How Financial Problems Affect Your Mental Health

Date: 19 May 2020

Half of people in problem debt also have a mental health problem, according to a Money and Mental Health survey completed by 5,500 people.

While 86% of respondents who experience mental health problems said that their financial situation had made their mental health problems worse.

There’s no doubt about it – mental health and money problems go hand in hand.

It’s highly likely you’ve experienced this yourself. Money doesn’t equal happiness, but it does equal security and freedom. When these two things are in jeopardy, it can cause lots of stress and anxiety, especially if you are on your own or are responsible for others.

We explore the relationship between mental health and money problems, focusing on strategies you can use to ease financial worries and feel happier.


The cause and the culprit

Financial problems can lead to consistent anxiety and low moods. At its worst, it can feel like you’ve lost hope for a brighter future, and that your life is spiraling out of control. Your self-esteem plummets and your energy levels decrease as a result of these crippling emotions.

When you feel this low, it’s difficult to think clearly or find the motivation to take positive action. This might manifest into unhelpful behaviours such as:

      Avoiding the telephone from unknown numbers

      Ignoring letters from creditors

      Seeking temporary relief through impulse purchases

      Lying about what’s going on with money to a family member

      Overworking and not taking any breaks

A spiralling vicious circle forms – as your mental health declines, it becomes harder to manage your finances, increasing the risk of more problems. One study found that individuals with depression and anxiety were three times more likely to be in debt.

If any of this resonates with you, don’t despair. There are things you can do to step outside of the vicious circle, combat your financial problems and improve your mental health. As the Citizens Advice Bureau puts it: “Every debt problem can be managed if you make a plan and stick to it.”


Create manageable payment plans with providers

Struggling to pay your mortgage or utility bills? Most providers are willing to create a payment plan that works for your unique circumstances. All you need to do is contact them and say that you want to pay off your debts in installments.

If your provider refuses to do this, you can contact your local Citizens Advice for help.

If you’re in debt to your energy supplier, you might be eligible for a grant from a charitable trust to help you pay it off. For example, the British Gas Energy Trust offers grants that are open to anyone.

There are also companies who offer grants specifically for their customers:

      npower Energy Fund

      Scottish Power Hardship Fund

      Ovo Energy Fund

      E.on Energy Fund

      EDF Energy Trust

      SSE (Southern Electric) Priority Assistance Fund

To cut your future bills, make sure you get the best possible deal. Use Citizens Advice’s price comparison tool to check.


Tackle loan debts with creditors

It might be tempting to get another loan to pay off the one you already have. But borrowing more will likely make your situation worse.

It’s absolutely worth contacting your loan provider to explain your situation as this can prevent it from getting worse.

According to, you should be able to pay your debts in instalments by setting up:

You can apply for a Debt Relief Order or Bankruptcy Order if you cannot pay your debts because you don’t have enough funds or assets you can sell.


Deal with credit card debt

Credit card debt can mount up at a frightening pace – speak to your card provider and explain your situation sooner rather than later.

The good news is that credit cards are covered by the Consumer Credit Act (CCA). There are strict rules your creditors must follow if you’re struggling to pay your credit card bills. Many creditors will agree to an affordable repayment plan to help you get back on track.

If you’re not feeling up to making the call, you can get free help from your nearest Citizens Advice or another organisation like StepChange. They can help you understand your options if you can’t afford your credit card payments.

It’s also vital to stop using your credit card. If the amount you owe keeps growing, it’s going to be much harder to settle your debt.


Consolidate existing borrowing

A consolidation loan helps you pay off a number of existing debts so that you have one single monthly repayment to one lender each month. This results in several benefits:

      Manage monthly repayments easily

      Spend less time sorting out all your different repayments

      Make budgeting simpler with just one repayment

      Improve your credit score by having one monthly repayment that harder to miss

Important note: while you’re reducing the number of debts, you could be increasing the term of your loan. So you might be repaying for longer. Also, while you may be paying lower monthly repayments, the total replayable sum could be higher overall.

Freedom Finance also advises that you should compare the APR of your existing debts with the interest rates of the consolidation loan you are applying for.


Become a budgeting pro

Part of dealing with anxiety or depression is coming up with a plan to prevent stressful situations from spiralling out of control.

In the case of managing debt, budgeting is key. Work out your budget by listing your income and spending (without using further credit) and turn this into a monthly plan you can follow.

Set aside an amount to repay your debts using your budget. Or, ideally, set up an emergency fund in a separate bank account. If you find yourself in debt, this will help ease your anxiety because you have the funds aside to deal with your arrears.


Take care of your mental health

You may find that you still struggle with your mental health after addressing your financial problems. Or perhaps you feel paralyzed by poor mental health and can’t find the energy needed to take positive action. Either way, it might be time to get support from a trained mental health professional.

Your GP can refer you to therapy support services in your area. Depending on the severity of your symptoms, they can offer group counselling, online courses or one-on-one sessions.

You can also access free advice or paid counselling sessions from mental health charities like Mind and Relate (the latter of which offers support from counsellors experienced in the impact of financial problems on relationships).


Come out of financial woes healthier and stronger

Knowing that there’s plenty of financial support available should ease your anxieties, but we know it’s not always that simple.

If you ever need to talk to an expert on personal finance, we can give your free and impartial advice. Simply call us on 0161 486 1777 or email us at today.

We’re here for you no matter your financial situation. And that’s the biggest takeaway here – you’re not alone. Reach out to the right people and you will find the strength needed to improve your mental health.