Debt's Impact on Mental Health

Sara Gillberg of MoneyGeek asks me to weigh in on how debt and financial stress affects your mental health and ways to cope.

Read the full article here or my contribution below:

What is the most dangerous mental health side effect of debt?

Anxiety and depression are both common and debilitating results of experiencing debt. The more significant the debt on a person's finances, the higher the danger of mental health repercussions. The amount of debt is less relevant than how the debt affects a person's quality of life. For one person, a couple of thousand dollars may feel insurmountable and lead to a significant loss of opportunity, whereas for another person, a few thousand dollars in arrears does not create significant stress or shifts in lifestyle.

Anxiety results from the stress of not knowing how to overcome debt, from imagining other future ramifications of continued debt and from the fear of others' judgement. Depression arises from a hopelessness corresponding to debt and a helplessness to confront the debt and find a path forward. Once anxiety or depression takes root, they can interrupt a person's ability to make headway on their financial situation, which in turn may increase symptoms of anxiety or depression. It is imperative to stop this cycle before mental health issues become entrenched.

If someone is experiencing declining mental health because of debt, do they tackle overcoming debt or improving mental health first? What are the first steps they can take to recover?

Addressing the mental health difficulties associated with debt requires dealing with the debt itself. This does not mean that the debt must be cleared in order to alleviate mental health concerns. The most important aspect of tackling debt is cultivating a clear, manageable plan to move forward. This may involve budgeting, consolidating debt and/or collaborating with a financial planner or other knowledgeable professionals.

The overwhelm which arises from feeling out of control financially is the biggest contributor to stress, anxiety and depression related to debt. Begin by clarifying your financial situation, including all debt, bills and income sources. Assess which debt holds the highest interest and whether these debts can be paid off first or consolidated at a lower interest rate.

Often when a person has struggled with debt for some time, assessing the facts can be overwhelming. Looking into debt consolidation, financial planning, or simply asking a trusted and financially savvy person in your life to help can make the task of assessment and planning feel more manageable. The amount of debt carried and the length of time it will take to pay the debt off is typically less impactful on mental health than whether a person feels in control and has a clear plan to move forward.