Debt and stress go hand-in-hand.
Rampant inflation, increased interest rates, and rising credit card debt have all contributed to the growing financial anxiety in the U.S.
The good news is that there are ways of coping with debt stress, which can also help you progress toward achieving true financial freedom—this article will explore five strategies you can incorporate into your daily life.
A Few Words on Debt
According to recent studies, over 62% of Americans are stressed about their financial situation.
Considering total household debt sits at $16.9 trillion—with personal credit card debt reaching nearly $1 trillion in the U.S.—the concerns are more than justified.
Debt stress creates a sense of hopelessness. When debt holds us prisoner, our physical and mental well-being are the first casualties.
Times are tough right now, and every generation has its own financial burdens:
- Millennials are saddled with over $3.8 trillion in debt (not to mention student loans).
- Gen Xers have more debt than anyone—an average of $136,869 per person.
- Baby Boomers—those aged 56 to 73—are widely unprepared for retirement.
While these statistics are scary, it’s important to know that you’re not alone in the fight.
Debt isn’t a problem for some people; it’s an issue for almost everyone, at every age and socioeconomic level. In fact, over 80% of Americans have some form of consumer debt.
It’s also important to keep in mind that things can, and will, get better.
Just a few years ago, credit card debt plummeted from $926 billion to $811 billion—in just six months! And during that time, Americans paid off a record $83 billion in credit card debt.
Change is possible, and with the right habits, it will come.
How Debt Affects Your Mental and Physical Health
The link between debt and mental health is very real—many scientists and health experts have studied the effects of financial stress on the mind and body.
According to recent studies, increased financial debt can cause:
- Increased depression: over 50% of high-debt student loan borrowers have experienced depression and anxiety. While depression is often considered an “invisible” enemy, its effects are truly pervasive.
- Decreased fitness: seemingly insurmountable debt decreases the will to exercise and eat healthy meals. In fact, personal debt can boost the odds of obesity by 20%.
- Poor digestion: it’s no surprise that debt can even affect your gut health. 27% of people with high debt stress report stomach ulcers and digestive tract issues.
- Aches and pains: 76% of people in their 30s and 40s with financial debt are more prone to develop ailments, such as joint stiffness and chronic pain, later in life.
- Reduced sleep quality: financial debt increases cortisol, the primary stress hormone in the bloodstream. As cortisol increases, sleep quality decreases—Americans lose over 200 hours of sleep every year due to “debt nightmares.”
As much as debt stress and anxiety can weigh us down, there are proven ways to pull us up and help us build credit.
Five Tips To Help Alleviate Debt Stress
Talking about debt is one thing, but dealing with it is another. As you move forward, we encourage you to face the challenge head-on.
Start by conducting a comprehensive audit of your financial situation: identify your largest debts, and decide which ones you’ll tackle first.
As we discuss in our debt cycle explainer, there are two effective debt-eradicating strategies to consider:
- The Snowball Method, which prioritizes paying off the smallest debts first, and gradually approaching your larger ones.
- The Debt Avalanche Method, which confronts the debts with the highest interest rates first.
Whichever path you choose, stick with a single debt repayment plan as best you can. To help you along the way, consider incorporating the following tips:
1. Build a Budget
While budgeting may sound boring, it presents a powerful opportunity to restructure your financial life.
Want a great place to start?
Try the 50/30/20 budget, where 50% of your spending covers your “needs” (like your rent and groceries), 30% covers your “wants” (like dinner out or a vacation), and 20% goes straight to savings.
2. Invest in Yourself
You are your greatest resource.
Whether you build a business, learn new marketable skills, pursue a second degree, or enter the gig economy this summer, keep finding new ways to invest in yourself (and your future).
As your value increases, so will your income. And as your income increases, you will have more bandwidth to pay down debts and live the way you always imagined.
3. Establish an Emergency Fund
Rainy days are inevitable, but an emergency fund can help keep your finances dry.
Whether you save up one month of expenses, six months, or an entire year, know that every dollar saved will come in handy down the line.
According to Greg McBride, chief financial analyst at bankrate.com, “nothing helps you sleep better at night than knowing you have money tucked about in the event of unplanned expenses.”
Peace of mind is perhaps the most prized possession of all.
4. Tackle Outstanding Debts Strategically
A young investor once asked renowned entrepreneur Mark Cuban for his best investment advice.
He looked the boy in the eye and said, “[pay] off whatever debt you have.”
It may sound obvious, but it’s sound advice. After all, nothing erodes savings like debt, whether it derives from student loans, auto loans, credit cards, or all of the above.
When you pay off debts, you’re ultimately paying yourself.
5. Consider a Debt-Friendly Credit Card
While they’re great financial tools, credit cards can also make it easy to fall into debt.
That’s where a credit builder card can help. As the name implies, a credit builder helps you build credit.
By offering lower credit limits than traditional credit cards, a credit builder card provides an easier pathway to managing your finances, paying down debts, and even raising your FICO score.
Click here to find out how to pick the right credit builder card for your financial situation.
Moving Forward
Stress is a part of life, especially when it comes to finances.
But coping with debt stress is at your fingertips: with the right planning and repeatable habits, you can pay down your debts, reduce your anxieties—and ultimately improve the relationship between debt and mental health.
Remember: the journey to becoming debt-free is a marathon, not a sprint. Plan accordingly and be patient with yourself along the way.
The results will come.
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