Updated on 11.25.14

The Emotional Effects of Debt

Man with insomnia

Debt stirs different reactions in everyone, from ambivalence to anxiety to severe depression. Photo: Jacob Stewart

Whether it’s considered “good debt” or “bad debt,” the truth is, any debt can cause serious emotional effects. Studies show what many of us already know: Debt is about much more than money. Being in debt can lead to a number of other emotional and psychological issues.

The average American has $15,950 in credit card debt, and 39% of Americans carry credit card debt month to month, according to CreditCards.com. Meanwhile, the average college student will graduate with a whopping $40,000 in student loans — and those who pursued graduate or higher degrees, switched majors, or went back to school may owe significantly more. In fact, about one in five borrowers owes $50,000 or more in student loans (and 5.6% owe more than $100,000), according to a Federal Reserve Board survey.

Round it out with car loans, mortgages, medical debt, personal loans, and other obligations, and it’s safe to assume that most Americans carry some kind of debt.

That debt affects different people in different ways. There is no common tolerance of debt. While one person may suffer anxiety over just $1,000 of credit card debt, someone else may not have thought twice about his debt until he saw his student loan and credit card balance top $200,000.

Regardless of the type of debt or the amount, here are some of the common psychological and emotional issues associated with debt.

Depression and Anxiety

Dr. John Gathergood of the University of Nottingham studied the correlation between carrying debt and any depression and anxiety associated with it. In that study, Gathergood found that those who struggle to pay off their debts and loans are more than twice as likely to experience a host of mental health problems, including depression and severe anxiety.

Anxious feelings can arise with an array of triggers, such as constant worry about money, experiencing immense feelings of being overwhelmed with no end in sight, and hopelessness. The study also reported that 29% of people with high debt stress also report severe anxiety.

Meanwhile, Social Science & Medicine did a study on household financial debt and its impact on mental and physical health. No surprises here: That study also found that high amounts of debt are associated with higher rates of stress and depression.

Likewise, the Royal College of Psychiatrists collected and examined the findings of more than 50 research papers over time, and found that men and women with higher risk credit behavior were more likely to report depression symptoms.

Resentment

Debt is rough on anyone — especially when it encroaches on your marriage, partnership, or family. A spouse or partner may resent the other as a way of coping with debt. It isn’t uncommon to blame your partner for coming into the relationship with more debt, losing a job, or not making enough money, or spending habits that may have led to debt.

In fact, arguments about money are the top predictor of divorce, according to Sonya Britt, assistant professor of family studies at Kansas State University. The Royal College of Psychiatrists also concluded that large amounts of debt have severe effects on a household’s psychological well-being.

It’s not just our significant others that become targets of resentment. You might also resent your employer for not paying you enough money or not giving you a raise. You might resent family members or friends that are financially dependent on you, or are otherwise affecting your financial health. If you’re a young college graduate, you might start to blame counselors and parents for not fully explaining the effects of student loans.

And in reality, many opt to resent themselves and the decisions they made that led them into debt. Whether it was excessive spending, opting out of health insurance, a poor career decision, or something else, it isn’t uncommon to look back with regret.

Denial

While some people feel debt weighing on them like an albatross, others try to block it out completely. It’s very common to be in denial about your debt, despite the constant reminders and overdue notices you might receive. Unfortunately, even if you’re able to ignore your debt completely, it will only offer temporarily relief, if any — and it often leads to more and more debt piling up.

Denial can manifest itself in not opening bills and bank statements that come in the mail, stuffing bills and late notices in a drawer and forgetting about them, not answering the phone when you suspect it’s a creditor, or simply choosing not to deal with the debt.

Staying in denial of your debt can also increase the amount you owe in a few ways. Not paying or dealing with bills can result in late charges and possible interest rate increases, and if you’re only making the minimum payments on debts with interest, your balance may still grow higher as interest accrues.

Worse, denial can lead you deeper into debt as it facilitates further spending. You may be in denial about just how severe your debt really is, or look the other way to rationalize purchases you can’t afford; debt-forming habits die hard.

Stress

Debt and stress go hand in hand. With a mountain of owed money weighing on your mind, it’s natural to worry about how you’re going to deal with that debt and whether you’ll ever get out from under it.

