Carrying high debt balances can feel like walking around with a weight on your shoulders. When stress from high-interest credit card debt and loans is taking a toll on your mental health, finding ways to relieve the pressure is key.
While it's not uncommon to try to cope with financial difficulty and debt anxiety by pushing thoughts of your debt away, that only prolongs the strain you're under. You'll find more lasting relief by finding clear, specific and sustainable ways to address your debt. Here are seven tips for dealing with debt stress.
1. Face Your Debt Head-On
When financial difficulty becomes a source of looming uncertainty or dread, it's not unusual to try to avoid acknowledging your debt. But while this may feel like a way to escape discomfort, it's only elongating the stress and financial burden.
Instead, get clear about what you owe—and what it's costing you. Start by writing down all of your debts. Include everything: credit card balances; loans; buy now, pay later plans and anything else you owe. Next to each balance, record the interest rate, minimum amount due each month and payment due date. Then, take a deep breath and acknowledge that, even when the state of your finances becomes dire, there are financial resources that can help you build a debt-free future.
2. Set Priorities
Now that you're clear on exactly what you owe, decide which debts you want to focus on paying off first. Not only can this be a more efficient way forward, but narrowing your focus can make an overwhelming problem feel manageable.
Remember, it's critical to pay at least the minimum required on each of your debts to avoid damaging your credit and incurring late fees and other penalties. One way to prioritize your debt payoff is to make only minimum payments, but use any extra funds to make aggressive payments toward one debt at a time.
Consider tackling your highest-interest debt first. This saves you the most money in the long run. Or, if the number of debts you're carrying is a major source of stress, you could aggressively pay off your smallest balance first, then move on to the next-smallest balance and so on, watching your balances dwindle in number.
3. Create a Budget
When your finances are a source of stress and money's tight, budgeting may feel overwhelming. Or, worse, you may even feel like it's pointless to make an idealistic plan for your money when you aren't even sure you can manage to stay afloat.
In truth, the more financial stress you're under, the more important it is to start a budget. At its core, a budget is just a plan for where your money will go. It helps you see how much you'll have leftover after paying for your non-negotiables, such as housing and basic food, plus meeting your minimum debt obligations.
Often, a budget reveals that cutting back on discretionary spending could be the difference between living paycheck to paycheck and finally building financial stability.
But if a budget reveals the worst-case scenario—that you aren't in a good position to pay for your bare-bones essentials—that's important information too. Because from there, you'll need to find a way to either drastically cut back, such as by selling a vehicle, moving to a smaller home or taking on a roommate, or increase your income, such as by taking on a part-time job.
4. Supplement Your Income
High debt combined with difficulty making ends meet can create money anxiety. An increase in income, even only a slight one, can help you improve your cash flow, direct more funds toward your debt, create an emergency fund and start to regain a sense of control.
Consider ways to bring in more money now, such as:
- Look for a side hustle in an on-demand gig with a low barrier of entry, such as driving for a ridesharing service or pet sitting.
- If you have skills in a field with good opportunities for freelancing, such as web design or online marketing, contracting out these skills on the side can help you bring in money around your current schedule.
- You could sell items you no longer need, such as electronics or clothing, on the internet.
- For a steadier stream of income, consider whether you might be able to fit a part-time job around your current work or ask for additional shifts or overtime at work.
5. Seek Professional Support
Consider meeting with a nonprofit credit counselor to discuss your debt and plan a path forward. Credit counselors are financial professionals who look over your debt and finances with you and make recommendations for what you should do next. They can help you create a budget and prioritize which debts to pay off.
Depending on your financial situation, a credit counselor may also recommend entering into a debt management plan (DMP)—a type of payment plan that your counseling agency manages for you.
6. Consider Consolidation
Depending on your current finance and credit situation, consolidating your debts may be one way to lower stress surrounding what you owe. Debt consolidation is when you take out a new loan and use it to pay off other debts. Ideally, a consolidation loan will have a lower rate than your other debts, which helps you save money on interest while also simplifying monthly payments.
But while a debt consolidation loan can make debt easier to manage, it can also lead you deeper into debt if improperly managed. In addition, it can be difficult to qualify for a good consolidation loan if your credit needs improvement.
7. Talk to Your Lenders
When debt becomes a large financial burden, your lenders may be willing to work with you to lessen your monthly obligation. The key is to contact your credit card company or loan issuer as early on as possible when you start to struggle. Ask them about credit card hardship programs, reducing your monthly payments or lowering your interest rate. They may be willing to offer you a solution to help you avoid missing payments. That can help you stay afloat while you explore long-term solutions.
Make Self-Care a Priority
When stress from debt is impacting your mental health, start by taking care of yourself. Stay connected: Reach out to friends and family who you can trust to talk about your finances with and let them know what you're dealing with.
If debt is causing you to feel anxiety that's interfering with your daily life, take advantage of any mental health resources that are available to you. If you need emotional support to help you manage your finances or want to better understand and overcome certain money habits, consider contacting a financial therapist. Or see if your school or employer provides free counseling. You can also find free online resources through mental health organizations such as the National Alliance on Mental Illness (NAMI).
While debt is serious, financial problems don't have to be permanent. It's always in your best interest to keep a positive outlook while you work toward brighter days ahead.