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Debt and mental health: Your guide to reducing financial anxiety

July 1, 2022 - 17 min read


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Debt and mental health in America

How does debt affect mental health?

The effects of debt on physical health

4 ways to manage your debt stress

“We’re celebrating a new life. Ours.”

These were the words that grabbed my attention as I scrolled through my social media feed. I found myself moved to tears by the story that followed. The author of the post (BetterUpper Ashley Strahm!) shared an honest, vulnerable account of how they felt, having finally — after more than ten years of hard work — liberated themselves from the student loan burden that they had carried since the age of sixteen.

They never missed a monthly payment. The lowest? Nearly $500 on a teacher's salary. The highest? Nearly $3,000 — made possible by leveraging her husband's entire salary over the course of four years. The post garnered thousands of reactions from friends, family, colleagues, and strangers. 

I’m sure that everyone was proud and excited about the young professional’s achievement, but I know there was something else behind it, too.

What makes a story like that so moving? Unfortunately, it’s extremely relatable. Everyone can relate to the pain of personal debt and the stress that it causes. Many of us have had the experience of being overwhelmed by financial obligations. Statistically, those who have debt are at higher risk for physical and mental health problems, and have an increased risk of dying by suicide.

If you’re having financial difficulties, know that you’re not alone. A recent study reports that more than 77% of Americans feel anxious about their financial situation. Keep reading to get a sense of how debt is impacting mental health in the United States, and what you can do to protect your peace of mind.

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Debt and mental health in America

Mental health and financial wellness are linked to one another. In the United States, debt has become a kind of health crisis unto itself, exacerbated by the economic fallout of the coronavirus pandemic.

The statistics on debt are startling. Research published by indicates that:

The impact of this debt on people, professionals, and families across the country is startling and pervasive. The American Public Health Association (APHA) links increased income with better health among low and moderate income people. Unsecured debt reduces income available, and makes it that much harder to comfortably provide for basic needs. 

The misconception that all debt is a result of overspending is now being turned on its head, as well. Many families are using their credit cards as a way of making ends meet. In 2019, an estimated 25% of Americans were using their credit cards to pay for basics like groceries. Pandemic job insecurity and the rising cost of inflation have likely worsened this reality.

Finally, APHA cites unsecured debt as particularly harmful to mental health. Their statement on debt and well-being states:

Unsecured debt, which often carries high interest rates and punitive repayment structures, is likely to be especially stressful. Indeed, borrowers describe being in debt as causing intense feelings of personal failure, shame, depression, and anxiety.
This pathway could be a form of institutional betrayal (developed from betrayal trauma theory), which occurs when a trusted institution mistreats an individual. Institutional betrayal is associated with measurable psychological and physical harms.

In more ways than one, money and mental health are inextricably linked. And while there are some considerations around income, generation, and demographics, the strongest factor affecting mental health is consistently debt.


How does debt affect mental health?

Even if you’re not consciously thinking about it, being in debt affects your mental health. It causes stress, can affect your decision-making, and isolate you from others. Financial stress can exacerbate underlying mental health conditions, like depression and anxiety. Here are 7 common ways that debt impacts your mental health:

1. Increased stress

Individuals who have debt are far more likely to describe themselves as being stressed. Stress is associated with an increased risk of both mental and physical health conditions. These include depression, anxiety, suicidal ideation, digestive issues, and cardiovascular illness.

2. Lower self-esteem and self-efficacy

Carrying debt can impact your self-esteem, especially if it’s affecting your ability to save or pay other bills. Even if no one else knows that you have debt, you might be stressed about upcoming expenses or debt collection calls. 

Millennials and other demographics are choosing to delay or forego goals like buying a home, starting a family, or career development due to debt. If you feel like your financial situation is forcing you to put off other important goals, you may start to feel hopeless. You might start to feel like no matter how hard you work, you’ll always have money problems. This can stop you from taking advantage of potentially positive and lucrative opportunities.

3. Reduced access to opportunities for development

As the saying goes, “it takes money to make money.” Many opportunities for professional development, like higher education, training, entrepreneurship, and coaching require an upfront investment. 

If money is tight, you’ll likely be less willing to invest in your personal growth. Instead, you’re much more likely to turn your attention to immediate needs. Lack of capital or poor credit history can also impact your ability to start a business, obtain funding, or take a chance on switching careers.

4. Altered health behaviors

Given a choice between paying debt or spending on health care, housing, or other personal expenses, many Americans are choosing to pay debt. Unfortunately, the choice carries more than just a high interest rate. A study found that people who paid debt instead of personal necessities rated their health lower. The same study found those people more likely to be stressed and display symptoms of both depression and anxiety. 

5. Increased work hours

Psychologists are beginning to turn their attention to how people parent in response to their financial situations. Unsurprisingly, working parents who carry debt often find themselves taking on overtime — or even a second job. 

