The Link Between Financial Debt and Mental Health The Link between Financial Debt and Mental Health

The Link Between Financial Debt and Mental Health

Debt takes a serious toll on happiness.

They may be happy to have the item they bought with debt temporarily but later on they start wondering if that purchase was necessary. Having debt seems to be the norm. The majority of Americans have debt of some kind.

Whether it is student loans, medical bills, car loans, mortgages, or business debt, people owe.

What is Debt?

Debt is when one person borrows money or something of value to purchase an item they want.

Debt is used because the borrower does not have enough money to pay for the item they want. However, because they want the item so bad, they get the money by borrowing it from somewhere else. In turn, the lender will then charge the borrower interest on the money they gave. Interest rates can range from 1 to 20 percent and sometimes higher with credit cards or rent to own items. For instance, if you borrow $100 to buy a television at the local rent to own store and they have an interest rate of 15 percent, you will actually be paying $115 for the television.

This doesn’t sound incredibly harsh at first. It’s only after you miss making a payment on time and the interest rate automatically increases to 29 percent that you start to feel the sting. A simple note, lenders rarely lose.

Owing money to someone else is not wise.

The math alone tells us it is not smart to borrow money. Rarely are you paying the exact amount you borrowed. As noted, lenders do not lose money on any deal. Not even the car dealers who tell you they aren’t making anything off of the sale.

That is a lie, especially if you are borrowing money through their bank or dealership. They know they will make more money on your interest rate than on the actual cost of the car.

It may take a little while after the purchase to realize borrowing money was a mistake, but it always happens at some point, usually each month when you are making that payment to the creditor and sometimes more often than that. And with each hard earned dime you made that month going to a credit card company or a bank, it hits you.

You begin to realize that new car was not worth it, especially since you now owe more on it that it is worth. You realize you could have stayed in a smaller home for one more year. You realize you really should not be putting groceries and gas on your credit cards since you have nothing to show for them now except a payment due slip. You become sick just thinking about that $10 fast food meal you are now paying $25 for and it didn’t even taste good.

When these realizations start to sink in, your mental health becomes affected.

Unhealthy Side of Debt

Unhealthy behaviors associated with debt include lack of willpower, addiction, instant gratification, irrational thinking, and poor decision making. Medical daily suggests debt causes stress that leads to heart disease, stroke and several mental health disorders.

Debt has been linked to several mental health issues including depression, anxiety and fear, and denial.

Debt can become overwhelming for many people, which can lead to a person feeling void of hope, alone and desperate. These feelings can lead to anxiety, causing people to lose sleep over their debt worries, having panic attacks over how the bills will get paid. Sometimes, in order to not feel depressed or anxious, people allow themselves to be in denial over their debt problems. Denial is an extremely dangerous coping mechanism.

Denial is spoken in conjunction with addiction most of the time.

However, denial connected to debt is just as bad. The American Psychological Association emphasizes how bad the denial among debtors can be, especially among college students. The stigma is reduced because so many people are in serious debt, making people feel it is okay as long as they are not the only ones.

Student Loan Debt

One of the worst debts to have can be student loans.

These debts follow you through the rest of your life until they are paid off. While there are cases of people who get so bogged down in debt that they need to file bankruptcy and have some of their loans forgiven, student loans stick with you like the plague. The majority of student loans are not forgivable in a bankruptcy.

So while you may not have to pay off those credit card bills, you will still have to pay off your student loans. Your car may be forgiven in bankruptcy but they take your car or your house or whatever else you decide you can no longer pay.

Student loan debt has a negative effect on students of all ages, socioeconomic status, and degree program.

Students ranging in age from 18 to 100 can get student loan debt.

People from the richest neighborhoods to the poorest neighborhoods are given student loan debt. People in all professions have student loan debt. From doctors to lawyers to social workers, they all have to pay the loan back to the lender. And while doctors may make hundreds of thousands of dollars, they also owe that much more. There is a sad fact that many students who take out loans for college do not even finish college.

Do the loans go away even if you do not complete a degree program? No.

If you go to a college or university campus you can find credit card companies set up all around to entice young people into applying for debt.

What should be criminal behavior is allowed and promoted on campuses. Freshman in college to do not understand the ramifications of going into debt and credit card companies feed on this. They offer those sweatshirts, watches, free trips and more to get them to sign up.

And many do sign up.

And one year later when they can’t pay the credit card bill they realize that sweatshirt was not so free after all.

