The Impact of Debt on Mental Health: Coping Strategies & Solutions

BySara East

Updated: March 20, 2024

BySara East

Updated: March 20, 2024

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Carrying debt can have a tremendous impact on mental health. If you've ever experienced anxiety over a debt-collection phone call or a bill coming in the mail, you know this firsthand. Before COVID-19, 56% of Americans said that their debt was negatively impacting their life. The addition of a pandemic and added financial stress has likely increased that number.

As you work to balance your finances, take notice of how you feel physically and mentally. Feelings of being overwhelmed or helpless can have a profound impact on your mental health over time. Overcoming financial stress is a critical step in getting out of debt. Learn which people are likely to be the most severely affected by debt stress, how your finances can affect your mental health and how to cope with financial stress.

Whose Mental Health Is Impacted by Debt?

Whether you're a millennial facing college loan debt or a senior looking at retirement and long-term care, you're not alone. Americans of all ages are impacted by debt. However, some generations carry larger debt loads than others because of economic events that have taken place in their lifetime.

According to a Northwestern Mutual study, members of Generation X, the group born between 1946 and 1964, carry the most debt of any generation. The average Gen Xer has $36,000 in personal debt, excluding home mortgages.

However, Gen X is not the only generation experiencing debt. Below are the top age groups most likely impacted by debt and financial stress and why this is the case.

Who Is Impacted
Why and How

Millennials: ages 23 to 38

The average millennial faces debt because of the increased cost of living, student loan debt and the Great Recession's financial effects.

Generation X: ages 39 to 55

This generation tends to have the most financial obligations between paying mortgages, raising children and potentially helping parents financially.

Baby boomers: ages 56 to 73

Even though 28 million baby boomers retired in 2020, many did not retire debt-free. Baby boomers carry debt from mortgages, car loans, personal loans and credit card balances.

People aged 70 and older

The total debt burden for Americans over age 70 increased 543% from 1999 through 2019. This debt is primarily a result of mortgage and auto loans and having to take on more debt just to make ends meet.

Ways Your Financial Health Affects Your Mental Health

An illustration of a young couple with a wallet full of cash and a humanoid brain character

Overwhelming debt can result in stress and depression and has been linked to increased suicide rates. Money issues have also been linked to relationship instability, so both your sense of physical and emotional security can be at risk when debt is a constant presence in your life. The following are ways financial health can affect a person’s mental health.

Creates additional stress

Stress, especially chronic stress that becomes part of your life for years, has a deeply powerful effect on your mind and body. Stress puts more wear and tear on your cardiovascular system. Constant stress makes it easier to develop mental health problems and can affect the parts of your brain associated with Alzheimer's disease.

Risk factors for mental illnesses

People in debt are three times more likely to take their lives than those who are not experiencing financial issues. Long-term financial insecurity and consistent poverty, as well as the pressure from lenders and debt collectors to pay bills, can trigger suicidal thoughts and actions.

Developing physical health issues

Debt can lead to anxiety and depression, which can increase headaches, affect sleeping patterns and impact a person's ability to focus. This type of physical stress on the body can result in more frequent colds and infections and affect a person's ability to go to work which further enhances financial struggles.

Affects families and communities

Families suffering from debt, whether it be personal debt or student loan debt, are unable to put as much money into retirement as they would like and experience a delay in traditional milestones like starting a family and buying a home.

Developing behavioral symptoms

Financial stress can lead to an adverse change in behavioral symptoms such as changes in appetite, procrastination and nervous behaviors.

Increases poor spending habits

When someone is experiencing mental health issues, they may resort to overspending to relieve feelings of depression and anxiety temporarily. Compulsive overspending can lead to guilt, depression, overspending and ultimately more debt.

Increases usage of drugs and alcohol

Someone who is experiencing stress from financial debt may turn to antidepressants or alcohol to help deal with their anxiety. This can lead to addiction and even increased debt due to the costs associated with substance abuse.

Snapshot: Income Levels And Mental Health

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Income inequality is directly correlated to mental health issues. Low-income populations are more likely to suffer from depression, attempt suicide and have higher substance abuse rates. Here are four statistics on how income levels could affect mental health.

