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Because money can have a huge effect on day-to-day mental health, personal finance management and keeping debt low can, in theory, lead to better peace of mind.
But after years of COVID-19 effects, economic downturns and rising costs of living, staying out of debt just isn’t as simple as keeping a budget. Being in debt, or even worrying about finances generally, is negatively impacting people’s mental health — as of April 2022, 28 percent of U.S. adults who say that money negatively affects their mental health say that they worry about it daily.
Here’s how debt affects the mental health, regardless of income, age or other factors, of U.S. adults.
Key Bankrate insights on debt and mental health
- 46% of U.S. cardholders carry a credit card balance from month to month. (Bankrate)
- 43% of U.S. cardholders with debt say they don’t know all of the interest rates on their credit cards that carry balances from month to month. (Bankrate)
- 57% of those who say money-related issues cause a negative impact on their mental health say not having sufficient emergency savings is affecting them. (Bankrate)
- 56% of those who say money-related issues cause a negative impact on their mental health say being able to pay for everyday expenses is affecting them. (Bankrate)
- 66% of Americans don’t expect their personal financial situation to improve in 2023. (Bankrate)
- 63% of those who don’t expect their personal financial situation to improve in 2023 cite high inflation as a reason why. (Bankrate)
- 19% of people said their main financial goal for 2023 is to pay off debt — more than any other goal. (Bankrate)
- 60% of U.S. adults say thinking about their personal finances makes them feel anxious, as of 2018. (Global Financial Literacy Excellence Center, FINRA Investor Education Foundation)
- 44% of those who say that their financial situation has gotten worse during the pandemic say it will take three or more years to get back to their pre-pandemic finances, as of 2021. (Pew Research Center)
At-a-glance: The state of American debt
The average American has $96,371 in debt, according to the latest data available by Experian, as interest rates and rising prices in categories like real estate mean people are taking on more debt for homes, cars and other pricey loans. The average debt balance increased 3.9 percent from 2020 to 2021, according to Experian.
In total, Americans carry $16.71 trillion in debt, as of the third quarter of 2022, according to the latest data available by the Federal Reserve Bank of New York.
|Type of debt||Average debt per U.S. individual in 2021|
How debt is linked to anxiety, stress and depression
Anxiety and depression are mental health conditions that affect many U.S. adults. 19.1 percent of U.S. adults have an anxiety disorder, according to the National Alliance on Mental Illness (NAMI) and 8.4 percent of U.S. adults had a major depressive episode in 2020 (defined by the Substance Abuse and Mental Health Services Administration as a period of depressed mood that lasts at least two weeks).
Many factors can affect mental health, but money and debt, regardless of someone’s income, can have huge effects. When someone is faced with paying back a large percentage of their income to debt, it can become a major source of stress, anxiety and depression. Of those who say money has a negative impact on their mental health, 48 percent say that being in debt is their top issue, according to Bankrate. People with debt are three times as likely to have depression, anxiety and stress from the worry, according to AIMS Public Health.
Over half of U.S. adults (52 percent) who have had a credit card balance carry out and have paid interest report anxiety and stress, per a 2021 Global Financial Literacy Excellence Center (GFLEC) and FINRA Investor Education Foundation study. The study also showed that 36 percent of people with auto loans and 32 percent of people with student loans also report anxiety and stress.
Credit card and student loan debt were also frequently mentioned among survey respondents as a major source of anxiety.
Many, especially younger people, can feel even worse about their finances from seeing how their friends and peers spend money. 46 percent of millennial (ages 26-41) social media users and 47 percent of Gen Z (ages 18-25) social media users feel negatively about their financial situation due to others’ posts on social media, according to Bankrate.
But the issue doesn’t just affect younger adults. Financial stress can impact anyone, regardless of background. Men and people without a college degree who say money has a negative impact on their mental health also report more daily negative mental health effects than others as a result of money.
*Of those who say money has a negative impact on their mental health
How mental health challenges may influence your money management
Just as debt can worsen your mental health, mental health challenges can make it more difficult to manage your personal finances, only continuing the cycle and often worsening both. Here are a few ways how.
- Debt denial. The stress of debt means that you will sometimes be hesitant to seek help, leading to feeling depressed and/or being in denial that you’re in debt. If debt is accruing interest or going into collections, the stress can sometimes lead to ignoring your debt repayments, which may only lead to more money owed and a worse mental health outlook.
- Compulsive buying. Spending too much on unneeded items can drive you further into debt, but it’s often used as a way to relieve stress, depression or other negative emotions, according to a 2007 study published with the University of Iowa. Compulsive buying can lead to feeling guilty for spending unnecessarily, and it can create a cycle of spending to soothe anxiety, only to feel worse after the fact. Though compulsive buying isn’t a diagnosable condition in itself, it can often come with other mental health diagnoses.
- Decreased job performance. Depression interferes with one’s ability to complete physical job tasks 20 percent of the time, and it reduces cognitive performance 35 percent of the time, according to the Centers for Disease Control and Prevention. It can also affect engagement with work and communication. Decreased job performance can lead to lost job opportunities and wages in the future. People without significant financial resources and those who perceive a larger financial strain from unemployment are less satisfied with their lives, a 2005 study cited by the American Psychological Association (APA) showed.
