How to break the cycle of debt and mental health

Sharon Mccutcheon 8a5ej1 Mmq Unsplash
Photo by Sharon McCutcheon on Unsplash

The spread of coronavirus has shaken the economy with mass layoffs and increased uncertainty. As a result more and more Americans are finding themselves in mounting debt. In 2018, the American household debt reached an all-time high at $13.21 trillion across 300 million people. But for those with a diagnosable mental illness, debt has an even more detrimental impact.

One in four adults will experience a mental health event at some point in their life. The relationship between debt and mental health is complicated and different for everyone. According to Katie Lear, LCMHC, “Not everyone who struggles with debt also struggles with mental health, but the two can impact each other in a “chicken-and-the-egg” sort of way.” In other words, no one can say for sure which comes first, debt or mental illness.

In this article, we hope to inform you about the links between the two, although we won’t be giving definitive advice on mental health. Instead we will show you how to start rebuilding your finances, like starting with a personal loan.

Debt impacts your mental health

Debt and mental health can often get stuck in a vicious cycle that exacerbates the other. Thomas McDonagh, Psy.D. a San Francisco-based psychotherapist and founder of Good Therapy SF, spoke about a 2016 Longitudinal Study  that “found financial issues for university students ‘lead to’ poor mental health, as opposed to mental health problems ‘leading to’ mental health problems with debt.” Having debt can serve as a trigger for the nearly 44 million people in the U.S. who live with a diagnosable disorder, perpetuating their symptoms and in some cases, causing them to add to their balances.

Lear described the relationship between debt and mental health: “We’ve probably all heard of ‘retail therapy’ as a cure for a bad mood, and someone who is struggling with anxiety or depression may find short-term relief from the buzz of shopping.” As a result, “If shopping becomes a person’s go-to coping skill, it can lead to financial troubles. Being weighed down by debt can be a trigger for anxiety and depression. It’s possible to enter a vicious cycle where a person ‘treats’ anxiety or depression by spending.”

However, Dr. Cassandra Lenza, LCSW CEDS, RYT emphasized the importance of not lumping everyone together. “Each individual may experience managing money and debt in a variety of different ways, and thus it is important to see all individuals on a mental health spectrum, rather than over-generalize.” Depression, bipolar disorder and anxiety disorders do not always interact with debt in the same way. Instead of lumping these different experiences together, we decided to speak to them individually.

Anxiety disorders

There are various subsets of anxiety disorders: The main ones include generalized anxiety disorder, panic disorders and phobia-based disorders. Anxiety disorders go beyond temporary worry and fear. Those living with anxiety disorders may experience physiological responses like increased heart rate, shortness of breath and headaches in response to thinking about the debt they have. Additionally, they might tend to fixate on the worst possible outcome of their situation, like losing their home, bankruptcy or the inability to take care of their children.


One of the most prevalent disorders, depression can happen at any age and can affect anyone. Defined by symptoms that influence how you feel and how you handle daily activities, depression can make it harder to keep track of your finances. In times of distress, some may even lash out at the debt and go on a spending spree … which ultimately leads to more debt and more feelings of hopelessness.

Bipolar disorders

Formerly known as manic depression, there are three types of bipolar disorder: Bipolar I, Bipolar II and Cyclothymic disorder. Each type has unusual shifts in mood, activity and energy levels. According to Lear, “People with bipolar disorder may experience manic episodes in which they feel very energetic and are less inhibited than usual. This can lead to risky or impulsive behavior, including shopping sprees or even shoplifting. Once the manic episode has ended, the person may really regret the overspending and be left to deal with the consequences of the debt.”

Getting help

Living with a mental illness does not mean that you are unable to handle your finances or that you are in need of immediate intervention. But it’s also okay to recognize that everyone needs help sometimes. If you’re struggling with debt or your mental health, there are opportunities for help available to you.

Types of therapy 

Seeing a therapist or a counselor will help you identify how you can help yourself and where you may need outside support. No one therapy method can help every disorder, so we’ve broken down bipolar disorder, depression and anxiety by the most common types.