  1. Increases psychological distress: 8.7% of people with incomes below the poverty line have severe psychological distress.
  2. Creates barriers to health care: Less than 15% of children living in poverty who need mental health care receive services.
  3. Developing severe mental illness: Adults aged 26 and older living below the poverty line are 26.7% more likely to experience severe mental illnesses.
  4. Leads to unemployment: 10.1 million Americans are unemployed. Unemployment can lead to mental disorders and further drive poverty.

Source: Centers for Disease Control and Prevention (CDC), Pediatrics, Substance Abuse and Mental Health Services Administration (SAMHSA) and U.S. Bureau of Labor Statistics

How Your Mental Health Can Influence Your Finances

An illustration of a humanoid brain lifting weights with a young couple encouraging the brain and coins are in the background.

Just as debt can lead to mental health issues, mental health issues can also influence a person's finances. Someone who is experiencing anxiety or depression may turn to poor financial decisions to cope. This can include making expensive impulse purchases and developing a shopping addiction. Depression can also lead to difficulties in working and keeping a job. In the U.S., depression causes 490 million disability days from work each year. When people experience mental illness, they may struggle to create and stick to a budget and pay their bills, which results in growing bills and debt.

Why Is There a Correlation Between Mental Health and Money?

Money is one of the most significant stressors for many people. According to the American Psychological Association, 72% of Americans reported feeling stressed about money at some time. One of the main reasons so many people feel stressed about money is how money is viewed and used in our society. Money is required to live and provide for a family, so individuals struggling to make ends meet may experience low self-esteem. Also, watching bills pile up on the kitchen table can easily send someone into a mental spiral of feeling stuck and like there is no way out.

Once someone struggles with their mental health, it enters all aspects of their life and can become a vicious cycle. According to the CDC, depression affects job performance and productivity, engagement with one's work, communication with coworkers, physical capability and daily functioning. Once a person is incapable of focusing or completing their work, they're unable to bring in income, thus fueling the cycle of debt and mental health.

Coping Strategies for Financial Stress

An illustration of the humanoid brain being strong and healthy while the young couple is happy for it. There is also a safe with coins in the background.

High interest rates make student loans and credit card debt a severe burden. Unexpected debts like medical expenses can happen to anyone. Add flatlining wages and a pandemic into the mix, and it can be hard to imagine living debt-free. You can take control of your money and mental health, and you don't have to do it alone. Here's where to start.

Talk to someone

Science shows that talking about problems helps relieve stress. By simply admitting to a close friend or loved one that you're struggling with your finances and mental health, your struggles may seem more manageable. The person does not need to have the ability to fix your financial problems or even help. The purpose of opening up to someone you trust can be a meaningful way to release the pressure you feel and talk through your feelings and fears with someone rather than keeping it bottled up and increasing your anxiety.

See a doctor

Mental health issues should never go untreated. If you begin to notice your physical or mental health declining, it's essential to get help. Even if you're unsure if you need assistance, if you notice your sleeping patterns, eating habits and energy levels shifting negatively, it's a good idea to get your health examined.

Speak with a credit counselor

Sometimes, it can be hard to see the way out of our financial problems. A credit counselor is a trained professional who can look at your finances as a whole and help you determine where you can start making some cuts and how to begin eliminating debt. Some nonprofit organizations, like the National Foundation for Credit Counseling, can put you in touch with a counselor who can customize advice for your situation.

Ask about writing off your debt

Some creditors may allow individuals who suffer from long-term health issues or disabilities to write off their debts. The easiest way to see if this is an option is to call the creditor's office and ask.

Seek out mental health counseling

Everyone feels down sometimes, but feeling hopeless, depressed or anxious enough to interfere with your life is a problem. You deserve help. Look for counselors who offer sessions on a sliding scale for payment, or call a free hotline or use digital tools like apps if you can’t afford a therapy session.

Make an action plan

Should you deal with a collections account or pay a high-interest debt first? Is there a way to reduce the burden of your student loan payments? Are you looking for methods to pay down credit card debt? Would bankruptcy relieve your debt or make life more challenging? Identify the most critical financial issue and make a plan, either on your own or with a professional to guide you.

Work on your credit score

It may sound silly to think about your credit score when you're trying to get yourself out of debt, but understanding your credit score is a big step toward borrowing money and making significant financial purchases in the future.

Advice on How to Cope With Debt Stress

While coming to terms with your financial situation is a significant step in improving it, it's crucial not only to recognize financial stress but take actionable steps to get out of debt and remove debt stress from your life. The following steps are an excellent place to start.

