As individuals and households grapple with various financial obligations, the impact on mental well-being has become a subject of significant concern. Research and anecdotal evidence suggest that the burden of debt can have profound effects on mental health, leading to heightened stress, anxiety, and even depression. Several studies have shown that addressing the intricate link between debt and mental health requires a comprehensive approach. Financial education, budgeting skills, and access to support services can equip individuals with tools to manage their financial situations more effectively. Simultaneously, promoting open conversations about mental health can help reduce the stigma and encourage seeking help when needed.
The reasons behind the intersection of debt and mental health are multifaceted, explained Gaurav Rathi, a life coach specialising in executive and corporate coaching. “The constant pressure to meet financial obligations and avoid default can create a persistent sense of unease. This can contribute to sleep disturbances, strained relationships, and a reduced ability to concentrate or make clear decisions at home and work. Moreover, the stigma associated with financial struggles can lead to feelings of shame and isolation, further exacerbating the mental health challenges,” he said.
Rathi added that conversely, existing mental health conditions can also influence an individual's financial situation. “Impulsive behaviours during episodes of depression or mania, for instance, might result in excessive spending and accumulation of debt. Additionally, individuals dealing with mental health issues might find it harder to maintain stable employment or effectively manage their finances, leading to a cycle of financial difficulties.”
By incorporating these expert-backed strategies into their financial journey, individuals can proactively manage debt, alleviate mental distress, and forge a path toward improved financial and emotional well-being.
Acknowledging The Situation
Facing the reality of debt is the crucial first step, as highlighted by financial advisors and psychologists alike. Rathi highlighted that ignoring debt only allows it to grow, intensifying the accompanying mental strain. According to Dr Sarah Thompson, a global financial wellness expert, acknowledging your debt head-on is the foundation of regaining control over both your finances and your peace of mind.
Crafting A Thoughtful Budget
Gayatri Runwal, Financial advisor and debt manager, strongly recommends creating a comprehensive budget. “This serves as a fundamental tool for managing both debt and mental health. A well-structured budget helps individuals regain a sense of control over their finances. By defining income sources and expenditures, individuals can identify areas to cut back and allocate more funds towards debt repayment.”
Prioritising Debt Repayment
"It's wise to tackle high-interest debts first," added Runwal. “This approach not only saves money over time but also provides a psychological boost from achieving smaller debt milestones.”
Exploring Debt Consolidation
Experts suggest that debt consolidation can be a viable strategy for simplifying debt management. Many clients of Runwal have chosen this option and have successfully balanced their financial burdens. “Consolidating multiple debts into one loan can streamline payments, making them more manageable. However, individuals should carefully evaluate the terms of consolidation to ensure that they align with their financial goals,” she said.
Open Communication With Creditors
According to a recent study by the National Foundation for Credit Counselling, creditors are often willing to collaborate on modified repayment plans. “I have always advised all my clients to initiate proactive communication with their creditors, especially for individuals facing financial hardship,” Runwal said. “This communication not only eases the financial burden but also reduces the stress associated with debt,” she added.
Seeking Professional Guidance
“Not a very common thought in India but financial counsellors play a pivotal role in alleviating the mental toll of debt,” said Rathi. “Just like mental health professionals, experts dealing with financial wellness can offer practical strategies, and provide emotional support during challenging times,” he added.
Navigating Emotional Spending
According to Rathi, during the debt management journey, curbing unnecessary expenditures is crucial. “Distinguishing between essential and non-essential spending is the key to a finance success story. Individuals can direct more resources towards debt reduction, subsequently easing financial stress,” he said.
Setting Realistic Milestones
Runwal emphasised breaking down debt repayment into achievable milestones. “This approach fosters a sense of progress and helps mitigate the stress of the long-term debt repayment journey,” he said.
Educating For Empowerment
“Read and understand everything, before you make a decision. Financial literacy is crucial in the battle against debt,” said Runwal. “Empowerment through financial education enhances confidence and reduces anxiety surrounding financial choices,” added Rathi.