The impact of debt extends beyond interest rates and principal. Beneath the surface lie hidden costs that can surprise you, affecting your wallet and overall well-being in ways you may not expect.
“I recently had a client who was paralyzed by her debt,” says Kathy Plowman, a credit counselor at Credit Bank Canada. “She suffered from anxiety and learning difficulties, which prevented her from seeking help sooner. Although her debt was about $4,000, she felt that her debt was insurmountable with her disability income, which contributed to her anxiety.
And she is not alone. Ltembika Pratt, Founder Rich for hera personal financial consulting firm, the mere thought of accumulating more debt overwhelmed her.
Big changes in her life brought a wave of emotions, including shame, anxiety, and a feeling of losing control of her finances.
Impact on your mental health
When you feel overwhelmed, your ability to think clearly and make sound financial decisions can be compromised. For some, this may lead to impulsive spending or neglecting bills.
Emotional spending often starts with looking for a quick fix to feel better, which leads to a cycle of regret, and sometimes it can lead to more spending. That’s why it’s also important to address emotional spending triggers so you can set boundaries with yourself and others.
People who feel overwhelmed may avoid confronting their financial situation altogether, allowing small financial issues to turn into larger problems.
The stress that financial stress puts on relationships is often overlooked. Money-related stresses can lead to conflicts that not only affect your emotional health but also complicate your financial situation, especially if they escalate to the point of separation or divorce.
Stress can also trigger or worsen anxiety and depression and affect cognitive function, impairing the ability to concentrate, make decisions, and remember important information. Constantly worrying about your money can lead to social withdrawal, substance abuse and, in serious cases, suicidal ideation (if you or someone you know is thinking about suicide, call or text 988).
Physical stress
When you owe someone money, it doesn’t just affect your mind; It can have a physical impact as well. the Stress can lead to insomniaHigh blood pressure, unhealthy habits, and chronic pain such as muscle tension, headaches, and back pain. These health issues may lead to medical expenses or decreased productivity, further straining your finances.
If debt leads to burnout or stress, it may affect your ability to work effectively or seek better opportunities, which may lead to decreased income.
Practical ways to deal with debt
The cycle of debt and its effects can seem like it never ends, creating a feeling of hopelessness that is difficult to shake. However, realizing the damage it causes to your life is the first step towards liberation.
The most important thing to remember is that if you feel like your debts are unmanageable, consider seeking help from a professional such as a nonprofit credit counseling service. They can provide personalized advice and help you create a customized debt relief plan. Also contact your creditors if you are having difficulty making payments. Sometimes they are willing to work with you to create a payment plan or lower interest rates. Open communication can prevent your situation from getting worse.
Disclosure of your financial behaviour
Your understanding Money personality It can help you recognize your strengths and weaknesses in financial management and help you make more informed decisions.
“It’s important for Canadians to understand that financial issues are symptoms, not the root of the problem,” says John Nerika, founder of PocketBook Wellness Inc. “To address them effectively, you need to dig deeper.”
For example, gamblers often take on debt and financial stress by taking high risks to achieve potentially high returns, while high savers miss out on growth opportunities in an attempt to avoid risk.
In either case, their distinct financial personalities can contribute to financial challenges, including debt, by either taking on too much risk (leading to potential losses) or not taking on enough (leading to insufficient growth and lack of income). financial security).
Try a holistic approach
While “debt-free” is a laudable goal and important milestone, financial wellness also requires building savings and investing.
“You need to address saving and debt management simultaneously,” Nerika says. “Without these things, you may find yourself unprepared for emergencies, unable to take advantage of growth opportunities, and lacking sufficient funds to achieve future goals such as retirement, education, or purchasing a home.”
By doing this, you ensure consistent savings and good financial management from the start. It helps correct harmful financial habits and paves the way for healthy habits.
Once you pay off your debts, you can automatically redirect the money you used for repayments to create emergency funds or meet other needs.
Keep your money organized
Start by listing all of your debts, including interest rates and minimum payments. Choose the repayment strategy that works for you, whether that’s focusing on high-interest debts first or tackling smaller balances.
This also includes determining your income and expenses and identifying areas to cut back.
“Before my current situation, I used to advise others that they had two choices: make more money or cut back – it’s that simple,” says Pratt. “Now I’m facing it myself, I had to tell myself the same thing. I started with cutting back because it’s easier now. I stay home more, so I’ve cut back on spending on things like frequent hair and nail appointments, and shopping trips to the mall.
But it’s not always that simple, especially when you’re already living paycheck to paycheck and struggling to manage household expenses.
This is where keeping your finances well organized is crucial to making informed decisions. For example, using a line of credit with a lower interest rate before turning to a higher-interest credit card can save you money in the long run.
Practice sustainable money habits
Stress management is crucial when dealing with debt. Some people can fall into a cycle of deprivation, where they set strict rules to be financially responsible, but then feel overwhelmed and extravagant later on.
“I recently had a client who pledged to cut all spending on travel, dining out, and socializing, but this extreme approach often backfires,” Pratt says. Setting realistic spending limits and finding ways to enjoy what you love without drastic cutbacks can lead to sustainable financial habits.
Adopt a healthier view of debt
Debt can feel like a heavy burden dragging you down, causing stress and anxiety. But here’s the thing: debt is not a death sentence. This doesn’t mean you failed. If we change the way we think about debt, we can tackle it better and feel more confident about our financial future.
Instead of looking at debt as an impossible mountain, try looking at it as a temporary obstacle. This shift in mindset can help you feel more in control and ready to make smart choices to deal with it.