Acknowledge your debt and write it down

Talk to your partner, a trusted family member or a good friend about your debt and begin to write down all of the debt you have in an organized manner. This enables you to start tackling your debt one item at a time.

Prioritize your debt

Once you've made a list of how much money you owe and who you owe it to, you can start determining which debt is most important to pay off first. Typically, this should begin with debt that impacts your living situation, such as rent or mortgage and keeping the lights on.

Identify your spending habits

The only way to change spending habits is to identify what they are first. Are you an impulse buyer? Do you spend $6 a day at Starbucks when you could spend the same on a bag of coffee and make it at home? Once you identify your habits, you can start to make changes.

Set a budget

Create a budget that includes paying off your debt and living within your means. Budgeting leads to a more organized financial life and can help you keep track of money coming in and going out.

Once a budget is in place, you can critically look at opportunities to lower your monthly bills. This may include finding more affordable car insurance or health insurance. Or, combining bills for discounts such as bundling cell and internet service or home and auto insurance.

Take care of your mental health

If you’ve experienced any of the common symptoms of declining mental health, call a health care practitioner and get a wellness exam. Be honest with your practitioner about the debt stress in your life.

Contact a financial advisor or credit counselor

If you don’t have a financial advisor you can start with the National Foundation for Credit Counseling®, a national organization that will connect you with a nonprofit credit advisor.

Start paying down your debt

Whether you can put $5 or $50 towards your debt, you can begin to envision an end in sight once you start seeing your debt decline. This will have a tremendous positive impact on relieving your debt stress.

Where to Get Help

Even though debt can feel looming, there is help available to cope with financial stress and find ways to manage money better. From organizations to support groups and debt counselors, various professionals who are experts in money management and debt relief can help you begin to tackle your financial stress.

  • National Foundation for Credit Counseling: The NFCC is a national directory of nonprofit credit counselors. It provides debt advisers who can help you perform a financial review, establish a budget and create a personalized financial action plan.
  • American Psychological Association: The APA has published a series of guides, resources and content related to psychological science. APA is made up of 122,000 researchers, educators, clinicians, consultants and students. You’ll find numerous articles and guides on debt and financial stress.
  • Debtors Anonymous: This 12-step recovery program is designed for those experiencing unmanageable debt. Meetings are offered across the U.S. face-to-face or virtually.

Expert Insight on Debt and Mental Health

MoneyGeek spoke with industry leaders and academics to provide expert insight into debt anxiety and stress and advice on managing mental health while getting out of debt.

