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Financial Debt: How to Effectively Manage the psychological impact!

18 Feb 2015


In Financial Debt & Distressed? We can help you deal with the psychological and emotional impact of this.

Need more information: continue reading

Have you been looking for such phrases and terms? If yes, then what you are now going to read will definitely help you handle the debt situation more positively and effectively. No, we are not going to ask you to pawn or borrow to pay up your debts but guide you on how to handle the array of psychological consequences of the financial crisis you are in. Often any kind of crisis affects our emotional levels intensely, increasing our anxiety which in turn affects our clarity of thought and decision making ability. As you read you will come to know how debt affects our reasoning and ability to plan and learn. Also will be shared with you strategies on how to overcome these emotional and cognitive challenges arising due to financial difficulties.


There are no second thoughts that money permeates into every aspect of your life. Life has become such where it is difficult to imagine about how you or anyone around you would operate without money. To make matters worse are the readily available means to pay, such as credit cards and the use of debt. Money dictates where and how you live, what and how much you buy and, to an extent, your social status. Even the most detached are not untouched by its power. Its presence or lack thereof, has profound physical, mental and emotional repercussions. There is no better way of saying it than admitting that money has tremendous power over you and everybody around you.

But having admitted that, it’s also important to remember that every culture or religion talks about not being too attached or involved with the materialistic possessions as they can disappear as suddenly as they appeared in your life. Such teachings are to constantly remind us of the addictive nature of money and things it can buy, hence the advice to stay contended, share and stay detached.

Causes of financial debt

Factors leading to incidence of default :Age, current economic status, household composition, presence of one or more members with chronic illness, labor market, access to social security or pension benefits are some other factors that may affect the incidence of debt and default. In the Indian scenario, off the limits spending for big weddings can put one under financial debt.

Attitude towards borrowing and repaying: Some money problems are self-inflicted because of attitudes people have towards debt taking and repaying. Certain people have behavior patterns that compel them to spend without feeling restricted, “abuse” money in a way that is self-defeating. This can drive the person into debt just as certainly as any financial emergency.


Lee, WeblyandLevine(1993)1 found that debt levels are strongly associated with attitudinal factors and warned that the adaptation of these attitudes to higher debt levels in combination with increased availability of debt could lead to a “self-sustaining culture of indebtedness”. They also showed that people who had tendency for one form of debt had more chances of being involved with other types of debt. How much distress debt would cause depends on whether a person is pro-debt or anti-debt. Under these circumstances if an anti-debt person has to take a loan or is unable to repay existing pending payments, she/he may report higher level of stress.

Age: Individuals in young and middle adulthood may experience financial stress more frequently as they are trying to develop and maintain a career.  Health related financial stress may be seen more common in old age due to their facing an increasing number of acute and chronic diseases and having retired they may not have access to adequate financial sources to count on when needed. 

Job-loss: Sudden job-loss due to external factors such as labor-market demand fluctuations, lay-offs, downsizing and intrinsic factors such as health, family emergency, reckless behavior, lack of coping skills when working in a team environment can push a person to financial difficulties thus making her/him more vulnerable to pile up debt to make both ends meet for herself/himself and family.

Household composition and numbers of earning members: The number of earning members in the family will also impact an individual’s borrowing and repaying decisions. A principle finding of a recent research is that those household heads who have outstanding credit, and who have higher amounts of such debt, are significantly less likely to report complete psychological well-being. The average increase in the psychological distress is greater when outstanding credit is measured at the individual, as opposed to household, level2.

Personality traits and personal habits: People with antisocial or sociopathic traits are prone to get addicted to substance or gambling, hence the compulsion to get their substance or gamble under all circumstances may make them chronic borrowers. Then there are people who hoard and people who are compulsive shoppers. With the introduction of plastic money, amount of cash being spent is not experienced directly and these individuals don’t realize the damage they are doing to themselves and their families. Families of these individuals often remain under debt and face external threats of being ostracized or harmed with regards repayment of borrowed money.



