The Psychology of Debt: How it Affects your Mental Health

The Psychology of Debt: How it Affects your Mental Health

Debt is much more than just money and being in debt can lead you to a host of psychological issues. It does not matter if you term it as ‘good debt’ or ‘bad debt’ because both have the potential to adversely affect you.

According to, the average North American has almost $16000 in credit card debt, and 39% of them carry their credit card debt from month to month. On other hand, an average American will graduate from college with a whopping $400000 in student loans, while those who pursue higher degrees or switched their majors may owe significantly higher than other students. According to a Federal Reserve Board survey, every one in five borrowers owes approximately $50000 in student loans.

Now you may round this off with car loans, mortgages, personal loans, and other kinds of debt. Therefore it is safer to assume that most Americans carry some form of debt to their shoulders.

That debt affects them in many ways. Regardless of the quantity of debt, the most common psychological issues are directly related to debt.

1. Anxiety and Depression

The University of Nottingham conducted research under the leadership of Dr. John Gatherwood. He studied the correlation between carrying debt and any potential depression and anxiety associated with it. In his study, it was found out that, people who struggle to pay off their debts and loans are more likely to undergo mental health issues such as depression and anxiety.

There is an array of emotions that can arise due to triggers, like constantly worrying about money, overwhelming feelings having no end in sight, extreme hopelessness, and severe anxiety.

Similarly, people under household debts also did not vary in conditions. Rather they showed higher stress and depression ratios as compared to others.

 2. Chronic Stress

It should not come as surprise to you that stress and debt come hand in hand. With mountains of owed money piling on your shoulders, it is but natural to feel worried about how you are going to pay them off and whether you will be able to get out of it.

If you are under a substantial amount of debt, even your otherwise smooth job will seem chaotic for you. Your stress levels will spike because losing your job will be even more catastrophic to your dwindling financial position. Whenever you want to spend money on simple needs like grocery or paying for utilities will cause stress.

As per the American Psychological Association, there are a whopping 64% of college students who claim that their constant fear over their debt interferes with their optimal performance in life. People who are directly dealing with their debt are more than ever under chronic stress, anxiety, and depression. This isn’t surprising at all because the higher your debt is, the chances of you falling into the quagmire of stress doubles.

One often misunderstood point is that stress just does not affect your work and daily activities. It also rips off normal circumstances that were otherwise productive and affirmative. If you thought that spending money will make you happy, your debt will make it vanish in one go. So before you decide to splurge on a new pair of sneakers, an electronic gadget, or dinner with friends at a lavish joint, remember these will not provide you happiness, rather it will be replaced by stress due to your debt.

3. Bitterness 

Not just you, debt is fairly rough on everyone, more when it takes its toll on your marriage, family, and happiness. Your spouse or partner will resent you, as a method of coping with the debt. It is not highly uncommon to blame your spouse for their spending habits that lead to excessive debts. Arguments over debt are the most common reason for couples to fall into divorce. Larger amounts also adversely affect the psychological well-being of households.

It’s not just in the households that we feel bitter, but you will also have resentment feeling for your boss for not paying you enough, or giving you a raise. You will also feel bitter towards your financial dependents who will affect your mental health. If you are a student, you will blame your parents or counselors for not making you fully aware of student loans.

And in the end, many people show resentment towards themselves because of their decisions that led them into debt. No matter what made them indulge in debt, it is always predictable that they look back with deep regret.

4. Profound Frustration and Anger

Debt is something hard to win unless it takes you into the red zone. It is especially devastating and frustrating because of the reasons that were beyond your control.

When you are on vacations, or dining out with friends, or spending lavishly on shopping trips, you don’t consider falling under the debt trap because these moments impart happiness. Similarly, college loans are also a different story as they give you a degree and make you a graduate.

But the most frustrating part is when you have to deal with unforeseen circumstances that lead you to debt, such as medical bills, death of a loved one, job loss, major car or home repair and other such expenses.

These are the top reasons why millions of young adults dealing with such kinds of debt declare themselves bankrupt each year. What could be worse is the debt reminds people constantly about the negative and agonizing events that happened in the first place.

5. Panic

You constantly panic about the repercussions that accompany your debt. As you are struggling with the payments you fear eviction or closure of your home, bankruptcy, disconnection of your utilities or simply falling into more debt. You also fear losing your job which further wrecks your mental health.

Debt also panics you about never getting out of it, or debt affecting your relationships. Studies also link debt to be one main reason why young adults don’t want to settle into marriages.

Therefore, if you want to feel independent, freedom and relief, you should choose to live a lifestyle that doesn't burden you paying off debts. This can lead to improved mental and physical health as well.

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