September 15, 2021

How debt and financial issues affects the Mental health

A closer look into debts effect on mental health, and how to get out debt with your mental health in great shape

17 min read

Lyle Solomon

Guest Blog


People who have overwhelming debt and financial problems are more likely to have a high level of stress, chronic depression, anxiety, hypertension, and various other chronic illnesses.

Anybody can be affected by debt and the mental illnesses it brings, but unemployed people are more vulnerable. Households, single-parent families, and seniors, on the other hand, may find themselves in debt as a result of a lack of cash flow in dealing with financial impacts and volatility. Because of the specific economic issues that military veterans confront following their service, they are also in danger of falling into debt.

Debt is indeed a financial problem that influences health conditions. While you must address the financial aspect of the problem, it is also beneficial to comprehend how finances might affect your mental well-being. Here's everything you need to know about the link between your brain and your bank account.

How debt and financial issues affects the Mental health

Having a lot of debt might harm your mental health. A lack of cash funds resulted in a significant increase in stress. Managing debt and financial issues can be as emotionally draining as losing your home, having your wages garnished, or watching your credit score plummet to the point where you won't be able to acquire another loan.

Families owe roughly $11 billion in past rent, according to research published by the Federal Reserve Bank of Philadelphia in 2021. As per a study conducted by the University of California, the value is $20 billion. According to a study released in the January 2016 issue of Psychology Science, persons with high unemployment rates were more inclined to consume over-the-counter medicines.

Before COVID-19, 56% of Americans thought their debt had a negative impact on their lives. The inclusion of the COVID-19 pandemic and rising financial stress have undoubtedly raised that figure by affecting millions more people.

Take note of how you feel mentally while you attempt to balance your budget. Feelings of helplessness or depression can have a long-term negative influence on your mental health. Low self-esteem and reduced cognitive efficiency are two of the negative consequences. For example - when you're worried about your gas bill, you won't be able to learn, recall, pay attention, or resolve issues.

The following are some of the symptoms and signs of stress brought on by debt and financial difficulties:

●       Headache

●       Lightheadedness

●       Rapid heart rate

●       High blood pressure

●       Insomnia

●       Digestive problems

●       Lower immunity

●       Tensed muscles

●       Having trouble focusing

●       Feeling impatient or frustrated

●       Increased alcohol consumption

To get out of debt, you must first overcome financial anxiety. Find out who is most prone to be affected by debt pressure, how your finances might affect your mental health, and how to deal with financial strain. It's uncommon for someone to go through life without ever having financial difficulty. No one is immune to a pandemic, particularly during and after it.

When you're stressed about money, it affects more than the wallet. According to at least one study, money stress has been linked to more significant mental trauma, decreased self-esteem, strained interpersonal connections, and trouble being creative and concentrated at work.

Coping with debt and personal expenses when they impact your mental health

You don't need to face it alone if you want to take charge of your finances and mental health. There is still a way out, no matter how hopeless your circumstance appears to be right now. Here's where you should begin.

1. Understand what you may do

Consider what you can control before deciding that your debt is over your capacity. Focus on the high-interest debt if you have any extra money to pay down your debt.

Eliminate all costs that aren't absolutely necessary. 

Keep in mind to contact lenders and financial agencies regularly. Ask yourself - should you take care of a collections account first, or should you pay off high-interest debt? Is there a way to make your student loan installments more manageable? Are you trying to figure out how to pay off your credit card debt? Would bankruptcy help you get out of debt or make your life more difficult? Analyze the most pressing financial issue and devise a strategy, whether on your own or with the help of a professional.

2. Talk to someone regarding financial issues

While having financial difficulties, it's easy to keep everything secret from others and figure it out independently. Most of us believe money matters is a taboo topic that one should not share with others. You might hesitate to share your income or expenditures, be ashamed of any poor financial decisions you've made, or be humiliated about not being able to support your family. But practically, keeping things bottled up will just add to your financial stress.

Financial difficulties affect the entire family, so seeking the help of your loved ones can be vital in getting things back on track. Even though you pride yourself on your independence, keep your family informed about your financial condition and how they may assist you in saving money. Your family members are most likely concerned about you and your family's economic security. Allow them to express their worries and offer advice on fixing your financial troubles. Make time for each other regularly to enjoy each other's presence, let off stress, and forget about your financial concerns.

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3. Begin with a financial plan

A budget is among the essential tools for reducing financial stress, but many individuals fail to use it. If you are under financial anxiety due to a loss of income, developing a reasonable, realistic budget is vital.

Making a budget does not have to be complicated.

A basic budget simply comprises calculating the amount you save and spend every month by evaluating your spending to your income. Budgeting applications can help you keep track of your costs to figure out where you can cut down or remove expenses to save money.

Lowering bills can also help you save money. These are tiny but actionable steps you may take to reduce your bills and relieve stress.