Emotional Responses to Debt

Regardless of how someone gets into debt, once there, being in debt can trigger unsettling emotional responses — especially if the debts are perceived as unmanageable or overwhelming. People go through the following stages and not everybody may go through all the phases:


Denial about one’s real debt situation: The initial reaction to being in debt, even from individuals under crushing debt is denial. As a borrower, you may simply find it too difficult to face the frightening financial facts and thus continue to spend compulsively while ignoring your falling economic condition. You and other people in a similar situation may actually ignore dealing with the financial problems until some external threat — denial of credit, legal action, and pursuit by bill collectors—makes you change your way of life and you begin making some long-overdue decisions.


Stress: You may have sleep disturbances due to feeling anxious and sad regarding your current debt situation. Eating habits may also change due to worry. Appetite may increase or decrease due to anxiety and fear of more troublesome times ahead. Eventually, the stress may affect your quality of work, both at home and in daily life. You may constantly fear that you will never get out from under your financial obligations. You shut yourself in from all social contact, as your constant fear and paranoia impacts your relationships with your family, friends and co-workers. All aspects of your daily life may become affected with anxiety. Persistent stress of this kind can lead to serious psychological problems like severe depression and even suicide.


Depression: Depression is a state of hopelessness with the feeling that things cannot be fixed or changed. Once you get into the vicious cycle of anxiety and stress and are unable to actively address the issue because of constant worrying, loan repayment seems like an impossible thing. You may start to perceive yourself as hopeless and helpless and may withdraw from the world, stay in bed all day, cry uncontrollably, or turn to alcohol or drugs to numb the pain of perceived failure and disappointment. Depression and helplessness accompanied by desperate efforts over repayment of debt have been the cause of many suicides over the course of history, especially during times of economic crisis.


A large percentage of suicides are committed by individuals who perceive that they would be unable to pay off their debts and that the situation will only worsen. Suicide is the dark side of the loan granting and repayment crisis and, despite all the media attention to the issue of loans; it's been severely under-reported. In patriarchal societies like India, where the man is considered the head of the household, suicides rate related to debt and loan payment is more for men than for women.


Any of the aforementioned negative emotional responses to debt may be serious enough to require medical or psychological intervention.


Anger Debt can also make you angry. You may direct you rage inwards for getting into this difficult position in the first place. You are angry at everybody you can blame for your poor financial situation, for example, at your boss for not paying you enough, or your parents for their chronic illness. You are angry at your bank or credit card agencies who you may perceive as devoid of patience and compassion and are sadistic enough to enjoy seeing you writhing in pain. Anger can precipitate impulsive actions involving self-harm or harming others and often news of people murdering their children and partners are reported as a result of non-repayment of loan and immense debt.



Where do we go From Here?

To find relief and peace of mind, a person in debt-you or somebody you know- needs to take practical and realistic steps to deal with the financial underpinnings of the problem. Whatever are the reasons or life situations for you plunging into this painfully uncomfortable level of debt, there are two major choices to consider: How are you going to deal with the challenges of repayment and move towards being more financially stable? And, how will you handle its impact on the quality of your life, especially mental well-being? The way you try and answer these questions will pave the way –negatively or positively- for the health and well-being of your financial life, your personal life, and your family’s future.

Given below are some self-help tips to manage stress and other psychological symptoms arising because of this intense and tough life situation:

Acceptance of debt as a real problem: Denial of the problem is the first reaction to debt and by the time you may realize of the impending threat of looming debt it’s often too late. Thus, you need to accept that it’s a problem. For many people, debt is something that creeps up on them, building slowly over time. Your debt may have inflated from being small and manageable into something that now appears totally out of control, but now you need to tell yourself that your debt is a problem.

Vent out: Guilt and shame associated with debt often results in you not sharing your problems with anybody, sometimes not even with your spouse or parents. This leads to constant worrying about future and failed attempts at trying to battle the related anxiety of loan repayment, which further leads to more anxiety, anger, sleep disturbances and even depression and suicidal thoughts.

