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3 Emotional Effects of Having Too Much Debt and How to Cope

When it comes to consumer debt, everyone has an opinion. Some people avoid debt at all costs, even if it means never buying a house, while others view debt as a necessary evil – a way to enjoy a certain quality of life.

Most Americans fall into the latter category, and all too often, debt ends up getting out of hand. To avoid this pitfall, it’s important to maintain a sense of moderation, to know your limitations, and to manage purchases so you can pay them off within one to two months.

Unfortunately, some people don’t learn how to manage debt until it’s too late, and end up buried by the financial and emotional cost of reckless spending. Recognizing the emotional signs of too much debt is a first step to climbing out of the hole.

Emotional Effects of Financial Trouble

1. Denial

If you’re constantly putting new purchases on credit but are only paying the minimum amounts due, you may convince yourself everything is under control. After all, your creditors aren’t complaining, and debt is the American way, right?

Even though your creditors are satisfied, you’re not in the clear. If family and friends start suggesting it’s time to reign in expenses, but your knee-jerk reaction is to make excuses, you may be in denial.

Denial is a defense mechanism – if you don’t accept reality, you don’t have to acknowledge the mistakes you’ve made. This emotion protects your ego, but it doesn’t fix the problem. In fact, it makes it worse. It encourages additional debt, and if your income can’t support your spending, you could lose everything. Signs of denial can include:

  • Leaving bills unopened
  • Underestimating how much you owe
  • Telling yourself that everyone is in a similar situation
  • Adopting a “you only live once” attitude
  • Rationalizing impulse purchases

How to Overcome Denial

  • Stop Trying to Save Face. Underneath all your justifications, you probably know you’re carrying too much debt. High credit card balances, maxed out accounts, and late payments are tell-tale signs of a problem. To move forward, stop making excuses and acknowledge your past mistakes.
  • Confront Your Debt. Open your paper statements or view your online accounts. Grab a notebook and write down all of your current balances, then calculate the total amount you owe. Hiding from debt isn’t going to get you far, and even though coming face-to-face with your debt won’t be comfortable, it’s a necessary step toward reducing and eliminating debt.
  • Get to the Bottom of Your Spending Problem. What’s your spending really about? Are you filling a void? Are you trying to keep up with others? The only way to address your spending problem is to acknowledge the force that’s driving you to spend. The sooner you accept the truth and learn how to cope with the real issue, the sooner you can recover and move on.

2. Anxiety and Fear

Anxiety may set in once you know how much you owe, and this emotion can quickly turn to fear. Both emotions can be paralyzing, but don’t let them take over. Things aren’t hopeless, and there are ways to get a handle on your debt. You need to take control of what you owe in order to gain control of your emotions.

How to Deal With Anxiety and Fear

  • Always Pay Your Minimums. This keeps your creditors happy, and when creditors are happy, you won’t have to deal with the stress of collection letters and phone calls. If you have to pay late or miss a payment, notify your creditors immediately. If you have a good payment history or are experiencing a hardship, ask for an extension or a skip-payment allowance.
  • Create a Budget. If you’re worried you won’t be able to pay down debt, the problem may not be a lack of cash, but a lack of a budget. If you’re flat broke at the end of the month, it’s easy to conclude that there’s not enough money to go around, but the truth is, you may be spending your money in all the wrong places. A budget puts your income and expenses on paper, forcing you to look at where your money really goes.
  • Drum Up Additional Cash. Create extra cash flow by selling unused personal belongings or seeking out a part-time job. If you figure out how to generate an extra $100 a week from a part-time job or home business, that’s an extra $400 you can put toward debt each month.
  • Don’t Use Credit Cards. Canceling a credit card can actually lower your FICO score because it increases your utilization ratio, the ratio of your credit card debt to your credit limit. So while you shouldn’t cancel them, you can stop using your credit cards – you can even cut or shred the cards to remove the temptation to spend. Of course, this doesn’t make the debt go away, but it puts you in a better position to pay down the debt you have, helping you conquer anxiety and fear.
Stop Using Credit Card For Points

3. Depression

Once you’ve let go of anxiety, developed an effective debt-reduction plan, and are making progress toward your goal, it’s not unusual to run into a roadblock. Maybe your car needs a major repair and you have no choice but to pull out the plastic. Suddenly it feels like you’ve taken 10 steps back and you find yourself drowning in depression.

Depression is about feeling helpless to make positive changes in your life. However, if you regroup and regain control, you can overcome feelings of helplessness and ward off depression.

How to Address Your Depression

  • Stay Positive. Don’t focus on the setback, but acknowledge the progress you’ve made so far. The fact that you’re making moves to undo past mistakes is commendable, and if you were able to knock down some of your debt before the setback, you have a reason to feel proud. No one ever said this road would be easy.
  • Reduce Expenses. Refer to your budget and look for ways to decrease your monthly expenses. This can free up money for debt elimination. For instance, can you cancel a household service, such as cable? Is there a way to reduce your grocery bill, or maybe cut your transportation costs? How much are you currently spending on entertainment and recreation? You need disposable income to realize your goals, and you can only achieve this if you spend less than you bring in.
  • Increase Monthly Payments to Creditors. After decreasing your monthly expenses, use your savings to increase monthly payments. Minimum payments keep creditors at bay, but for real results, you need to devote more toward your monthly payments.
  • Get a Better Credit Card Interest Rate. You can overcome helplessness and avoid depression by taking control of your credit card interest rates. Options are available if you have decent credit and haven’t missed payments. Call you creditors and request a lower rate, or transfer your balances to a new low-interest credit card. A better interest rate is extremely useful when paying down debt. If you have a lower interest rate, more of each month’s payment goes toward reducing your principal. And the lower your principle, the lower your interest payment.
  • Set a Payoff Goal Date. Based on your interest rate and how much you can devote toward debt each month, calculate how long it’ll take you to eliminate your balances. While you’re at it, establish short-term payment goals. For example, if you want to pay off your debt within 18 months, aim to be at a certain point in three months, six months, and 12 months.

Final Word

Whether it takes 2 years or 10 years to conquer your debt, don’t be surprised if you feel a roller coaster of emotions along the way. Luckily, the chance to breathe a sigh of relief doesn’t only come at the end of the journey; rather, it’s likely to occur when you have an effective plan in place. As your balances decrease month after month, you’ll feel reassurance and satisfaction knowing you’re on the right path.

What emotions did you battle while dealing with your debt?

Valencia Higuera is a personal finance junkie who enjoys reading articles on budgeting, saving money, and credit cards. She has written personal finance articles and blogs for several online publications. She holds a B.A in English from Old Dominion University and currently lives in Chesapeake, Virginia.