Having substantial debt can also increase your stress level at work, since a job loss would be even more catastrophic to your financial position. And anytime you’re required to spend money, even on simple things like food to eat or gas to get work, it may cause further stress.

A whopping 64% of graduate students said their constant concern over debt interferes with their optimal functioning, according to a study by the American Psychological Association. People dealing with debt are more likely to report health problems, according to an Associated Press/AOL study, many of which are brought on by stress, anxiety, and depression. And it shouldn’t come as a surprise, but studies also indicate that the higher your debt-to-asset ratio is, the higher your likelihood is of experiencing stress and depression.

Stress caused by debt doesn’t just affect the way we work and our day-to-day activities. That stress can also strip away the benefits of events that would normally be positive. Ryan Howell, associate professor of psychology at San Francisco State University, says that the stress that comes from debt can eliminate all happiness you get from spending money. So splurging on a new pair of shoes, an electronic device, or a dinner with friends — which ordinarily would increase your levels of happiness — is actually replaced by more stress because of your debt.

Anger and Frustration

Debt is hard to accept regardless of our own personal journey into the red. However, it can be especially frustrating and infuriating when it was somewhat beyond your control.

It’s one thing to be dealing with student loans in exchange for going to college and earning a degree. You may be dealing with debt from credit card purchases that brought joy to your life, such as vacations, shopping trips, and dinners out.

But it can be especially frustrating to deal with debt from unforeseen events such as a job loss, divorce, identity theft, a death in the family, major repair to a home or car, or unforeseen medical bills. In fact, 56 million adults are struggling to pay medical bills, and these medical bills are the number one reason people Americans for bankruptcy, according to a study by NerdWallet Health.

What’s more, the debt can serve as a constant, agonizing reminder of the negative events that brought it about in the first place.

Regret

Looking at a pile of bills and seeing that total debt amount can, without a doubt, lead to regret. You may regret over the purchases you made, not saving enough money, and other poor financial choices.

Students with the weight of student loan debts on their backs may regret not searching for scholarships, applying for financial aid, or not understanding the loans they were taking out when they began school. Studies have shown that students with higher debt levels tend to have worse mental health scores than those without as much debt.

Shame and Embarrassment

Like it or not, money and material possessions are often associated with success in our society. If you’re in debt, it’s no surprise if you feel embarrassed or ashamed about it. You might feel embarrassed that you aren’t making enough money, that you didn’t manage your money properly, or that your compromised financial position is preventing you from living the life you want.

Many graduate students feel isolated by the shame of being in the red with massive student loans, according to the American Psychological Association.

Debt is often a taboo topic, and most don’t want their family and friends to know they’re struggling with debt. In fact, 85% of respondents to a CreditCard.com survey were hesitant to talk about their credit card debt. In turn, this attitude can lead to more debt, since we may still try to portray a debt-free image. We’ll say yes to expensive nights out, buy gifts for friends and family that we can’t afford, and continue to try to keep up with spending habits of others.

Fear

You may grow to fear repercussions that sometimes accompany debt. If you’re struggling to make payments toward your debt, you may fear eviction or foreclosure on your home, bankruptcy, your utilities getting shut off, or debts going into collections.

You may also fear losing your job, or that some other unexpected twist, such as your car breaking down, is going to destroy you financially.

Debt can also lead to other fears: fear of what happens next, fear of never getting out of debt, and fear of how it will affect your relationships. A post-doctoral study at University of Wisconsin-Madison concluded that high debt levels actually contributed to reduced marriage rates among young adults.

Relief, Freedom, and Accomplishment

Say what? These are just a few of the positive emotional effects of debt — once you’ve paid it off, that is.

Burying that financial burden can also eliminate the negative effects associated with it, from stress to low self-esteem. As The Simple Dollar founder Trent has said, “Debt freedom isn’t just freedom from debt. It’s freedom from worry.”

It can also lead to a noticeable improvement in your mental and even physical health.

“When people pay off debt, they’re going to say, ‘My stomach feels better, my heart feels better,'” Carole Stovall, a psychologist in Washington, told Fox Business.

If you’re ready to take action and start systematically getting out of debt, here are some helpful posts to get you started:

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