As a result, children spend less time with their parents, parents spend less time with their spouses, and people overall have less time to dedicate to other interests. A study found that parents with both debt and young children were significantly more likely to be depressed.

6. Increased risk of suicide

Debt and suicide are strongly correlated, particularly in developed countries. In one heartbreaking story, a 20 year old courier died by suicide, despairing over his ability to pay parking fines. Statistics indicate that as many as 16% of suicides happen in response to financial struggles.

7. Social isolation 

Financial stress can be a lonely experience. You might feel embarrassed about your financial situation. Your lack of funds might affect whether you feel comfortable joining your friends and family for social events. Even when you spend time together, you might be thinking about your finances and feeling hopeless.


The effects of debt on physical health

Even if you want to spend time with others, your debt might have an impact on your physical well-being. Carrying debt — and the associated stress — can impact how you sleep, how well your immune system works, and even how much pain you feel.

1. Poor sleep

Most of us relate to sleepless nights when anxiety is high. Several studies have indicated that a high rate of indebtedness is positively correlated with sleep disturbances and use of prescription sleep medication. Lack of sleep also impacts our resilience, making it harder to deal with stress when we do experience it.

2. Increased stress

It’s unsurprising that financial concerns increase stress. However, stress isn’t anything to dismiss lightly. High levels of chronic stress are associated with sleep deprivation, reduced immune response, increased absenteeism from work, and higher risk of chronic illness.

3. More pain

Lack of financial security can be a physically painful experience. People are more likely to experience chronic pain (as much as 30 years later) when they experience financial discomfort as a young adult. However, a study also showed that even thinking about financial stress (past or future) nearly doubled the amount of physical pain a person experienced in their body.

4. Substance abuse

Addiction and debt often have a bilateral relationship. Having an addiction can make it challenging to hold down work, and there are often costs associated with relapse and/or treatment.

However, because the stress of debt and financial obligations can feel so overwhelming, many turn to substances to ease their discomfort about money. This can create a cycle that’s hard to break, and makes it increasingly difficult to take control of either.


4 ways to manage your debt stress

Arguably, the most painful aspect of being in debt is feeling powerless to do anything about it. It’s easier said than done, but try not to be overwhelmed by financial stress. Taking control of your financial situation requires a little bravery, a lot of support, and a bit of determination.

Here are four ways to reduce your financial anxiety:

1. Take control of your finances

When you’re feeling stressed, it’s easy to want to stick your head in the sand and avoid dealing with things. But with finances, that has the tendency to make things worse. 

Instead of hiding out, deal with your financial health head on. Make a list of all of your bills, credit card debt, and accounts. Once you have it all in one place, talk to a professional who’s qualified to give money advice. They’ll generally recommend starting with either the smallest debt or the highest interest rate. You can continue to make minimum payments on the other debts until you knock out the first one.

You can also reach out to your lenders directly for support. Many lenders have provisions in place to support borrowers facing financial difficulties. If you’ve lost income due to medical leave, job loss, or unexpected expenses, they may be able to help you. Some lenders will modify or even write off a portion of your arrears if you’re unable to pay.

2. Talk to someone you trust

Financial pressure can leave you feeling alone — but you don’t have to stay there. Talking to someone you trust about your situation can help ease a lot of your stress. They may also have ideas to help you get back on track.

You might feel like your financial situation is worse than anyone you know. If you start to feel that way, take another quick read through the above statistics. With 77% of people anxious about money, you’re in better company than you think.

3. Commit to your self-care

When you’re stressed, self-care is often the first thing to go. And not just massages and mimosas. Since people with debt are more likely to skip on medical care, exercise, and healthy meals, the negative effect compounds.

No matter what your finances look like, don’t compromise your health. Plan your doctor’s appointments and other non-negotiables in advance, and stick to them. 

Look for free or inexpensive ways to take care of yourself. Taking walks in nature, leaving work on time, and setting (even a small) budget for personal splurges can go a long way towards boosting your mental health.

4. Get support for your mental health

If you’re feeling stressed about your finances, it’s okay to reach out for support. You can talk to a mental health professional, even if you haven’t been diagnosed with depression or anxiety. 

A therapist or counselor can help you sort through your feelings and deal with any anxiety that might be preventing you from tackling your finances head-on. Some providers might be able to give you some insight into your financial decisions and other circumstances that might have led you to where you are. 

Additionally, some mental disorders affect your ability to manage money. A professional can help spot any correlations that might indicate an underlying mental health issue.

Final thoughts

Debt can be overwhelming. Feeling like your finances are out of your control can even trigger a mental health crisis. And if you feel this way, you’re not alone. Money is stressful at the best of times, but the uncertainty of the last few years have made circumstances more difficult than ever.

If you need financial coaching, support around your career, or some perspective on your current situation, reach out to BetterUp to schedule a demo. Our coaches can help you tackle any circumstance with clarity and compassion.

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Published July 1, 2022

Allaya Cooks-Campbell

BetterUp Staff Writer

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