  1. What is the most dangerous mental health side effect of debt?
  2. If someone is experiencing declining mental health because of debt, do they tackle overcoming debt or improving mental health first? What are the first steps they can take to recover?
  3. What are the first steps they can take to recover?
Christine Matthews, LCSW, MBA, CLC, CCTP, BSP
Christine Matthews, LCSW, MBA, CLC, CCTP, BSPCEO/ Owner at Never Journey Alone, LLC
Madhavi Menon, Ph.D.
Madhavi Menon, Ph.D.Professor of Psychology at Nova Southeastern University
Stephanie Gilbert
Stephanie GilbertOwner of Stephanie Gilbert and Associates, LLC
Bob Sinclair, Ph.D.
Bob Sinclair, Ph.D.Professor of Industrial/Organizational Psychology at Clemson University
Dr. Robert J. Thompson, CHA, TMP
Dr. Robert J. Thompson, CHA, TMPAssistant Professor of Business at William Carey University, U.S.A.
Bobbi Olson
Bobbi OlsonFinancial Coach & Host of the "CentsAble Chat" Podcast
Katie Lear
Katie LearLicensed Clinical Mental Health Counselor, Coach and Author
Michael Urban
Michael UrbanSenior Lecturer, Director, Doctorate of Occupational Therapy Program at the University of New Haven
Claudia Grauf-Grounds, PhD, LMFT
Claudia Grauf-Grounds, PhD, LMFTEmeriti Professor, Marriage & Family Therapy, Licensed Marriage & Family Therapist
Dr. Alex Melkumian
Dr. Alex MelkumianFounder of Financial Psychology Center
Elliott Michael Smith
Elliott Michael SmithCEO at The Ohana
Curtis Lehmann
Curtis LehmannAssociate Professor at Azusa Pacific University
John Carlson
John CarlsonProfessor of School Psychology at Michigan State University
Steven C. Hayes
Steven C. HayesFoundation Professor of Psychology at the University of Nevada, Reno
Janet Hoy-Gerlach
Janet Hoy-GerlachProfessor in the Social Work Program at the University of Toledo
Dov Cohen
Dov CohenProfessor of Psychology at the University of Illinois at Urbana-Champaign
Beth A. Trammell
Beth A. TrammellAssociate Professor of Psychology at Indiana University East
Stacey McElroy-Heltzel
Stacey McElroy-HeltzelAssistant Professor of Counseling Psychology at the University of Iowa
Dr. Shelly Rauvola
Dr. Shelly RauvolaAssistant Professor of Industrial & Organizational Psychology at DePaul University
Paul (Ted) Klontz, PhD
Paul (Ted) Klontz, PhDAssociate Professor of Practice of Financial Psychology and Behavioral Finance at Creighton University’s Heider College of Business and Co-Founder and Director of the Financial Psychology Institute®
Phoebe C. Ellsworth
Phoebe C. EllsworthFrank Murphy Distinguished University Professor of Psychology and Law at the University of Michigan
Kate Mielitz, Ph.D., AFC®
Kate Mielitz, Ph.D., AFC®Accredited Financial Counselor; Special Groups Manager at AFCPE® (Association for Financial Counseling and Planning Education®)
Daniel Rodriguez
Daniel RodriguezProfessor of Public Health at LaSalle University
Sandro Galea
Sandro GaleaDean at the Boston University School of Public Health
Alan B. Young
Alan B. YoungProfessor of Sociology at MidAmerica Nazarene University
Indigo Stray Conger, LMFT, AASECT CST
Indigo Stray Conger, LMFT, AASECT CST
Ron Blake
Ron BlakeDirector of the American PTSD Association
Brian Wind
Brian WindChief Clinical Officer at JourneyPure
Joyce Marter
Joyce Marter Psychotherapist, Entrepreneur, National Speaker and Author of “The Financial Mindset Fix”

Additional Resources for Debt and Mental Health

Help for debt and mental health comes in all shapes and sizes. Seeking assistance is the easiest way to start taking steps to overcome mental and debt health challenges. The below resources offer a variety of places that can assist.

  • Anxiety and Depression Association of America (ADAA): You will find resources and support for treating anxiety and depression, including links to local resources in your area.
  • Centers for Disease Control and Prevention (CDC): Look to the CDC for articles, guides, quizzes and other resources to help identify and manage mental health issues.
  • Community Mental Health Centers: You can use this Health Resources and Services Administration (HRSA) searchable database to find mental health centers across the United States.
  • Consumer Credit Counseling Services (CCCS): Find resources for working with and finding consumer credit counseling services which are nonprofit organizations that help find workable solutions to financial problems.
  • Daylio: You can use this mobile app to track your moods and other variables such as exercise, sleep, nutrition and socialization or hobbies.
  • Employee Assistance Programs (EAP): EAP is a benefit program offered by employers that will help cover your copays or bills for mental health treatment.
  • Federal Trade Commission: The FTC offers a valuable guide to help people cope with debt. It includes links to debt relief services, credit counseling, debt management plans and more.
  • Financial Therapy Association: Find a therapist specializing in financial therapy who can help you think, feel and behave differently with money.
  • State Consumer Protection Offices: Search this database to find consumer protection offices in each state. You can check with your local consumer protection office to see if complaints have been filed against creditors who may be contacting you.
  • Substance Abuse and Mental Health Service Administration: Part of the U.S. Department of Health and Human Services, this site provides articles, guides and resources related to substance abuse and mental illness.
  • United States Trustee Program: This program provides a list of credit counseling agencies that are approved to provide pre-bankruptcy counseling.

About Sara East

Sara East headshot

Sara East is a freelance writer and content marketing professional based in Reno, NV. She has more than 10 years marketing experience in public relations, content and digital marketing. Sara has been a published writer for more than 10 years having written articles about finance, business, entrepreneurship, education, travel, real estate, insurance, healthy living, social media, travel and study abroad.

Sara's writing has been published in national news sites including Mashable, The Muse and The Next Web as well as on a variety of blogs. When she's not writing, Sara enjoys spending time with her fur kids exploring the mountains of Reno/Tahoe and enjoying the outdoors.