Bipolar disorder

The type of therapy for bipolar disorder will depend on the type of bipolar disorder and the patient’s needs. The first step is usually prescribing medication to help stabilize moods. There are several options, and finding the one that best suits your needs may involve some trial and error. But there are also different types of therapy that may help.

Common therapies for bipolar disorder
Cognitive-behavioral therapy CBT targets unhealthy beliefs and behaviors and works towards replacing them with healthy ones. Patients also learn ways to cope with crises and mitigate stress.
Interpersonal and social rhythm therapy Unlike other types of therapies, ISRT focuses on improving interpersonal relations and stabilizing daily routines to better manage moods and stressors. Patients learn stress management, medication adherence and how to prevent future episodes.
Family-focused therapy If you choose to include family and friends on your journey, family-focused therapy will help them understand warning signs and triggers. The ultimate goal is to establish a line of communication and support system.


Treating depression is a balance between medication and therapy. Antidepressants are often prescribed to help control and symptoms of depression, and many people try different medications or doses before they find what works best for them. Remember antidepressants take two to four weeks to see any effects and 12 weeks before they take full effect.

One of the main types of therapies for depression is psychotherapy or talk therapy.

Psychotherapy subtypes
Cognitive behavioral therapy The aim of CBT is to reframe negative thinking and develop skills to combat future episodes.
Interpersonal therapy This type of therapy is targeted to improve interpersonal relationships and social functioning as a way to reduce stress.
Psychodynamic therapy Focused on self-awareness and understanding of past behavior, this type of therapy allows clients to examine unresolved conflict and past dysfunctional relationships as a way to understand their stress and depression.


Medications are prescribed to treat the symptoms of anxiety disorders, while therapy is used to find the underlying causes of the disorder and work toward developing coping and problem-solving skills. There is no one-size-fits-all therapy for anxiety disorders. Since they vary so much, the therapy has to be tailored to the disorder.

Popular therapies for treating anxiety
Cognitive behavioral therapy Most widely used for treating anxiety disorders, this type of therapy targets how patients behave and react in anxiety-inducing situations.
Exposure therapy Designed to help people face their fears, exposure therapy breaks the pattern of avoidance and fear.

 How to find a therapist

Finding a therapist is about more than simply finding someone who accepts your insurance or is in your price range, though it’s undeniable that it does come into play. You may have to speak with two or three therapists before they find the right one for you. While that might seem like an added hassle, finding someone you trust and are comfortable speaking to is essential.

When asked how she suggests finding a therapist, Lear said, “I would recommend finding someone whose website or bio speaks directly to your own struggles: For example, a therapist who mentions struggling with debt on their website has likely worked with many people with similar issues, and will know just how to help.” If finding a therapist feels difficult, use these tips to start your search.

Starting points for finding a therapist:
  • Ask a friend or family member.
  • Speak to a professional you work with or trust.
  • Ask a known therapist for a referral.
  • Use school or university resources.
  • Research local therapists online.
  • Ask your insurance company for help.

How to afford getting help

Wanting to get help and being able to easily afford it aren’t always the same thing. For those who don’t have a stable income choosing to take time off work or being forced to cut hours can limit their access to help. But there are financial solutions and resources available:

  • HRSA Health Centers— Focusing on underserved communities, these health centers provide services to patients regardless of their ability to pay. They offer sliding scale payments.
  • Substance Abuse and Mental Health Services Administration— SAMHSA provides access to support and information helplines, cruising counseling centers and treatment facilities.
  • American Psychoanalytic Association— APsaA provides a list of their approved facilities that offer low-cost and reduced-fee options.
  • NeedyMeds— A dependable option for those who are uninsured or underinsured. NeedyMeds keeps an updated list of low-cost clinical services.
  • Half of Us— Focused on connecting students to counseling services near their campus.
  • Open Path Collective— Lear recommends Open Path Collective for those who are struggling financially. “It’s a directory of therapists in private practice who have committed to seeing a set number of patients at a reduced rate, in order to provide quality mental healthcare to uninsured or under-insured people in their communities.”

