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The Psychological Impact of Debt

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Debt can have a huge psychological impact.

With the rising cost of living and interest rates at a 22-year high, many of us are struggling to stay ahead of mounting debt. Add to that the fact that student loan payments have resumed for about 44 million Americans, and you have a recipe for a stressed-out nation. In fact, a recent report by the American Psychological Association indicated that money is the top source of stress for most American adults and an overwhelming number of those adults surveyed said they have “just enough” or not enough money to make ends meet.

Debt affects nearly all of us at some point in our lives and it often carries a profound psychological impact. Studies have shown that the stress, anxiety, and depression associated with debt can be overwhelming. Even worse, those emotions can block our ability to address the problem, leaving us stuck in the mire of financial instability.

Where Money and Mental Health Meet

Regardless of the amount owed, being in debt can exacerbate feelings of hopelessness, anxiety, and depression. Plus, the constant worry about bills and unexpected expenses can leave us feeling vulnerable and more tempted to ignore our stressors. It is a vicious cycle that is difficult to break. That is because, according to the journal Society and Mental Health, debt and economic hardship not only increase our stress levels but also erode our sense of personal control. The fear of not being able to meet our financial obligations can take a toll on mental health, affecting sleep patterns, relationships, and overall productivity. This burden of debt can then lead to a cascade of negative emotions, impacting one’s overall quality of life and well-being.

Debt Shame and Social Isolation

To make matters worse, debt often carries a stigma that can induce shame and social isolation. Those struggling with debt may feel embarrassed or inadequate. They may be reluctant to seek support or share their financial predicament. This isolation can worsen the psychological impact of debt, fostering a sense of loneliness and exacerbating mental health issues.

Breaking the Cycle: Strategies for Coping with Debt-Related Stress

Ignoring debt won’t make it go away, but there are ways to make the stress of it more manageable. The key to avoiding a downward spiral of emotions is to break the cycle—which is easier said than done.

1. Change Your Mindset

Many people feel stigmatized by debt, but it’s important to remember that debt is a normal part of most adult American lives. It is nothing to be ashamed of. Look at your debt as an obstacle to overcome instead of a burden. If you think of budgeting as a burden or a chore, it will always be hard to stay focused. Make it easier for yourself by setting smaller, specific goals. Treat yourself with kindness along the way and don’t try to save money by skipping out on the things that help you maintain your health (like medical care, exercise, and healthy meals).

2. Seek Professional Help

There are many things you can do to manage debt stress yourself, but if you find yourself ignoring your mail and missing payments, you may need some help. If calls from unknown numbers spike your blood pressure and you feel consistently anxious about how to manage the cost of everyday life, you don’t have to carry the burden yourself. A financial advisor or mental health professional may be able to provide valuable guidance and support in managing debt and its associated stress. You may even be able to access free financial and mental health services through your employer, school, or financial institution.

3. Budget and Develop a Financial Plan

Set yourself on a positive path by creating a comprehensive budget and setting achievable financial goals. Sometimes just having a plan can disrupt the anxiety cycle long enough for you to regain control over your finances. If you don’t know where to begin or have struggled with budgeting in the past, check out our budgeting resources through GreenPath Financial Wellness. As a Maps member, you are entitled to free debt management services, financial counseling, credit report reviews, and student loan counseling. You can also get free foreclosure prevention services as well as homebuyer, renter, and reverse mortgage counseling.

4. Build a Support Network

Sharing concerns with close friends or family members can provide emotional support and alleviate feelings of isolation. It’s hard to be honest about overwhelming debt, but as Fred Rogers (a.k.a., Mr. Rogers) once said, “Anything that’s human is mentionable, and anything that is mentionable can be more manageable. When we can talk about our feelings, they become less overwhelming, less upsetting, and less scary. The people we trust with that important talk can help us know that we are not alone.”

Understanding the psychological toll of debt is crucial for fostering a compassionate and supportive network. By recognizing the signs of debt-related stress, anxiety, and depression we can work to develop meaningful coping strategies. If you are struggling with the financial and psychological aspects of debt, let us know. Together, we can work towards a healthier, more resilient financial future.

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