Personal Finance

The emotional burden of debt and the rising cost of living.

New York Life | May 15, 2024

A couple dealing with debt.

Whether it’s considered “good debt” or “bad debt,” the truth is, any debt can cause serious emotional effects. Studies show what many of us already know: debt is about much more than money. Being in debt can lead to a number of emotional and psychological issues.

Today, as the US is faced with high inflation, economic uncertainty, and the rising cost of living, many American’s are battling increasing financial pressure. Everyday costs are on the rise, and managing steep inflation is a challenge. The result? Higher levels of debt are becoming more widespread.

The average American has four credit cards, and owes around $8,000 in credit card debt1. Add in car loans, mortgages, medical debt, student debt, personal loans, and other obligations, and it’s safe to assume that most Americans carry some kind of significant debt. Debt affects different people in different ways; there is no common tolerance level.

Regardless of the type of debt or the amount, here are some of the common psychological and emotional issues associated with debt:

Depression and Anxiety

Over half of U.S. adults report that money concerns and dealing with debt negatively impacted their mental health, leading to a host of problems such as anxiety, stress, and depression2. This can lead to feelings of being overwhelmed, and hopelessness.

Likewise, a study from the Royal College of Psychiatrists found that half of all adults with a debt problem are also living with mental health issues. This ranged from a consistent feeling of anxiety and low mood, to a diagnosed mental health condition3.


Debt is tough on anyone — especially when it encroaches on your marriage, partnership, or family. It isn’t uncommon to blame your partner for coming into the relationship with additional debt, losing a job, or not making enough money, or spending habits that may have led to debt.

In fact, arguments about money are one of the top causes of divorce in America, after infidelity. High levels of debt and poor communication can lead to stress and arguments within a marriage4.

In reality, many also resent themselves and the decisions they made that led them into debt. Whether it was excessive spending, opting out of health insurance, a poor career decision, or something else, it isn’t uncommon to look back with regret.


While some people feel debt weighing on them, others try to block it out completely. It’s very common to be in denial about your debt, despite the constant reminders and overdue notices you might receive. Unfortunately, even if you’re able to ignore your debt completely, it will only offer temporary relief, if any — and it often leads to more and more debt piling up.

Denial can manifest itself in not opening bills and bank statements that come in the mail, stuffing bills and late notices in a drawer and forgetting about them, not answering the phone when you suspect it’s a creditor, or simply choosing not to deal with the debt.

Staying in denial of your debt can also increase the amount you owe in a few ways. Not paying or dealing with bills can result in late charges and possible interest rate increases, and if you’re only making the minimum payments on debts with interest, your balance may still grow higher as interest accrues.


Debt and stress go hand in hand. With a mountain of owed money weighing on your mind, it’s natural to worry about how you’re going to deal with that debt and whether you’ll ever get out from under it.

Having substantial debt can also increase your stress levels at work. Stress-related sleep disruption could impact your performance at work and anxiety over the importance of your job could cause you to take on too much extra work, or not speak out regarding mental health struggles.

According to the 2022 Stress in America survey conducted by the American Psychological Association, a whopping 87 percent of Americans reported the rising cost of living as a significant source of stress5. The survey also found an increase in the percentage of Americans stressed about the economy, and finances in general.

Stress can have negative impacts on both our short- and long-term health and can impact our day-to-day activities and relationships.

Anger and Frustration

Debt is hard to accept regardless of our own personal journey into the red. However, it can be especially frustrating when it can be somewhat beyond your control.

It’s one thing to be dealing with student loans in exchange for going to college and earning a degree, or even with debt from credit card purchases that brought joy to your life, such as vacations, shopping trips, and dinners out.

But it can be especially frustrating to deal with debt from unforeseen events such as a job loss, divorce, identity theft, a death in the family, major repair to a home or car, or unforeseen medical bills.

In fact, 20 million American adults are struggling to pay medical bills or have problems with significant medical debt, according to a recent survey. The findings suggest people in the United States owe at least $220 billion in medical debt6.

Shame and Embarrassment

Unfortunately, money and material possessions are often associated with success in our society. If you’re in debt, it’s no surprise if you feel embarrassed or ashamed about it. You might feel embarrassed that you aren’t making enough money, that you didn’t manage your money properly, or that your compromised financial position is preventing you from living the life you want.

Debt is often a taboo topic, and most don’t want their family and friends to know they’re struggling with debt. We’ll often say yes to expensive dinners, buy gifts for friends and family that we can’t afford, and continue to try to keep up with spending habits of others.


You may grow to fear repercussions that sometimes accompany debt. If you’re struggling to make payments toward your debt, you may fear eviction or foreclosure on your home, bankruptcy, your utilities getting shut off, or debts going into collections.

You may also fear losing your job, or that some other unexpected twist, such as your car breaking down, is going to challenge you financially.

Relief, Freedom, and Accomplishment

There can be some positive outcomes from managing your debt. Often, simply facing up to a financial challenge can be a chance to prove to yourself and others that you are able to tackle a difficulty head-on, despite hardships.

Continuing to make repayments is an exercise in determination, and there can be a rewarding feeling as you notice the figure decrease.

By reducing the financial burden of debt, you are often reducing the negative effects associated with it, from stress to low self-esteem. It can also lead to a noticeable improvement in your mental and even physical health.

Working with a professional to get a plan in place to not only pay down debt, but to also elevate your awareness around spending patterns is a surefire way to climb out of financial stress.

Steep inflation and the rising cost of living is placing a financial strain on many Americans. New York Life is committed to supporting our customers during difficult times. For more insights and resources to help manage financial pressure, explore the New York Life inflation hub today.

This article was originally published on November 12, 2019.


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Media contact

Kevin Maher
New York Life Insurance Company
(212) 576-7937