Post accepting that debt is a problem, you should share this with your loved ones which may help to reduce feelings of stress. Be open with your partner or parents about your debts it affects them too – both financially and emotionally. If you feel uncomfortable to talk about it initially, don’t worry as it can be a difficult subject to bring up. The following step then should be to ensure you get professional debt advice from a debt counselor and help for your psychological signs and symptoms from a mental health professional who will hear you out and help you to deal with your emotional situation.

Take steps to deal with your stress: if you’ve been under debts for long, you may also have felt some degree of stress, anxiety or even depression. There are simple steps you can actively take to help you battle stress and become more confident in taking control over your life. So while you deal with your debt, remember to:

  • Eat well: A healthy, balanced diet will help your mind and body function.
  • Exercise:  Run around the park, go for a brisk walk or practice yoga.
  • Sleep: A good diet and regular exercise will help you sleep but that’s not enough. You need to modify your sleep schedule by doing the following:
  • Eat your meals at least two hours before your sleep time
  • Do not watch TV while lying on your bed, just before your sleep time.
  • Lie on your bed 10-20 minutes before your actual sleep time and not before that as lying passively for too long may get you to start thinking about debt or any other worrying thought
  • Wash your face and feet before you lie down
  • Practice deep breathing. As you lie down, focus on each breath as you take your mind away from any disturbing thought.
  • If you still can’t fall asleep, say post 30-40 minutes of lying down, move out of the bed and sit and read or maybe listen to relaxing music (preferably instrumental) and then again after 10 minutes come and lie down on your bed.
  • Practice it daily to see results in say 15-20 days of your starting this sleep routine.

Try and analyze you attitude or other psychological factors that may have driven you towards debt: Your debt may be linked to your emotional or psychological needs. For many people, shopping or gambling is a way to tackle their low phases or to make up for failures or rejections in other aspects of their life.

For others, their pro debt attitude may allow them to borrow incessantly and non-repayment of debt may fuel depression which in turn fuels a desire to spend. If you realize that your spending habits are affected by your emotional or psychological state or that you are unable to control the urges to gamble (you could read our article on addiction to learn some self-help skills to handle your impulses/urges) or borrow, you may want to seek counseling. Speak to your doctor who may refer you to a counselor or speak directly with a psychologist or a counselor who will help you deal with you debt related issues.

If the feelings of sadness is too intense, and makes you dysfunctional or you harbor suicidal thoughts, its best to contact your doctor or a suicide helpline to avoid acting on the impulse to harm yourself.


Make a budget and try to adhere to it:  Try making a budget for just one area where you spend your money, say clothes. Decide that you will not go overboard shopping and will stick to shopping within a decided amount for a particular time period, say starting with a month. Once you gain confidence in doing this, you could start extending the time period and then over other areas where you spend. Demarcate compulsory items from luxury ones and keep separate budgets for both, while keeping some amount for saving too.

Controlling your finances and associated emotions will help you gain confidence for repayment and a feel good feeling that would help you say no to borrowing.

Finally & in many cases needed: Seeking help from a financial counselor or advisor may be helpful as they can guide you with debt repayment methods; keeping in mind your current financial status and other sources of income.

And, to be able to listen to and follow the guidance of the financial counselor you should be first able to realistically address your emotional challenges as those listed above. A mental health professional like a psychologist or a counselor can help you chart a graph reflecting a healthy mind working towards a healthy financial life. The sessions with the trained professional have proven to be extremely effective as they help you manage the negative effects of debt on your mind, making you more relaxed and allowing you to take a more balanced decision. A nervous & stressed mind cannot make efficient and wise decisions.


“My other piece of advice, Copperfield, said Mr. Micawber, you know. Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pound sought and six, result misery.”(David Copperfield, Chap. 12, by Charles Dickens)

This is a free article created by’s mental well-being specialist team. offers specialized 24*7 online counseling & therapy to help you overcome various issues across life stages & situations. Please visit our website and explore a whole new path towards mental and emotional well-being.


Tags: #Debt #Unemployment #Hopelessness #Depression #Frustration #Worry #Noway Out