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Don’t Let Debt Derail Your Life Change

Depression often rides along when you take on credit card debt, new research reveals.


by Sarah Mahoney

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Credit-card debt may be a way of life for millions of Americans, but it comes at an emotional price: New research from the University of Wisconsin shows that short-term household debt, which includes credit cards as well as overdue bills, increases depressive symptoms. And the link is especially strong among single people, as well as those approaching retirement age.

That’s important news for people looking to change their life, which often involves taking on new debt, such as small business or student loans, often on top of existing debt. (For more on this, take Jean Chatzky’s five-day program, Afford Your Dreams.) Long-term debt, such as a mortgage on a home or a car loan, didn’t increase depression, says Lawrence Berger, director of the University of Wisconsin’s Institute for Research on Poverty. The study, which included 8,500 working-age adults, was controlled to make sure that debt was causing depression, and not the other way around.

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Berger thinks that when people go into debt to buy a home or a car—things most people can’t afford without financing—the decision “is often made with greater consideration and foresight. And it is typically of lesser cost, with lower interest rates and fees, than is the case for short-term or unsecured debt.” 

Credit-card debt, on the other hand, “is often taken on for immediate consumption or with less foresight. It may also be taken on to meet emergency expenses. We hypothesize that these differences may have different psychological consequences, with mid- and long-term debt being experienced more positively, as investments in the future, whereas short-term debt may be a source of stress or psychological angst.”

While the research doesn’t show that short term debt will lead to increased depression for any particular individual, he says it does “support the idea that personal finances and economic stress are associated with psychological well being.”

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 That said, if you find yourself needing to assume short-term debt, Berger says these steps may help fend off the blues: Think carefully about the risks and benefits of borrowing; make sure you completely understand the total costs, including interest rates and fees; know the repayment schedule; and assess how well you’ll be able to follow the repayment schedule. With those four measures, he says, “it’s possible that any adverse emotional influences of borrowing could be reduced.” Life Reimagined’s seven-day program, Complete Your Goal With Self-Control, can help.

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