Debt affects how people will be able to meet financial milestones in the future. 59 percent of U.S. adults who took on student loan debt for their education have delayed financial milestones, including future purchases like buying a house and saving for life milestones like getting married or having children. Here are some milestones people have had to delay due to student loan debt, according to a March 2022 Bankrate study:
Note: Respondents could select multiple answers.
COVID-19’s continued influence on debt and mental health
COVID-19 hasn’t just affect physical health; it’s affected mental health, too. As people suffered layoffs, furloughs and other reduced income, one-in-ten people believe their finances will never recover from COVID-19, per a 2021 Pew Research study.
People were still worried about their ability to pay their expenses a year after COVID-19 first hit the U.S., with 27 percent of people saying in 2021 that they worried frequently about paying their bills, according to Pew Research. Also, 49 percent of people who lost wages during the pandemic were earning less money than before the pandemic began.
Financial stress statistics by generation
Though debt affects adults of all ages, it doesn’t affect all ages equally. Additionally, types of debt or bills people worry about change as they age. Here’s how debt stress breaks down depending on age:
- Gen Zers. 47 percent of Gen Zers feel somewhat stressed about their finances, more than any other age group, according to a 2021 study by the National Association of Personal Financial Advisors (NAPFA). 82 percent of Gen Z is stressed about money, more than any other age group, according to the APA.
- Millennials. More millennials (35 percent) feel extremely stressed about their finances than any other age bracket, according to NAPFA. Most millennials feel extremely stressed, with only 13 percent reporting that they are not at all stressed about finances. Americans between the ages of 25 and 34, which includes younger millennials, have the largest amount of student loan debt of any age bracket.
- Gen Xers. 34 percent of Gen X says they’re extremely stressed about finances; 33 percent say they’re somewhat stressed, according to the NAPFA. Gen X has the most mortgage debt of any generation, according to a Bankrate analysis, with an average mortgage debt of $259,100.
- Baby boomers. Baby boomers have some of the lowest stress of any age bracket, but it’s by a slim percentage. Only 19 percent of baby boomers report being extremely stressed about finances; the highest percentage (33 percent) are only slightly stressed, according to the NAPFA. Baby boomers have a lower average mortgage debt ($98,203) than millennials or Gen X, since they’ve had longer to pay it off, according to Bankrate. However, they have the second-highest credit card debt of any age demographic ($6,230), after Gen X.
Financial stress statistics by income
Making a high salary doesn’t necessarily mean you won’t have stress or anxiety, but it does lower your chance of anxiety about personal finance, according to GFLEC/FINRA’s 2021 study. The study looks at how people of different income brackets report feeling anxiety when thinking about personal finances. Here’s how the responses break down.
|Annual income||Percentage feeling anxious about personal finances||Percentage feeling neutral about personal finances||Percentage not feeling anxious about personal finances|
|Less than $25,000||67%||18%||15%|
|$100,000 or more||46%||17%||37%|
Source: GFLEC/FINRA’s 2021 study
3 ways to cope with anxiety about debt
Debt can seem like too large of a burden to tackle. But there are ways to not only take care of your debt, but to take care of yourself, too.
1. Face your debt — and your fears
Debt can seem like an insurmountable problem, but there are small steps you can take to begin managing it. Start to pay off your debt by paying more than the minimum payment and using strategies like the debt snowball method, where you pay off your debts from smallest amount to largest amount. Exactly which strategy you choose will depend on your debt and financial situation, but that first step can lead to long-term financial, and mental, wellness.
2. Prioritize where you can
Budgeting and taking on a side hustle are great ways to pay more toward your debt repayment, but start with smaller steps. Instead of trying to take on too much at once, like trying to put away half of your paycheck toward debt repayment or savings, try putting aside small amounts every paycheck to help manage financial stress in the long run without it being overwhelming.
3. When in doubt, ask for help
Whether it’s asking for help for your debt from a nonprofit debt credit counseling agency, or asking for mental health help through a licensed professional, you aren’t alone in looking for relief from stress and anxiety caused by debt. Talking to someone about your stress can be a huge lifeline when debt seems too big to tackle alone.
Learn more on Bankrate:
- Most Americans are significantly stressed about money — here’s how it varies by demographic
- Mental wellness statistics 2022: Being kind to your mind
- The impact of student loans on mental health
Bankrate.com commissioned YouGov PLC to conduct the survey on U.S. credit cardholders. All figures, unless otherwise stated, are from YouGov PLC. Total sample size was 2,458 U.S. adults, including 1,876 credit cardholders and 849 who carry credit card debt from month to month. Fieldwork was undertaken December 7-9, 2022. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
Bankrate.com commissioned YouGov Plc to conduct the survey on 2023 finances. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 3,656 U.S. adults. Fieldwork was undertaken on November 15-18, 2022. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
Bankrate.com commissioned YouGov Plc to conduct the survey on social media. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,664 adults. Fieldwork was undertaken between June 22-24, 2022. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
Bankrate.com commissioned YouGov Plc to conduct the survey on financial wellness. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,457 adults. Fieldwork was undertaken between April 6-8, 2022. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.
Bankrate.com commissioned YouGov Plc to conduct the survey on delaying financial milestones. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 3,939 adults, among whom 1,442 have, or had, student loan debt for their own education. Fieldwork was undertaken on March 29 – April 1, 2022. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.