Carrying A High Level Of Debt Affects Your Mental Health: Is There A Way Out?

Carrying high-level debts can affect not only your financial stability but also your mental health and relationships. It can leave a person feeling stressed, anxious, and depressed when they are unable to pay their debts. Therefore, understanding the link between debt and mental health is crucial for a happier, debt-free future. The purpose of taking on debt differs from person to person at different stages throughout their life. “Each individual is different and this also comes across in the way they deal with high levels of debt. Some consider it as part of life and try to find ways to come out of this whereas others get overwhelmed and throw in their towel,” says Abhishek Kumar, CFA (SahajMoney).

Also Read: Are You Taking Too Much Debt? Things You Should Keep In Mind

“Your exposure to debt and its toll on your mental well-being is a factor of three things,” explains Naresh Bulchandani, CFA (Merisis Wealth). These are:

- Your emotional temperament

- Your overall financial background; and

- How stable are your regular cash flows?

How can debt affect you at different stages of life?

Bulchandani explains: Early in their careers, young working professionals are generally eager to get a leg up on living the good life and resort to higher discretionary spending on items such as accessories, gadgets, fancy mobile phones, vacations, high-end bikes or cars, where the cost of debt is typically high. However since they have a long professional career ahead of them and incomes grow rapidly, the burden is usually low.

In their middle years after getting married usually the largest ticket item is a housing loan and in their late years loans typically revolve around education loans or loans taken for the marriage of their children.

It ultimately gets to you…!

“Whichever phase of life one may be in, the feeling of being weighed under the debt can ultimately get to a person,” says Bulchandani.

This happens especially if the outstanding loan absorbs a substantial part of your regular cash flow leaving aside very little for meeting emergencies or daily expenses. “If an individual does not have access to a steady cashflow stream, the stress factor can mount manifold,” he says.

What can debt do to your mind?

Defaulting or falling back on outstanding debt can eventually lead to unpleasant and disturbing personal experiences such as repeated calls, visits and in extreme cases, even threats from collection agencies with reminders to long outstanding clear dues. These can have a significant impact on your mental health due to living with constant stress and burden

A lack of financial literacy leads to a debt burden. How?

“Lack of awareness about managing personal finance does contribute towards debt burden and associated mental stress,” Kumar says.

Financial illiteracy also makes people extremely naive. “Most people fall for the headline promises being made by financial institutions such as Banks or Insurance Companies, whose goals are driven by business,” Bulchandani explains. Financially illiterate people do not read the fine print or suitability of the proposed financial product and invariably end up making poor financial decisions that ultimately impact their quality of life.

“The easy access to credit, ‘sachetization’ of loans through EMI schemes, gradual societal acceptance of taking debt, rising levels of ‘aspirational’ consumption through social media and influencer fueled promotions is driving many young individuals to spend beyond their means, ultimately leading them to fall into debt traps,” Bulchandani says.

The Way Out of Debt-induced Stress

Healthy borrowing and altering your spending behaviours can help you overcome debt-induced mental stress. “One of the best ways to maintain a healthy borrowing and spending habit is to make a point of spending what is left after saving from income instead of saving what is left after spending. That way one could avoid the trap of spending on things on credit and then falling behind on debt payment,” Kumar explains.

Bulchandani lists four ways to de-stress yourself from debt burdens:

- Adopt financial discipline and the art of delayed gratification at an early age

- Be open about your personal finances with near and dear ones. This will help you confide with those closest to you, especially elders in your family like your parents or elder siblings as you can learn a lot from their life experiences and mistakes.

- Never make any major financial decisions such as borrowing a house or investing in a risky financial product without first consulting elders in your family

- Also, take the help of a trusted professional financial adviser to help guide you through such matters