Her most excellent advice for doing so is to follow these steps:

●   Include regular expenses like groceries and transportation costs, monthly rent, home loans, and utility payments in your budget.

●    Divide expenses you pay yearly, such as vehicle insurance or property taxes, by 12 to make it easier to put money away each month.

●    If feasible, account for unforeseen costs such as a medical co-pay or medication costs if you become ill, as well as the charges of car or home maintenance.

●    Whenever possible, set up automated payments to ensure that bills are paid every month and that you avoid late fees and interest rate increases.

●    Make a list of your spending priorities. If you're having difficulties covering your monthly costs, prioritizing where your cash goes first will help. Food, shelter, water, and power are your prime necessities.

●    Continue to look for methods to save money. Review your budget regularly and seek methods to save costs.

●    Ascertain that everyone in your household, such as your spouse, partner, or kids, is thinking in the same direction and is aware of your financial objectives.

4. Create a plan to reduce debt

Financial stress can be the root of mental illness if it takes too long to pay off your huge debts. So, understanding what you owe is the initial step toward properly handling debt. Checking your credit reports to determine where you stand in debt management can be a good start. After that, you can choose specific debt-reduction techniques.

Shifting credit card balances to a new credit card with a 0% introductory APR can hel[p you to apply your payments towards the balance rather than simply the interest.

A balance transfer credit card, when used appropriately, can help you reduce credit card debt by saving you interest payments. Transferring a credit balance is a simple process that allows you to avoid rapidly accruing interest. Some cards even provide a period of zero interest of 18 to 21 months, giving you enough time to pay off your credit balance before the usual APR starts.

Apart from credit cards, other debt management alternatives could be considered to reduce financial stress.

For instance, here are some possibilities:

●       Consolidating debt with a personal loan

●       Taking advantage of decreased interest rates by refinancing private student loans

●       Taking out a home equity loan

●       Choosing a cash-out refinancing option

5. Put money aside for an emergency

An emergency fund might allow you to remain afloat and reduce financial difficulties in challenging moments. For example, if you lose your job or become ill and cannot work, your emergency funds can help you cover your bills.

If you don't have any emergency funds or if it's not enough to help you cover your bills — it's crucial to work on increasing them.

There are many ways to boost your income to help you save for an emergency. As an example, as a side job, you may try one of the following:

●       Earn money as an online teacher or tutor.

●       Become a dog walker or a pet sitter.

●       Working as a babysitter is a great way to get money.

●       Become a music or art teacher for children.

●       Earn money by creating internet educational videos.

●       Become a delivery guy for Amazon, eBay, and other companies.

●       Become a self-employed individual.

Another simple approach to get extra money is to use cashback programs. You can get cashback on online or in-store transactions by using cashback applications. By combining such applications with a cashback credit card, you can simply boost your cashback profits.

Pay off your bills in full to avoid paying interest, reducing your cashback returns. Also, to get the most out of your cashback funds, consider putting them in a high-yield savings account.

6. Build/improve your credit

Having a solid credit score can be faster and cheaper to borrow money at low-interest rates. If you don't have a properly funded emergency fund and require a small private loan, having good credit will make financing more affordable.

Monitoring your credit history and contesting inaccuracies is one of the first moves toward boosting your credit. All three main credit bureaus allow you to dispute credit report inaccuracies online.

Having a credit card account may help you improve your credit score if you don't have much of a credit record or low credit. If you have bad credit, you might want to begin with a secured card.

These practices can assist you in developing good credit once you get a credit card account:

●       Keep track of your bills and pay them on time or early every month.

●       Maintaining a low debt with your credit limit is better.

●       Apply for new credit until it's absolutely necessary.

●       Maintain credit accounts rather than canceling them when your credit increases.

●       Register for a free credit monitoring program to keep track of your credit score monthly.

Credit monitoring can also assist you in detecting possible fraud and avoiding long-term harm to your credit score.

7. Get professional help if required

If you are still experiencing financial stress, it's essential to seek professional help. Knowing how to manage financial difficulties is also therapy; it's vital to obtain the proper information or collaborate with somebody who can lead you.

A licensed financial planner with a behavioral science or behavioral finance background can assist you in developing a financial plan that addresses your money concerns. If you can't manage the fee, some low-cost or no-cost options are available.

A credit counselor is a skilled specialist who can examine your entire financial picture and advise you on where to minimize costs and how to get out of debt. Some nonprofits, such as the National Foundation for Credit Counseling, will connect you with a counselor who can give you proper advice to your specific situation.

8. Seek mental health treatment

Everyone experiences rough moments. But feeling helpless, depressed, or nervous while making decisions on your debts and finances is a big issue. If you are facing the same thing, then you deserve assistance. Consult a mental health expert immediately. If you can't afford a counseling session, look for counselors who charge on a payment plan.

About The Author: Lyle Solomon has extensive legal experience as well as in-depth knowledge and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998, and currently works for the Oak View Law Group in California as a Principal Attorney.

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