cortisol, the stress hormone, causing a feeling of anxiety or being under attack.  

Long term elevated stress levels can ripple out and affect other body functions, raising your risk of poor sleep, weight gain, a weakened immune system, hypertension, and more.

Depression

Financial stress has been linked to a heightened level of depressive symptoms. Unlike some other sources of stress, people often perceive their debt as a personal moral failure rather than an external threat.  

This can cause debtors to internalize negative feelings and avoid seeking help.

Unhealthy Coping Behaviors

Financial stress has also been linked to self-destructive behaviors used to cope or escape from negative feelings.  

For example, financial stress has been linked to substance abuse, self-isolation, and even suicidal ideation.

The Emotional Symptoms of Debt

The symptoms that may manifest as a result of stress caused by debt may include:

• Chronic anxiety/dread. The financial stress caused by too much debt can cause consistently elevated feelings of anxiety and dread. Over time, these feelings can cascade into other problems. ‍
• Trouble sleeping. Chronic stress has been linked to lower quality sleep. And if your debt is keeping you up at night, the issue may lead to other negative physical outcomes. ‍
• Low self-esteem. Many people with too much debt consider the problem a personal failing, which means they may beat themselves up about having too much debt. While this may not be productive or even logical in some cases, it can cause borrowers to lose confidence and feel low self-esteem. ‍
• Self-isolation. People with debt problems may avoid the topic of finances and debt. Over time, they might withdraw from friends or family to avoid spending money or discussing their financial troubles. ‍
• Relationship strain. Carrying debt and financial stress can strain the health of relationships, especially if there are frequent conflicts over money. Daily feelings of financial stress have been linked to lower satisfaction in relationships.

Tips for Better Mental Health

Luckily, there are some things you can do to reduce your mental distress surrounding your debt, even while you’re still working on the problem.  

Here are some tips for healthy ways to deal with stress caused by debt:

Talk About Debt

Talking about debt with a friend or loved one can help you feel better.  

This is because talking about our problems or negative feelings can actually reduce those feelings by relieving stress or isolation.

Reframe Your Debt

People often think of debt as a personal or moral failure, and a problem that they have earned with their own behavior.  

These feelings aren’t necessarily productive when you already have debt. Try to think about your debt as an issue you’re working on, rather than a character flaw.

Talk to a Professional

There are two major avenues for talking to a professional to help with your debt and the mental health issues it may be causing:

• See a therapist. A qualified therapist can help you manage stress, anxiety, depression, and other feelings associated with your debt, and give you coping strategies for dealing with these feelings. ‍
• See a financial advisor. A financial advisor can look at your overall finances and help you come up with a plan for dealing with your debt. Some organizations offer free financial advice to borrowers at a certain income level.

Related: Debt Payoff Strategies for Beginners

Work on Paying Debt Off

One of the best ways to reduce stress surrounding debt is to come up with a plan to pay it off. Here are some tips for paying down debt:

• Create a budget. If you don’t already have a budget, it’s time to create one. Use a spreadsheet to keep track of your monthly income, then create line items for your monthly expenses, including bills, groceries, rent, and more. From here, you can look for opportunities to reduce spending in other areas and put extra money toward your debts. ‍
• Prioritize your debt. Start by creating a list of all your debts, including the creditor, the current balance, the annual percentage rate (APR), and more. Then you can figure out how to prioritize debts: ‍
• The avalanche method. Focus on paying extra money on the debt with the highest APR, while making minimum payments on everything else. Once that debt is eliminated, you can move on to the next highest APR. This will save you money in the long run. ‍
• The snowball method. Focus on paying extra money on the smallest balance, while making minimum payments on the rest. Once that debt is eliminated, you can move on to the next smallest balance. This can give you some quick mental victories and reduce the number of monthly payments faster. ‍
• Avoid borrowing more. Don’t take out additional debt until you have eliminated your current debts (or your finances have become more manageable). When it comes to credit cards, only charge what you can afford to pay off in full each month. ‍
• Create an emergency fund. Open a bank account for an emergency savings fund and add to it a little bit each month. The next time you have an unexpected expense like a car repair or medical bill, you can dip into your savings instead of going into debt.

Related: Debt Consolidation Options: How to Choose the Best One for You

The Path Forward: Work Toward Better Credit and Greater Peace of Mind

Debt can create a heavy psychological burden for many people.  

For Mental Health Awareness Month, it’s important to recognize that debt is not a personal failure but rather a problem that can be worked on.  

The stress, anxiety, or depression you feel because of your debt isn’t a permanent reality, and you can take steps to get better.  

One of the best methods for dealing with debt and negative feelings is to talk to a professional, such as a therapist, financial advisor, or both.

CreditBuilderIQ℠ can help you monitor your progress and improve your credit as you work on paying off your debt.  

We monitor credit reports and credit scores and can provide you with tools you need to build a stronger credit profile. With the right support, you can move toward a stronger, financially secure future.