Is Debt Impacting Your Mental Health? Here's What to Do About It

For many Americans, debt is more than just a financial issue: it's a problem with far-reaching health and social implications. Research suggests that rising debt and worries about financial security are related to heightened levels of psychological distress, which in turn leads to adverse health outcomes such as heart disease, immunosuppression, emotional exhaustion and even increased mortality.

A recent study by Northwestern Mutual showed that 66% of respondents carried some form of debt and the average personal debt reached approximately $23,000. Compounding the concern over rising debt are feelings of financial insecurity: Roughly one-third (33%) of adults reported that they don't feel financially secure and only 9% believe that their household income is keeping pace with inflation. As financial insecurity and debt become more prevalent, understanding their impact on mental health has never been more critical. Keep reading to find out more about how debt affects mental well-being and discover effective strategies for managing debt-related stress.

The mental toll of debt

Debt can significantly affect individuals on multiple levels, influencing not only their mental and physical health but also their social relationships.

Debt and psychological distress

The link between mental health and financial issues such as poverty has long been established in scientific literature. Studies have shown a correlation between financial stress and depression, which is characterized by persistent sadness, fatigue and a lack of interest in daily activities.

Persistent worry over keeping up with payments and the looming threat of economic hardship can lead to chronic stress and anxiety. These feelings, exacerbated by economic uncertainties such as inflation and job insecurity, can create a pervasive sense of unease, helplessness and even despair.

Stress and physical health

Chronic stress — whether from debt or otherwise — isn't just harmful to mental health but also to one's physical wellness. Stress can weaken the immune system, increase blood pressure and contribute to obesity, diabetes, heart disease and stroke. It can also cause sleep disturbances such as insomnia, leading to a cycle of fatigue and irritability that further exacerbates mental health issues.

Debt and relationships

Financial stress can strain relationships and cause tension between partners and family members. Arguments about money are common in households with high levels of debt, and these conflicts can lead to a breakdown in communication and trust. The pressure to maintain a certain lifestyle or meet financial goals can also impact one's social interactions and lead to isolation.

Strategies for managing debt-related stress

Addressing the mental health impact of debt requires both financial and emotional strategies. Here are some practical tips to help manage debt-related stress.

Face your financial situation

Facing debt can be daunting, but ignoring it won’t make it disappear. Taking a close look at your finances might feel intimidating, but it’s a crucial step — and your situation might be more manageable than you think.

One of the first steps in managing debt is to create a monthly budget. Start by listing all your sources of income and expenses, including the minimum payments you owe on your debts. This will give you a clear picture of where your money is going and how much you have left over at the end of each month.

Once you understand your earning and spending patterns, you can explore ways to increase your income and/or reduce your expenses so you can direct any extras toward paying off your debts faster.

Pay down your debt

It's important to recognize that paying down debt may not be something you can start immediately, and that's okay. When you're ready, there are two popular methods to consider: the snowball and avalanche approaches. Both have their advantages, so choose the one that best suits your situation and that you feel you can stick with.

Debt snowball: With this method, you start by listing all your debts from smallest to largest. Make minimum payments on all but the smallest debt, which you’ll focus on paying off first. Once that debt is cleared, take the amount you were paying on it and add it to the minimum payment for the next smallest debt. You’ll continue this process, gradually moving from the smallest to the largest debt, until all are paid off.

Debt avalanche: With this method, you prioritize paying off the debt with the highest interest rate first, while continuing to make minimum payments on your other debts. Once the highest-interest debt is paid off, you apply the payment amount you were using to that debt to the debt with the next highest interest rate, and continue this process until all debts are eliminated.

While the snowball method provides quick wins that can boost your motivation, the avalanche method saves you more money in the long run by minimizing interest payments.

In addition to the snowball and avalanche methods, other strategies for paying down debt include:

• Debt consolidation, in which you combine multiple debts into one with a lower interest rate
• Balance transfers, that is, moving your credit card debt to a card with a 0% introductory rate
• Debt management plans provided by a credit counseling agency, which can also negotiate lower interest rates on your behalf and helps you create a repayment plan.

Some people also use the snowflake method, which entails making extra payments whenever they have extra cash. Lastly, if you have an unpayable amount of debt, you could negotiate a settlement with your creditors. While you can negotiate a settlement yourself, most people opt to hire the services of a debt relief company.

Seek professional advice

If you're feeling overwhelmed by debt, remember that you don't have to face it alone. As previously mentioned, seeking help from a credit counseling agency can be helpful. Many of these agencies are non-profit and may offer free assistance, although there may be some fees associated with creating a debt management plan.

The Consumer Financial Protection Bureau (CFPB) recommends contacting organizations such as the National Foundation for Credit Counseling or the Financial Counseling Association of America for guidance.

If you’re experiencing anxiety or depression due to your financial situation, we also encourage you to seek mental health services in your area. Most health insurance plans, whether through private companies or government programs, generally include coverage for mental health services. Alternatively, many communities also offer low-cost or free counseling services and support groups.

Practice stress-reduction techniques

Incorporating stress-reduction techniques into your daily routine could help alleviate the psychological impact of debt. Research suggests that practicing mindfulness meditation and deep breathing exercises can help reduce anxiety, enhance emotional resilience and support your overall well-being.

You can explore Mindfulness-Based Stress Reduction (MBSR) programs available for free or download mindfulness meditation exercises from different websites.

Yoga is another effective approach that combines physical movement with mindfulness. It has been shown to reduce stress, improve mood and increase mental clarity. You can find free yoga resources online, which can help you incorporate yoga into your stress management routine.

Seek community support

Reaching out to others can be an effective way to manage the stress of debt. If you have trusted friends, family members, or a partner, sharing your financial concerns with them can provide emotional relief and offer you different perspectives on handling financial challenges.

If you find yourself without a close support network, consider connecting with community resources, support groups or online forums where people share similar experiences. These resources can help you feel less isolated and provide valuable assistance.

Continue improving your financial literacy

Improving your financial literacy can help you manage existing debt and avoid new financial challenges by empowering you to make better-informed decisions.

Many organizations, including the CFPB, offer free resources that can help you expand your financial knowledge and skills. You can also explore books, podcasts, online publications and even social media groups such as those that focus on the Financial Independence, Retire Early (FIRE) movement.

Just remember to consult multiple sources. Not everything online can be trusted, and different finance experts may offer varying perspectives.

Summary of Money's Is Debt Impacting Your Mental Health?

Debt and financial insecurity can deeply affect your mental and physical well-being, leading to increased anxiety, depression and health issues. To address these impacts, consider strategies such as assessing your debt and income, exploring different debt repayment and management methods, and seeking advice from credit counselors and mental health professionals.

Incorporating stress-reduction practices such as mindfulness and yoga can help ease your anxiety over debt, as can connecting with a community of people who understand your situation and can offer moral and practical support.

Lastly, seek to improve your financial literacy through educational resources such as workshops, books or online tools. Empowering yourself with knowledge can help you make more informed financial decisions.