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Debt and Mental Health – Everything You Need To Know

Moneymagpie Team 4th Mar 2024 No Comments

Reading Time: 4 minutes

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*this article contains references to suicide

Mental health and money problems often go hand-in-hand. Research from Money and Mental Health Policy Institute reveals that in the UK, over 1.5 million people are experiencing both problem debt and mental health problems, with 86% (5,500 people) of respondents to a Money and Mental Health survey saying that their financial situation had made their mental health problems worse.

It’s also true that people with mental health problems are more likely to be in problem debt, with almost one in five (18%) people with mental health problems in problem debt. And 72% of respondents to the survey said that their mental health problems had made their financial situation worse.

As far as gender goes, women with mental health problems are 7% more likely to find it a burden to keep up with domestic bills and credit commitments, but men reported that gendered expectations, such as avoiding talking about your mental health, made it harder to access potential sources of support. Transgender and non-binary people also face obstacles to good mental and financial health, including stigma and discrimination in workplace and healthcare settings. Age and ethnic group can present compounding barriers to good income as well.

So, the overview is that juggling your financial responsibilities can often become an overwhelming task, with the problem only expounded for groups who have more barriers when it comes to accessing to help.

From credit card bills and mortgage payments to student loan repayments and utility bills, debt can start to build all too easily, causing stress and anxiety for any of us. So, the question is, what support is available to you if you’re living with mental illness that is exacerbated by financial trouble?

How does being in financial difficulty affect your mental health?

Financial difficulties are a common cause of stress and anxiety. Stigma around debt can mean that people struggle to ask for help and may become isolated. They may also think that cutting back on essentials is the only way to help them, or read something in the news about going without heat or food to cut costs: all of this is detrimental to mental and physical health.

It can become a vicious cycle where people in financial difficulty find their recovery rates for common mental health conditions drastically reduced. And something we might not know, or want to accept, is that people in problem debt are three times as likely to have thought about suicide in the past year. This doesn’t always relate directly to money but could in fact be a range of social issues, life events, cognitive and personality factors. There is an unavoidable link between problem debt and suicide, with more than 100,000 people in England attempting suicide while in problem debt annually.


Having a mental health problem can affect your income

People with anxiety and depression have a median gross annual income of £8,400 less than that of people without those conditions, and people with mental health problems are more likely to work part-time or to receive benefits, which can only provide a low level of financial support. People can struggle to attend work, maintain their benefit claims, or keep on top of managing their money.

Not to mention that a common symptom of depression is bad memory, and there is also a link with impulse buying (to get a serotonin boost to counteract feeling low), with many people reporting that their spending patterns and ability to make financial decisions change significantly during poor mental health periods.

Having a mental health problem can also affect your ability to access essential services and manage your finances – to engage with essential services such as banks and energy companies, or to understand bills and remember account details, leading to financial difficulties and distress.

All of this can drastically affect communication channels and prevent people from accessing support and addressing financial problems early.


How debt affects mental health

For many people, credit is an inescapable reality of modern life. Unfortunately, wherever there’s credit, there’s debt. This is where personal finances and mental health concerns tend to intersect.

According to a recent Money and Mental Health survey, 86% of people believe their financial situation has, at some point in their lives, made their mental health worse. This is a very worrying statistic given that, according to the charity Debt Justice, an estimated 10 million people were ‘heavily in debt’ in the UK as of April 2023.

As the cost of living continues to rise, for many, the impact of debt on mental health goes way beyond occasional feelings of stress or worry. The fact is, the constant pressure to meet financial obligations can lead to not only stress and anxiety, but also the development or exacerbation of chronic mental health conditions.


Some solutions

Support services can help people with mental health problems by identifying these people who need help and advice, but the problem remains that opportunities to spot people who would benefit from support are often missed.

Debt advice services can also serve as a lifeline to people with problem debt, but again these services are not always obvious or accessible if someone has a mental health issue.

There are legal frameworks in place in the UK designed to help those dealing with poor mental health and significant debt, not that this necessarily means debt can be written off due to mental health conditions as a rule. The Debt Respite Scheme (Breathing Space), introduced in 2021, grants temporary relief for anyone struggling with debt and interest charges by offering protection from creditor actions. For individuals with mental health conditions, Breathing Space can last for as long as they are receiving treatment (regardless of treatment length), plus a further 30 days once treatment has ended. It is worth considering if you think you fit the criteria.

Fundamental to the success of these processes is the Debt and Mental Health Evidence Form (DMHEF), however, this can only be applied for with evidence from a qualified Mental Health Professional.

Throughout this period, for many people this can be a respite or a gateway to taking the first step to regaining control over their finances and seeking professional debt management solutions such as Individual Voluntary Arrangements (IVAs), Debt Management Plans (DMPs), or Debt Relief Orders (DROs).

Total debt write-off remains rare and in the limited number of scenarios where this is an option, a complex process involving both legal and financial consultation is required. Bottom line as with all financial issues is: ask someone for help, because the first step to sorting any money problem is talking it through.


Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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