This is an update of the original article written by D. Lee and published August 29, 2013.
Debt has the power to take over your entire life — from what you buy to where you live.
But when debt is paid off, the benefits go well beyond the bank. A host of psychological perks can occur, from restored self-esteem to financial empowerment.
According to a 2018 Planning & Progress Study by Northwestern Mutual, 69 percent of American workers were stressed over their finances and 53 percent cited debt reduction as a top financial priority in 2018.
Whether you’re nearing the finish line or are miles away, consider the ways debt payment can help return balance to your mind and body.
Less stress, improved health
It’s no surprise that owing a large amount of money causes psychological strain, but did you know that it’s ranked as one of the most stress-inducing life events?
According to the Society of Occupational Medicine’s 2009 Life Events Inventory, which ranks the psychosocial stress of 100 life events, “getting into debt beyond means of repayment” received a score of 82/100 for men and 86/100 for women.
In a previous interview with Bankrate, conducted by D. Lee, Carole Stovall, a psychologist and executive adviser in Washington, D.C., emphasized that stress takes quite a toll on your body.
“Stress is one of the drivers for health conditions related to cardiovascular disease, allergies, diabetes (and) gastrointestinal disorders,” said Stovall.
That’s why paying off debt can result in physical healing. “When people pay off debt, they’re going to say ‘My stomach feels better, my heart feels better,’” said Stovall.
Eliminating debt is more than just a numbers game — it’s an act of breaking free from difficult past experiences.
Debt associated with rough events — such as divorce or a reckless phase in life — is painful to carry around. So when you finally cut that debt from your life, you’ll likely experience emotional liberation.
In a recent interview with Dr. Gail Saltz, associate professor of psychiatry at the NY Presbyterian Hospital Weill-Cornell School of Medicine, she discusses the toll financial stress takes on mental and physical health.
“Ongoing financial stress translates to chronic stress which can lead to depression, anxiety, high blood pressure, back pain, stomach ulcers, etc.,” says Dr. Saltz. “The point is high stress causes cortisol release, which impacts the health of all organs including the brain.”
According to Dr. Saltz, paying off your debt removes the fear and stress associated with it.
“While money does not make one exponentially happier after a baseline amount of reasonable well living, below that and certainly debt does detract from happiness… the closer you get to the reasonable living number the more likely you are to feel better,” says Dr. Saltz.
Freedom to pursue other life goals
When you’re in debt, it can feel like your life’s on hold. Your life dreams — getting married, launching a business, having a baby — seem impossible to pursue when your financial life is in disorder.
Chris Dlugozima, learning experience designer at GreenPath Financial Wellness in New York, explained that after his clients paid off their debt, they experienced much more freedom.
“I had a client [who] came in to see me; he was devastated,” said Dlugozima in a previous interview with Bankrate. “His fiancee had found out about his financial situation. He wasn’t sure if the marriage was going to go through.”
Dlugozima worked with the client to create a special payment program that helped him steadily knock out debt. Several years later, the client is happily married.
“It’s not just about the money, but about how the money can get in the way of life’s other goals,” said Dlugozima.
Debt tends to carry a uniformly negative stigma and can weaken self-esteem at its root.
“Real financial stress — it eats a person’s soul in a way that’s very different than other parts of our lives,” said Ryan Howell, professor of psychology at San Francisco State University and co-founder of Beyond the Purchase, in a previous interview with Bankrate.
In fact, the shame associated with debt can drive people to mask their hardship in unhealthy ways.
“You can still have the nice house, the nice things,” said Dlugozima. “But really, behind it, the financial walls are crumbling.”
Once debt is paid off, your self-confidence can make a fast turnaround. Some individuals even share their debt stories out of a renewed sense of confidence, according to Dlugozima.
“You become more open about it because you’ve gotten through the other side,” said Dlugozima. “It’s empowering.”
The strength to avoid slipping back into debt
In some cases, debt payoff can strengthen your resolve to stay financially solvent. Yet the likelihood of this occurring depends on the manner in which you paid your debt.
For example, if you worked hard to steadily dwindle your debt, you likely have practiced discipline to keep your finances in check going forward.
“If [debt payoff] is done in a vacuum… in a way where you’re not looking at your spending or budget, you’re doomed to repeat the sins of the past,” said Dlugozima.
To keep yourself from returning to the bad habits that got you into debt, Christian Patterson, Wealth Advisor at Exencial Wealth Advisors, suggests keeping a tight grip on your finances.
“It is important to keep track of where your money is going once your monthly income increases. Lifestyle creep and debt cycles can be detrimental to having a healthy financial future,” says Patterson in a recent interview.
According to a 2018 Couples & Money Study by Fidelity, 46 percent of couples concerned about debt agree that money is the biggest challenge in their relationship compared to 16 percent of couples not concerned about debt.
Fortunately, the relief that comes from resolving financial difficulties has the power to improve relationships once bogged down by money troubles.
A marriage that survived debt payoff — without the casualties of lost respect or bitterness — will likely grow stronger and the partners will have a greater ability to communicate honestly.
An altered link between spending and happiness
Once you’ve felt the relief of debt payoff, your feelings between money and happiness can change.
Purchasing a designer handbag out of your price range, for example, may bring you immense short-term joy. Yet the happiness that you’ll experience from a dinner with friends or weekend getaway will be more fruitful in the long run.
“People tend to expect that certain types of purchases are going to make them a lot happier than they really will. It’s not that they won’t make them happy at all, but the bang for their buck is much smaller than they anticipated,” said Howell in a previous interview with Bankrate.
A new set of temptations
After you’ve put your last debt payment behind you, it’s not uncommon to experience a new set of financial temptations.
“Quite often after paying off debt, people tend to gravitate toward taking on more debt, or they will simply unconsciously spend the extra money that’s available,” says Patterson in a recent interview.
“Now, instead of paying interest to a bank or financial institution, they can begin growing assets for their retirement or a future purchase. Employers are typically able to automatically deposit a portion of your paycheck into a separate account, so you won’t even have to think about saving,” says Patterson.
The bottom line
Debt payoff can be a long, tedious journey, but the psychological rewards of doing so will benefit you in the long run.
If you need help accelerating your debt payoff, visit Bankrate’s Debt Payoff Calculator and input your loan balance, payment, interest rate and term. For help with credit card debt specifically, try Bankrate’s Credit Card Payoff Calculator.