How Financial Stress Impacts Your Mental Health

October 10, 2018

So much in the personal finance and retirement space focuses on mastering the basics—setting savings goals, sticking to a budget, tackling debt—but how often do we address the emotional tolls and stresses that our finances precipitate?

There’s no denying that these basic concepts are important; we’re certainly no stranger to them here at The Dime. However, today, in honor of World Mental Health Day, we’d like to take a deeper look at how money and psychological health are inextricably linked (so much so, in fact, that the UK has established a Money and Mental Health Policy Institute).

According to a 2014 report by the Urban Institute35% of Americans with a credit file have delinquent debt. These overdue debts average around $5,178 and typically include some combination of credit card balances, medical bills, and unpaid utilities. This finding is problematic for a number of reasons, but it’s especially concerning because people’s financial well-being happens to affect their overall well-being. In other words, the worse you feel about your finances, the worse you’re bound to feel overall. At least, so says a recent study published in the Journal of Consumer Research. For this study, researchers defined financial wellness in two parts: the first considered participants’ assessment of how they feel they’re doing today, based on their responses to questions like, “Are you behind on your finances?” and “Do you control your finances, or do your finances control you?” The second part looked at the concept of future financial security; that is, participants’ views on whether their current financial hardships are temporary, and if their long-term financial outlook can help them deal with their financial stress in the present.

To summarize, in order to feel good financially, you have to feel in control of your finances in the moment, but you also have to feel like you’ll be safe in the future. It’s certainly easier said than done for the one-third of Americans above who are grappling with delinquent debt. And don’t even get us started on the staggering number of people (45 million, to be exact) who were facing an average of $28,288 in student loan debt as of last year. Needless to say, there’s a good chance you or someone you know is struggling to climb out of debt in one form or another—and wreaking havoc on your/their emotional well-being in the meantime.

Luckily, we’ve got a few tips to help with the latter (courtesy of this great article on The Cut). Regardless, hear this, friend: you are not alone.

1. Remember: You are NOT your debt. Whether you choose to say it out loud or write it down, know this: The fact that you’re in debt does not in any way mean that you’re bad, stupid, or lazy. Going easy on yourself is not only about showing a little self-love—it can also keep you from repeating the mistakes that got you into this situation in the first place. Indeed, research published in the Journal of Consumer Psychology suggests the following:

“Recalling failures does little to enhance self-control, despite conventional wisdom that one learns from their past mistakes. In fact, our results instead argue that focusing on one’s past mistakes may doom us to repeat them.

Put another way, take any lessons you can from the decisions you made in the past, but then move on. Beating yourself up will do little to fix the situation.  

2. Force yourself to look at the numbers. This is probably the toughest part, but it’s important to face the reality of your situation with both eyes open if you’re to come up with a plan to rectify it. Deal with whatever visceral reactions boil to the surface—shock, anger, denial—but then come up with a plan. Figure out what you can reasonably afford to throw at your debt (prioritizing your high-interest debt) and then brainstorm ways you might be able to earn some money on the side. It may sound cliché, but it’ll help your mental health tremendously to forget about the things that are outside of your control, and focus instead on the actions you can take to gain some control over your situation.

3. Find affordable mental health care. Being able to talk to a therapist, counselor, or other mental health professional is critical to improving your psychological well-being. The problem is, if you’re in debt, professional help might not be in the budget. You may be able to find affordable services at a college, local church group, or community center, though. Online therapy, such as that offered via Talkspace, could also be a good option. Another is Open Path Collective, an organization offering affordable mental health services, by connecting clients with mental health professionals who have agreed to offer their services at a discount. If you feel comfortable doing so, you might also consider commiserating with a close friend. Chances are one or more of your peers are going through similar things, and it would be a natural extension of a friendship to share emotional stuff and any practices that have worked for others.

The key takeaway? How we’re doing financially can have a huge impact on how we’re doing overall. With debt becoming a more prominent part of everyday life, it’s inevitable that our emotional state will be affected at some point. The important thing is not to ignore the impact that debt may be taking on your mental health. Not only will that make you feel worse, but it can actually worsen your financial situation, too. Allowing yourself the space to process and deal with your emotions sometimes feels like a luxury, especially when you’re struggling financially; ironically, though, that’s when the emotional toll of money matters most.