Expert advice on how dealing with your debt could do wonders for your mental health

The combined effects of the pandemic, a weak economy, rising inflation and interest rates are resulting in more financial stress for many South Africans, which is taking an associated toll on their mental well-being.

Evidence of the pressure consumers are experiencing can be seen in the increase in the number of debt counselling enquiries. According to DebtBusters’ Q4 Debt Index, debt counselling enquiries in the fourth quarter of 2021 rose by 18% compared to the same period the previous year. This trend intensified in the first month of 2022, with enquiries growing by more than 32% compared to January 2021.

“The positive aspect of this is that more people are seeking help, but there are still many consumers who could benefit from debt counselling yet continue to struggle month after month hoping things will get better. A typical comment from people who choose debt counselling is that they wish they’d come to us sooner,” says DebtBusters’ Nosiphiwo Nxawe.

This is also backed by research. According to a 2020 UCT study: “Emerging literature on debt and mental health shows that being highly indebted is stressful and it leads to psychological problems.”

READ: How does separation affect your debts and estate? Attorney weighs in...

“Anecdotal evidence from clients who apply for debt counselling indicates that debt can cause anxiety, loneliness and depression even for people who have never before had to cope with these issues. This, in turn, makes it harder to face reality and deal with the root cause of the problem. It becomes a vicious spiral,” says Nxawe.

“The good news is that this downward spiral can be interrupted. That’s why during National Debt Awareness Month, we decided to also explore how debt counselling – in addition to reducing the monthly debt burden - can relieve some of the mental stress.”

There are typically five stages of response to financial difficulties. While not everyone will experience all of the five stages, if you can recognise the signs early, you can respond much more effectively.

Stage 1: Denial

People who are in denial about the extent of their debt often refuse to recognise that they need help. Typically, they make excuses for their inability to pay the bills. They are inclined to disregard creditors’ calls or payment notices, which can add to the pressure.

Ignoring debt won’t make it go away and can lead to even more serious consequences such as creditors repossessing assets such as houses or cars. This can further impact both your financial and mental health.

Stage 2: Stress, anger and regret

This is when people begin to realise that things aren’t going to improve and can manifest itself as insomnia, anxiety and hypertension.

Sometimes the situation is made worse by taking out additional loans to make ends meet. When their credit score starts to reflect their difficult financial situation and their loan applications are denied, anger and regret can set in.

Stage 3: Depression

Confronted at last with the reality of their financial situation, it’s common for people to feel hopeless and desperate. This can be the critical phase of the debt-acceptance cycle. When people feel overwhelmed, they’re either paralysed by anxiety and do nothing or decide to seek help.

Stage 4: Acceptance

Coming to terms with debt is a significant step.

“This is when people recognise they have over-stretched themselves, realise they’re not able to solve the problem alone and are willing to accept help. It is the breakthrough moment and the earlier they reach it the sooner they can begin the journey to financial freedom,” says Nxawe.

Stage 5: Resolution

People who have taken back control of their finances talk about feeling a sense of relief and happiness having put the anxiety of being over-indebted behind them. The best way to sustainably tackle and resolve debt is via debt counselling.

South Africa’s debt counselling sector is world-class and well-positioned to provide support for people feeling vulnerable because of debt and who are reluctant to talk about their problems or stress their loved ones. 

Nosiphiwo Nxawe’s tips for dealing with the mental-health implications of being over-indebted are:

• Don’t let anxiety paralyse you. Seek help as soon as you can.
• Don’t carry the burden alone. Being in debt is nothing to be ashamed of. Many people are. In fact, getting help is the responsible thing to do.
• Don’t underestimate depression. It can be serious and may stop you from tackling your debt, which is the root cause of the problem. Speak to friends and family and get professional help if you need it. 

LISTEN: This debt collection tactic is not only effective; it's epic!

Image courtesy of iStock/ @Mohamad Faizal Bin Ramli