What to do if you can’t afford to get help

Depending on the treatment and medication that’s required, many worry about the cost of getting help. Unfortunately, even with insurance, nearly 50% of Americans cannot afford the treatment they need. Thankfully, sliding scales and free options are available to you. There are also plenty of online resources that accommodate those who work from home.

Online therapy resources

  • BetterHelp— Offers counseling through messaging, phone calls and video conferencing for an affordable price. Counseling is available for couples and teens as well.
  • Centre for Interactive Mental Health Solutions— Using cognitive behavioral therapy, this eight-session program is free.

Mental health apps

  • AnxietyCoach — Focused on addressing fears and worries, this app includes a severity self-test, anxiety and progress tracking and tools to make a plan.
  • Talkspace— This online therapy tool connects users with therapists and psychiatrists that create a personalized treatment for each user.
  • Breathe2Relax— Designed by the National Center for Telehealth & Technology, this free app teaches stress management skills that can be applied to anxiety disorders, stress and PTSD.
  • CPT Coach— This free app is for those who are in active treatment for PTSD. Offering education on symptoms and assessments, this app is designed to provide background to each CPT session.

Rebuilding your finances

Once you’ve taken steps to tend to your mental health needs, you can focus on rebuilding your finances. The good news is that financial recovery is possible with time and determination. When you’re ready to start your journey, keep these steps in mind.

  1. Take care of your needs

The first step in financial recovery is taking care of your needs. After you connect with a counselor or therapist, speak to your family and educate them on everything they need to know. Make sure they know the triggers and symptoms. You cannot improve your finances while ignoring your mental health. Make sure you give yourself time to establish routines and find your footing, instead of rushing off to fix your financial problems.

  1. Understand your finances

Next, make sure you get a good idea of your financial situation. Not just how much you owe, but the interest rate of each credit line and anything that’s behind on payments. It’s imperative that you understand every aspect of your financial profile. Once you have a handle on your income, your debt and everything in-between, the next step is to set a budget for spending. Set long and short term goals for yourself, while still being realistic about your situation.

  1. Focus on reducing your debt with debt consolidation

There’s more to reducing your debt than simply making payments towards your balances. If you’re facing high interest rates and multiple credit lines, sometimes it’s best to focus on debt consolidation. Two of the most common ways to consolidate debt is through a personal loan or balance transfer.

If you’re juggling multiple credit card lines, consider using a balance transfer to simplify your finances. Many cards offer an introductory offer of 0% APR for generally 12 to 18 months, which allows you to make interest-free payments. Avoiding interest and making payments towards your principal balance allows you to achieve your goals faster. Generally, there is a balance transfer fee, and this option is limited depending on your credit score.

Personal loans are another option for debt consolidation. A personal loan would allow you to pay off your other debt and focus only on repaying the loan, which often has a fixed monthly payment and a lower interest rate. Your credit score will dictate what terms and rates you get.

  1. Rebuild your credit score

If your credit score has suffered, it doesn’t mean you’re out of luck. Over time you’ll be able to build your score back up. Even though working towards a higher credit score will take time, it doesn’t have to be overwhelming. Just remember to:

  1. Pay your balances on time
  2. Use your credit card for small purchases and then pay it off
  3. Keep your balances as low as possible
  4. Don’t open a lot of new accounts
  1. Avoid scams and quick fixes

Getting out of debt is hard, though it’s important to remember that no quick fixes are available. Common scams claim that they can clear any bad information from your credit report or give you “a new credit identity.” Trying to go down any of these avenues can easily backfire and leave you worse off than when you started. It’s always best to avoid them entirely. Some warning signs of scams include:

  • You are told to not contact credit bureaus directly.
  • You receive false information
  • They tell you that you’ll have a new credit identity.
  • They promise to clear your credit history.

Interrupt the cycle

If you’ve been struggling, you longer have to grapple with mental illness and debt. Even though it won’t be a quick fix, there are ways to take charge of your mental health and rebuild your finances. Remember there are resources available to help you through and break the cycle of debt and mental illness.

If you feel that you need help immediately, refer to any of these resources for help.

  • Mental Health America
  • SAMHSA’s disaster distress helpline
  • Crisis Text Line
  • Veterans Crisis Line