Knowledge Center

How Can Debt and Money Issues Impact Your Mental Health?

Reading time: 3 minutes

Highlights:

  • Debt can occur for any number of reasons, many of which are beyond a person's control.
  • Your finances are closely connected to your overall well-being, so debt and other money issues can be a major strain on your mental health.
  • Ignoring your debt won't make it go away and could even make the problem worse, especially if it leads to late payments or continued overspending.

If you're one of the millions of Americans living with debt or other money issues, your financial situation could be negatively impacting your mental health.

Debt can leave you feeling stressed out, anxious and depressed. However, understanding the link between debt and mental health is an important step toward a happier, debt-free future.

Potential impacts of money and debt stress

There's a strong link between debt and poor mental health. People with debt are more likely to face common mental health issues, such as prolonged stress, depression, and anxiety.

Debt can affect your physical well-being, too. This is especially true if the stigma of debt is keeping you from asking for help. Increased stress could decrease the quality of your sleep, which can in turn negatively affect your physical health and impair your ability to concentrate throughout the day.

On the flip side, these negative effects can make your financial situation even harder to handle. Individuals struggling with mental health issues are more likely to have trouble managing their finances. For example, they may find themselves overspending to feel the temporary excitement of a new purchase. Or, they may make unwise financial choices such as withdrawing money from their retirement accounts to cover nonessential costs.

All of this together creates a cycle that's hard to break: A poor financial situation may lead to mental health struggles. Then, once you're struggling with your mental health, it could become even more difficult to manage your money, so your debt only continues to grow.

Reducing the stigma of being in debt

Many people feel stigmatized by debt, which can sometimes keep them from dealing with the situation head-on. But ignoring your debt won't make it go away and could even make the problem worse if it leads to late payments or continued overspending.

It's important to remember that debt is a normal part of financial life for millions of Americans. Although some individuals find themselves in debt due to bad decisions and unwise spending habits, for others, debt is unavoidable. For example, you might take on debt for a large but necessary expense, such as funding your education or buying a home. Or, you might go into debt after an unexpected job loss or a major medical expense.

Regardless of how your debt occurred, it's never something to be ashamed of. And it's never too late to take steps to change your situation.

How to find support resources

Debt can be detrimental to your physical and mental health, but you don't have to struggle alone. If you find yourself in financial hot water, take action and seek help:

  1. Take an honest look at the debt you're carrying. Review each of the debts you owe, including any interest rates or history of late payments. Make a list of how much you owe on each debt and when each minimum payment is due. This will help you structure your repayment process.
  2. Review your credit reports. Checking your credit reports can help you better understand your credit history and the status of your accounts. You can receive multiple Equifax credit reports with a free myEquifax account. Sign up and look for “Equifax Credit Report” on your myEquifax dashboard. You can also get free credit reports annually from the three nationwide consumer reporting agencies at AnnualCreditReport.com.
  3. Determine what you can pay off each month and create a budget. Start by listing your monthly income alongside your monthly expenses. Consider creating categories for what you spend each month such as housing, groceries, transportation, and personal expenses. Include another category for the minimum amount that you owe on your debts. Building a comprehensive budget can help you get a clearer picture of how much money you have left over at the end of each month to put toward additional debt payments.
  4. Reach out to your creditors about your situation. Consider contacting your creditors to explain your situation. In some cases, they may be willing to work out a modified payment plan that can make it more manageable to pay your bills.
  5. Connect with a reputable credit counseling organization. Credit counselors are certified professionals who thoroughly review your financial situation and advise on the best method for paying down your debt. This might include helping you develop a personalized budget or going through a debt management plan.

    You can start your search with the NFCC (National Foundation for Credit Counseling), the country's largest accreditor of credit counselors. On their website, you'll find a directory of nearby counselors, and you can choose one who specializes in the area where you're having the most trouble (for example, credit cards, mortgage payments or other types of debt).

    The U.S. Trustee Program, a component of the Department of Justice, also provides a list of counseling agencies approved to provide pre-bankruptcy counseling.

Be careful when looking for help, though. While there are many trustworthy credit counseling organizations, there are also scammers that prey on people looking for quick fixes to their money issues. Be wary of any service that promises to erase debt overnight or that requests payment before providing any assistance. The Federal Trade Commission offers additional guidance for choosing a credit counselor on its website.

With good information, direct action and the right help, you may find that any type of debt — from credit card bills and student loans to a mortgage on the verge of foreclosure — is more manageable.

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