A reason student loan debt is so devastating is because it hinders a graduate or non-graduate from truly reaching their potential. As soon as they quit taking classes, it is time to start paying back the loan, whether you have a job or not.

There is no grace period offered until you get a high paying job and after you get your dream house, dream car, etc. You are expected to begin making that monthly payment as soon as you stop taking classes. Student loans don’t allow you to wait for that dream job; you have to accept a job as soon as possible to make that payment. Then you risk getting stuck in a field you don’t enjoy because you are a slave to the student loan debt.

College students also don’t realize that their debt will affect their future family as well. You fall in love, get married and then share your debt. Ouch. Debt can delay when you have children, making you think you can’t afford to have children the way you dreamed of having them, in that house with the white picket fence. It is also embarrassing for graduates to try and explain to an employer why they have so much financial debt.

Many people are going into massive debt to get a degree in a low paying field. It is not smart to borrow $100,000 of student loan debt to become a social worker who averages $45,000.

Marital Debt

Many marriages are destroyed over financial issues.

Spouses make many mistakes when handling money issues. They either keep secrets from one another, don’t discuss finances at all, allow one spouse to handle all of the financial responsibilities, or lie to each other about their finances.

All of these can lead to the demise of a marriage.  Marital debt has been linked to anger, depression, anxiety, tension and stress. The most important thing a couple can do is to work as a team. Prevent marriage problems due to debt by being on the same page and having each other’s backs in times of distress makes you a powerful force. It can be you against the world, overcoming hardships and becoming winners together.

Working together to get out of debt makes you stronger and enhances the quality of your marriage.

Debt Stress Syndrome

Debt stress syndrome is becoming a concern in our society with so many people feeling overwhelmed with their financial obligations.

There are ways to help you cope. Stop denying it, getting help and being proactive. Too much debt can lead to mental health problems such as drug and alcohol abuse, panic attacks, insomnia, anger management. Post-traumatic stress disorder has also been linked to debt and financial problems.

Paying off debt improves psychological well-being.

Signs that debt is affecting your mental health feeling sick from worry sleep issues, withdrawing and isolation. People feel stuck in their debt situation and begin to lose hope. It is then that people resign themselves to having to be in debt the rest of their lives.

This type of thinking causes people to make unhealthy decisions that create a more damaging existence.

There are many excuses of why people can’t get out of debt.

Short attention spans, feeling deprived if we don’t have what others have, getting out of debt is overwhelming, seems intangible. Embarrassment is also a negative aspect of having debt. But this does not have to be the case. Getting out of debt is possible for everyone.

Get Help with Your Debt

The first step in getting out of debt is to admit how much debt you have.

Some people aren’t even sure how much money they actually owe to lenders. This form of denial keeps us from feeling the actual danger of debt. Doing the math and owning up to debt mistakes can be freeing because it gives us a starting point, a point of no return, a point to remember once we are successful in getting rid of the debt.

There are many guides and resources available today to help people get out of debt.

While prevention strategies could be improved to help people avoid debt are still needed, there are still many ways to reverse the effects of debt damage in your life. A guide to mental help and debt offers resources that can help a person cope with the mental health stress their debt is creating.

Some of these resources include: The Wellness and Recovery Action Plan (WRAP), Cognitive Behavioral Therapy, analyze why you spend, know triggers, medication. Paying off debt is just as much psychological as it is a physical action.

One of the best plans available, having helped millions of people get out of debt, is Dave Ramsey’s debt “baby steps”. The baby steps involve:

  1. Save $1000 to start an emergency fund.
  2. Pay off all your debt except your mortgage by starting with the smallest debt, knocking it out quickly and moving on to the next smallest debt. Paying off the smallest first will offer you needed rewards in increments and help keep you motivated.
  3. Save 3 to 6 months’ worth of expenses for a larger emergency fund.
  4. Invest 15% of household income into Roth IRAs and pre-tax retirement
  5. Start saving for college funding for children.
  6. Pay off your home early
  7. Build wealth and give.

Other ways to overcome mental health worries created by debt include:  do what happy people do, volunteer, be creative, and have a positive, can-do attitude.

There are so many perks to getting out of debt, especially for your mental health including confidence in self, freedom to pursue other things, emotional relief, less stress, improved health, improved relationships. Being free of debt makes you feel just like that, free.  It gives you the right to quit that job you hate, to own everything you buy, meaning no one can take it away from you. It allows you to be in control of your decisions.

When you don’t owe anyone any money, you get to make choices based on what you want, not what you have to do. Getting out of debt is doable. Get a plan, get started and enjoy your new freedom.