The Emotional Side of Debt

When discussing personal finance, the issue of debt is usually portrayed as somewhat cut and dry: it’s bad, and we all should be actively pursuing a debt-free lifestyle. While I’m not here to argue with that, it’s a lot easier said than done, in most cases. With seemingly endless ways to accrue debt such as credit cards, student loans, medical bills, car payments, plus, on top of the fact that most wages have been stagnant for quite a few years now, steering clear of debt doesn’t seem as easy as we would all like to think. 

Putting aside the logistics of finding yourself in debt and finding a way out, let’s take a deeper look at why we allow debt to happen and the after effects it can have on both our financial life and our general state of mind.

Everyone has a different relationship with money and will, therefore, have a different relationship with debt. This begs the question: How does debt really affect us? What emotional impact does carrying the weight of a financial burden have on us and what can paying off debt do for our emotional health? 

How We Fall Into Debt

Most of the advice out there about paying off debt is very straightforward implying that as long as you make a budget, stick to it, and stop drinking $5 lattes, your debt is as good as gone. Stories about people paying off $50k in debt in just a couple years seem to be commonplace now. But if it’s really that easy, how does anyone even encounter debt? Moreover, when someone thinks about the severely negative consequences of being consumed by debt, how do they let it continue? 

• As stated earlier, we all have different relationships with money or rather, a “money mindset.” Some people are natural savers, while others are spenders. When it comes to debt, that also means that tolerance levels vary. Some people will experience heightened anxiety over a debt of even just $1,000, while others won’t be bothered until that number creeps into the six figures or more. 
• The invention of credit cards has made the process of overspending seamless. When you’re just swiping to pay for everything, it’s much easier to forget about the actual dollar amount you’re spending. You don’t encounter the same pain you feel when you’re working with a designated amount of physical cash.  
• Many feel that debt is just a necessary part of life. This also plays into the idea that more of our “wants” are becoming “needs” for many people today. Being able to distinguish between wants and needs is one of the greatest emotional factors that contribute to digging one’s self into debt. 
• For many people, money is a taboo subject that we don’t feel comfortable talking about with friends, family or anyone else. So, when problems arise, it makes it even harder to even bring up the topic of money and seek help. 

The Emotional Toll of Debt

Whether it’s “good” or “bad,” and not even considering the negative financial consequences, debt can have quite the stronghold on our mental and emotional health. Even if it’s not at the top of your mind, it can still weigh you down. Research has found that debt and our mental health are closely connected. Here are some ways debt can affect more than just your bank account: 

• Depression and anxiety – Once faced with mounting debt, people can experience feelings of helplessness, loss of hope and lowered self-esteem. Experiencing this constant worry about money and being overwhelmed by bills can lead to depression and anxiety. Research has found that short-term debt and depressive symptoms are directly correlated.

• Stress – Being in debt can have the effect of making you go into survival mode. Constantly thinking about how you’ll get out of debt takes up a significant amount of mental energy, and therefore causes your stress levels to rise. Debt-related stress can also be a major distraction at work, since losing your job would be even more catastrophic than normal. In a recent study, a whopping 83% of employees report at least some financial stress, which costs an average of $5k per employee due to lost productivity.

• Shame – It’s no secret that success and material possessions are inextricably tied in today’s society. This makes it easy to feel embarrassed when you feel like you’re not performing well financially due to problems like debt. In a poll from the National Foundation for Credit Counseling, 37% of people cited credit card debt as their biggest embarrassment (To put that in perspective, only 12% of people chose their weight as most embarrassing.) Instead of being an incentive to pay off debt, shame can lead to even more debt, since these feelings will lead to overcompensating on dinners out, travel or other luxuries that you can’t afford. 

• Anger and resentment – These feelings can arise especially when someone feels that their debt is out of their control. Maybe something unpredictable or sudden occurred such as job loss, identity theft, divorce, a death in the family, or significant medical costs, which, as it turns out, is the number one reason Americans file for bankruptcy. These feelings of anger can then manifest into resentment towards a spouse, friends, family, your employer or even yourself. 

• Denial – All of these negative emotions can cause a person to do just one thing about their debt: deny, deny and deny. When you’re dealing with these emotions, it’s common for people to use this as a defense mechanism and continue to spend. Obviously, this distortion of reality only leads to temporary relief and without a strategy to pay off debt, your balances will only grow higher. Typical rationalizations for this denial? Thinking you’ll make more money in the future, convincing yourself you deserve purchases or disbelief that the “worst” is actually possible. Consumer debt expert, Steve Rhode states, “Denial will just slow you up and, if you are having problems with money, time is your enemy.” 

Benefits of Paying Debt Off

Believe it or not, debt isn’t all bad. Whether you’re experiencing financial issues right now or not, there is one guaranteed positive through all of this: the satisfaction that comes when you pay your debt down. Here are some positive changes that can occur when you complete steps to eliminate the weight of debt in your life:

• Self-esteem boost – While it may take a while, starting the payoff process can renew your sense of self-worth and confidence. This can in turn spill into other areas of life, motivating you to overcome other hurdles or take on new challenges you shied away from before. 
• Spending ≠ Happiness – That happy feeling you encountered with buying that may have once helped get you into debt usually dissipates as you’re feeling the pain of trying to work your way out of debt. Once you get there, it’s common to become much more mindful about your spending, choosing experiences like a vacation or dinner with friends, over a constant stream of new material possessions. 
• Strength of mind – In order to pay off debt, you need to alter your spending and saving habits. By doing this, you gain the wherewithal and discipline to change your behavior and pay off your debt. This resolve to become financially solvent is a skill that will help you time and time again so that you aren’t tempted to make the same financial mistakes again. 
• Freedom from worry – Debt is one of the most stress-inducing life events a person can endure. When you’re finally in the clear and aren’t constantly thinking about bills, your stress levels are drastically reduced and balance restored. 

Carrying debt is not simply just about the money. It’s not just a drain on your credit score and financial standing, it has a much further reaching effect on your mental, emotional and subsequently, even your physical state as well. While digging yourself out of debt is definitely no easy task, once you begin to take it on, you’ll realize that you’ll soon have the freedom to pursue other much more worthwhile goals that may have seemed impossible before, like owning a home, launching a business, or starting a family.