Published on November 21, 2021

How Your Personal Finances Affect Mental Health

There’s one thing that is shared amongst nearly everyone, regardless of socioeconomic status: We all have to deal with money – income, taxes, loans, bills, food expenses, living expenses, etc. – and most of us struggle at some point in our lives with at least one of these things. Debt cause stress on a personal and financial level and can affect an individual’s mental health either directly or indirectly.

Who Is Impacted by Debt?

When we think about how debt affects someone’s mental health we might automatically assume it’s only those deeply mired in the red with no clear path to escape their current situation. You don’t have to be rich to be stressed out about debt.

This doesn’t mean that those struggling with debt and living paycheck to paycheck aren’t dealing with mental health issues. Instead, it means that even those who have good job opportunities and a reliable savings account can also experience depression, anxiety, and other problems due to their finances.

It is not the amount of money you earn that affects your happiness but how satisfied you feel about what you make.

If you’re in so much debt that collectors are harassing you and you see no way out, it’s important to seek help from debt charities such as Step Change in the UK.

Ways Finances Affect Mental Health

There’s no denying that invoices for student loans or medical invoice template can be difficult to deal with day-to-day. However, whether or not these debts impact someone’s mental health is entirely subjective.

Three factors can contribute to someone’s general happiness with regards to finances:

  • The money you have (your financial situation)
  • How satisfied you feel about what you do with your money (how it makes you feel)
  • Whether or not the things that make you happy cost money (your lifestyle)
  • Your financial needs are met (healthcare, rent, food, etc.)

When all four of these factors are on point, most people don’t struggle with financial stress. But if any one of these is out of whack, there could be a serious problem.

For example, let’s say a person has a job they love and plenty of free time for hobbies – but they’re deep in debt because they can’t bear to part with their expensive clothes and their shopping addiction. This person might feel pretty good about their money and lifestyle – until they receive another phone call from their credit card company.

Ways to Cope with Debt and Improve Mental Health

TALK TO SOMEONE: All of these problems can be difficult to address by yourself. Reach out for support from your loved ones, or find a therapist that you trust.

SEE A DOCTOR: You don’t have to suffer in silence just because you’re embarrassed. If the depression doesn’t seem to pass after dealing with your finances, try seeing a physician. They could recommend additional treatment options if the problem continues to persist.

SPEAK WITH A CREDIT COUNSELOR: Many people don’t realize some professionals can help them reduce how much interest they pay on their debts. A credit counselor can help work out an arrangement so that you aren’t expected to pay what you can’t afford.

ASK ABOUT WRITING OFF YOUR DEBT: If you’ve already made trying to pay back what you owe and it didn’t work, you might be able to get help from the IRS.

SEEK OUT MENTAL HEALTH COUNSELING: Mental illness doesn’t have to hold you back. A therapist can help coach you through difficult money situations so that they no longer threaten your emotional well-being.

MAKE AN ACTION PLAN: Start with small goals when you feel overwhelmed by how much money is on your mind. Figure out how much extra money you need before the next paycheck comes in, or set a date when all of your debts will be gone.

WORK ON YOUR CREDIT SCORE: If there are issues with how lenders see you because of your credit score, try to fix them before applying for new loans. If you’d like a more detailed report of your credit report, check out this Credit Sesame review, there is also a free plan with additional levels of credit monitoring and ID theft protection.

If you take care of yourself mentally and work toward meeting your goals, there is a high chance you will overcome the financial obstacles in your way.

Expert Insight

According to now loan, the UK’s leading lending broker, these are four steps to take if you’re overwhelmed by debt:

STOP OVER-SPENDING: Stop adding new purchases on credit cards or loans by telling yourself, “it’ll be fine.”

CHANGE YOUR ENVIRONMENT: Ditch the credit cards and start paying with cash or debit only. For example, use cash or a debit card when paying for groceries rather than using a credit card.

CREATE A NEW OUTCOME: Go through every debt in your name and prioritize which ones need to be paid off first. Then set monthly milestones based on how much extra money you have each month, intending to eliminate debts within three years at most.

KEEP GOING: Once you start living with this new outcome in mind, continue with the process by finding ways to free up additional income that can go towards repaying debts faster (selling unnecessary items, spending less money on groceries, etc.). It takes time and patience, but the result is well worth it.


If you’re in debt, then there are ways to improve your mental health through coping strategies while improving your finances at the same time. Remember not to give up just because things are complicated. Even though it might take years for your debts to be repaid, improvements will eventually show in your monthly bank statements.

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