Understanding & Managing the Mental Health Impact of Debt

Learn how debt affects your mental health

A homeowner contemplates the difficulty of the pandemic and recession.
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Money doesn’t just impact your financial well-being. It dictates every facet of your life, from where you live, if you go to college, and whether you can comfortably retire. 

According to the Federal Reserve Bank of New York, total household debt increased by $87 billion in the third quarter of 2020, totaling more than $14 trillion. With so much riding on how we can afford basic things like housing and transportation, money is emotional. And we feel that emotion in many of the financial decisions we make.

If you’ve ever felt depressed or anxious about not having enough money to pay bills and afford necessities, you might want to find ways to manage the impact money has on your mental health. Here’s how to notice it and what to do if you experience any of these feelings. 

How Debt Weighs on Mental Health

Dr. Alex Melkumian, founder of L.A.-based Financial Psychology Center, said the pandemic has amplified the emotional impact of finances.

“In normal times, financial stress is the most common type of worry amongst Americans,” Melkumian told The Balance in an email. “The pandemic has exponentially amplified the levels of financial anxiety.”

That increased stress was felt early in the pandemic: Almost half of Americans reported they experienced “a lot” of financial stress this past spring, according to a June 2020 survey from Edelman Financial Engines. Furthermore, less than half of respondents said they’d be able to come up with $2,000 in the next 30 days in case of an emergency.

“The feeling of debt is akin to the removal of security and safety, base human needs,” Melkumian said. “When not knowing where the next paycheck or meal is coming from becomes a reality, stress and anxiety start to set in.”

Amid the stress and worry of debt, consumers can experience a wide range of emotions, ailments, and impulses.

Anxiety

Anxiety is one of the first feelings you might face when it comes to money. If you tend to get stressed when you think about money, being able to afford your bills, or not earning enough, you might suffer from financial anxiety.

“The fear of not being able to pay [the money] back and losing what you have can bring on intense anxiety attacks that are prone to strike at any moment,” Melkumian said. “As one falls deeper into debt or prolongs it through minimum payments, it can become very dark.”

If you feel like you have financial anxiety, it could lead to other mental health concerns like depression and suicide.

Insomnia

Financial stress not only harms your wallet, but it hurts your ability to rest, too. You could be worrying so much about not making ends meet that you’re losing sleep. If you’ve lost your job or face reduced hours, you might stay up at night trying to find solutions to your money problems.

“Insomnia is a very common manifestation of both [anxiety and depression] and is a relatively milder symptom than something like suicidal ideation,” Dr. Georgia Gaveras, chief psychiatrist and co-founder of Talkiatry, told The Balance in an email. “Unfortunately, we have seen successful people who have fallen on extremely difficult financial hardships who have turned to suicide.”

Depression

Financial trouble and depression are a potent mix, according to the U.K.-based Money and Mental Health Policy Institute. The institute’s research has revealed that people with depression and debt are 4.2 times more likely to be depressed a year and a half later than people without financial difficulties.

“While there are typically practical solutions to debt, the emotional toll can be so great that those suffering are unable to address their finances in a logical manner, further exacerbating the stress,” Melkumian said. “One develops an emotional relationship with money which can be marked by highs (payday) and lows (the day after payday) that become cyclical patterns in one’s life.”

Think about what causes your anxiety and depression. Do you constantly look at your bank account and worry that you won’t be able to pay bills? Or do you ignore financial obligations in hopes that they’ll go away? Both of those things can trigger depression and can take a greater toll on your mental health.

Suicidal Thoughts

In Nov. 2020, the American Journal of Epidemiology released a report showing a link between experiencing financial strain and attempting suicide.

“Financial debt and crises, unemployment, lower income, and past homelessness were each significantly and positively associated with subsequent suicide attempts,” the report said. “Predicted probabilities of suicide attempts (and suicidal ideation) increased substantially with each increment in financial strain.”

Those who endure strain from debt, housing instability, unemployment, and low income are 20 times more likely to commit suicide than those who did not report feeling strain from those four factors.

“There is a story recently of a 20-year-old who died by suicide after seeing a negative balance of over $700,000 [in his] investing app,” Gaveras said. “Studies have shown that debt is a risk factor for suicide and, again, the reverse is true. Those who have had a recent suicide attempt are more likely to have financial problems in the years following.”

Signs Your Debt Is Affecting More Than Your Wallet

Gaveras has a simple way to tell if your finances are starting to harm your mental health. 

“When someone comes to me with symptoms of anxiety and trouble sleeping, I ask them what they are thinking about when they are trying to fall asleep,” Gaveras says. “Even if the answer is not specifically about money or debt, sometimes it is something that is indirectly related.”

You may not think money infiltrates other areas of your health, but it does. Melkumian said there are two major ways to know if you’re suffering from the mental health impact of debt.

“The biggest warning sign [is] if you are constantly thinking about your money or never thinking about it,” Melkumian says. “If this behavior is combined with anxiety attacks, it’s fairly easy for someone to connect the dots as to what is causing their anxiety and depression.”

Other warning signs Melkumian shared with The Balance include:

Avoiding money talks: “Because finances are such a taboo topic in our society, one does not get to share what is going on for them financially, so they can get stuck in their own head without anyone to talk to. This builds anxiety, panic attacks, and even suicidal thoughts.”

Changing financial behavior: “Are they spending more with no apparent reason? Are they turning down restaurant invitations? They may be spending big but digging themselves into debt all because of anxiety caused by something like job insecurity.”

Suppressing negative feelings around money: “The cultural narrative of emotional positivity can lead to judgment and shame. It sets an unrealistic expectation that happiness is the most important emotion. When circumstances do not align with positivity or happiness, this leads to a significant decrease in mental health.”

How to Manage the Mental Health Impacts of Debt

If you’re suffering from the emotional toll debt is taking on you and your life, there are ways to manage it.

Get Help 

Whether you suffer from financial anxiety or face suicidal thoughts, talking it out with someone might be one of the biggest ways you can help yourself. Both Gaveras and Melkumian recommend seeking out the help you need and finding someone you can talk out your issues and concerns with. This could be with a financial therapist or a different type of specialist that meets your needs.

Reframe Your Approach

Melkumian notes that many people feel shame if they aren’t happy all the time. Try shifting your perspective to be more accepting. “If normally you are telling yourself ‘I should be happier,’ use a reframing technique to shift your perspective: ‘I am willing to face my financial situation as it is, so I can get to a happier place in the future.’”

Create a Plan

Money concerns go well beyond your wallet and deep into your mental health. 

“Build a plan for self-care and debt reduction while also working on self-esteem and deconstructing the subconscious blocks that have been in place since you were young,” Melkumian says.

Your financial fears don’t have to overpower your life. If you need more help, talk to a therapist or counselor who can help find a path that’s best for you. Not all specialists are the right fit and if you don’t connect well with one, don’t be discouraged. Instead, look for someone that’s a good fit for your needs. Explore the Financial Therapy Association or search for a professional near you.

If you are having suicidal thoughts, contact the National Suicide Prevention Lifeline at 1-800-273-8255 for support and assistance from a trained counselor. If you or a loved one are in immediate danger, call 911.