The Relationship Between Debt and Mental Health

The Relationship Between Debt and Mental Health

Poor mental health can damage your finances. Conversely, debt can contribute substantially to poor mental health and conditions such as depression and anxiety.

The causes of debt

One widespread and mistaken belief about debt is that it is the result of living beyond your means and profligate spending on credit and store cards. However, living life to excess is rarely the cause of debt. Debt is most often the result of redundancy and unemployment, situations that can affect anyone regardless of whether they are a spendthrift or a skinflint.

Becoming unemployed, separating from a partner or suffering from poor physical or mental health can all lead to severe financial hardship and a fight to cover basic expenses. Whether your circumstances have changed permanently or only in the short term, it is a challenge to adapt to a new financial situation.

The link between poor mental health and poor finances

People diagnosed with conditions such as depression and bipolar disorder are more vulnerable to debt issues. However, poor mental health of any kind can seriously impact how effective people are at managing their finances.

There are several reasons for this. Firstly, low energy levels can impair decision-making skills and make it more difficult for people to properly monitor their incomings and outgoings, leading to ill-advised purchasing behaviour. Furthermore, any time spent in a healthcare facility will make it challenging to monitor bills and taking a leave of absence from work can lead to a sharp and sudden decrease in income.

Making decisions about money can become impossible for certain sufferers of poor mental health and those with dementia and other progressive neurological conditions. In legal terms, the ability to make decisions is referred to as mental capacity and is governed by the Mental Capacity Act 2005 (MCA) in Wales and England.

Under the MCA, you can only make decisions on behalf of another individual if you are legally authorised to do so.

The impact of debt on mental health

A report released by the Royal College of Psychiatrists in 2010 finds that 50% of all UK adults with problem debt also have poor mental health. The mental health problems identified vary from low mood and constant anxiety to diagnosed psychological and psychiatric conditions.

Little support from creditors, relatives, friends and employers is responsible for a lot of the anxiety related to debt. Living with debt is often a significant burden and facing this challenging situation alone can be debilitating.

Moreover, anxiety about debt is associated with poor-quality sleep, which can exacerbate anxiety still further. Poor sleep can leave you with little energy and can impact your mood, with the negative follow-on effects of tiredness potentially being felt in your relationships and professional life. This can create a vicious cycle of debt-related anxiety contributing to debt problems which then contribute to debt-related anxiety.

How do I know if I have a problem?

If you are worried you might have a problem with debt, it may help to reflect on the following. You may have a debt problem if:

  • thinking about how you will repay your debts makes you anxious;
  • you routinely struggle or fail to cover your rent or utility bills or pay the minimum repayment amount for credit cards;
  • you ignore post from creditors and avoid taking calls from numbers you don’t know;
  • you are unable to put any money aside for a rainy day.

If any of the above describes you, it may be time to seek support.


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"Become Debt Free" is a trading name of Re10 (Finance) Ltd (company number 4651137) with offices based in Leeds and London. We specialise in providing and administering Individual Voluntary Arrangement (“IVA”) solutions to individuals based in England, Wales and Northern Ireland. We do not administer Debt Management Plans, Debt Relief Orders, or any other debt solutions.  We only provide advice after completing or receiving an initial fact find where the individual(s) concerned meets the criteria for an IVA, therefore, all advice is given in reasonable contemplation of an insolvency appointment. Re10 is regulated by the Insolvency Practitioners Association.

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