Why debt is causing stress and anxiety — and how to cope

5 minute read

Financial worries can be a significant source of stress for many people and subsequently take a toll on mental health.

A 2023 survey showed that 70 percent of Americans report feeling stressed about money. This money-related anxiety has been an issue for a while, with data from 2023 showing that nearly 60 percent of adults cited inflation as the main contributor to their financial stress.

However, current economic conditions, such as rising interest rates, exacerbate these concerns, especially for people carrying debt. This financial worry may be particularly acute for young people, who have never known such significant inflation. Prices are still trending higher even though inflation dropped to 3.1% in January 2024, a huge decrease from the high of 9% in June 2022.2

One first step that could help mitigate this money-related stress is to understand why current economic conditions are placing such strain on people carrying debt. With this knowledge, you can examine your financial habits and plan how to handle your budgeting amid the volatile economy.  

Why current economic conditions can cause strain

Understanding the drivers of stress in an uncertain economy can help you make sense of your stress and help you understand options to mitigate the impacts.

Debt may be more expensive

For many people, carrying credit card balances and paying interest causes anxiety and stress.

While nearly 72% of Americans say they have clearly defined money goals heading into 2024, nearly half (46%) expect to have credit card debt. Of those who expect to carry debt 74% expect to have $1000 or more while 25% expect to carry a balance of over $10,000 adding to the stress.3 

While holding credit card debt is stressful at any point in time, current economic conditions may be increasing this pressure for some people. Americans are feeling uneasy about their finances this year, with 21% worrying the Fed will continue to raise interest rates, making it more difficult to pay down debt.3 Plus, rising interest rates are affecting people who hold student loan debt, too, and research shows people carrying this type of debt are also experiencing mental health challenges.

Inflation takes a bite out of budgeting

Although showing signs of slowing, inflation has had a dragging effect on most peoples’ finances. Consumer staples, such as groceries and clothes, were hit particularly hard by inflation. This meant spending more on the same goods you need for everyday life, which can be a jarring experience. The fact that inflation rates rose as quickly — and as sharply — has also been hard to process for many people.

It’s challenging to set and stick to a budget when inflation takes a bite out of what you can buy and changes the plans you've made around spending in the past. This translates into some people needing to reduce discretionary spending or put off large purchases. 

Can make milestones harder to reach

Financial challenges can make it harder to reach major milestones, with retirement being, perhaps, the biggest. Seniors may work longer than they anticipated before markets began to fluctuate. Approximately 65% of Americans experienced financial setbacks in 2023, with 17% putting off contributing to their retirement savings which could delay retirement for some until later.2

Economic uncertainty, and the stress it causes, isn’t just affecting would-be retirees. A substantial number of young adults with student loan debt may also delay major life events.5 This may include putting off a wedding, waiting to start a family, or having to spend a few additional years saving before buying a car or home as they sacrifice spending over saving.

Addressing Financial Stress Head-On

Although current economic conditions can be worrying, there are proactive steps you can take to help take back control and minimize the impacts.

Learning financial literacy

Getting yourself up to speed with financial literacy concepts can be a significant first step to mitigating money anxiety. Financial literacy is the ability to gain financial-management skills and understand how to use them to make positive and proactive decisions with your money.

By immersing yourself in financial education to improve your financial literacy, you can better understand how to manage your debt and potentially protect yourself during economic fluctuations. It can also help set yourself up to pay off debt most efficiently and inexpensively as possible. Watch our video on financial literacy to help get you started on improving your knowledge so you can feel more financially confident.

Creating emergency savings for unexpected expenses

It may be difficult to save significant amounts of money when carrying debt. However, putting aside small amounts to help build an emergency fund may be more reasonable and possible.

If you save a little each month to create this fund, it can help buffer you when you urgently need money and prevent you from taking on additional debt to address unexpected expenses. Read Six steps to save for an emergency to help you get started on creating your emergency savings. Even starting small can add up over time.

Learning to budget

Since current economic conditions, notably inflation, mean prices are rising for essentials, dedicating time to create a budget can be very useful. Understanding where your money is going each month, and creating habits to prevent overspending, can help mitigate anxiety and stress.

If you have created a budget before, consider revisiting it with changing prices and rising interest rates in mind. If this is your first time creating a budget, now can be a good time to dive into your spending and ensure you're managing where your money goes each month. Watch our Voya Learn® video Creating a budget to help you set up your budget and keep yourself on track.

Look for alternative solutions for debt management

It can be helpful to look into alternative sources of debt management that you may have not considered in the past.

One instance is exploring consolidating debt, which may help lower monthly payments. In some cases, too, employers may offer a student loan debt solution to help pay off student debt — if you haven't looked into your benefits, this can be a good time to do so. Talking to a financial professional can help you explore some of these options and even uncover some you are unaware of.

So, what's next for people who hold debt?

Of course, it's impossible to forecast the future — finances or life. Regardless, when economic signals are mixed, it can be helpful to develop a solid plan. Paring back spending to maintain savings levels, creating a budget, learning to be savvier with your money, or prioritizing paying off debt, can provide you a good start. That alone may help ease financial worries.

Log In Log in to your retirement account experience to check in on your savings and use myOrangeMoney to see how small changes today could make a big impact for financial future.


1. CNBC  -70% of Americans are feeling financially stressed, new CNBC survey finds 04/11/2023 70% of Americans feel financially stressed, new CNBC survey finds

2.  US Inflation Forecast for 2024: Analyst Expectations and Market Implications 02/26/2024 https://www.techopedia.com/us-inflation-forecast

3 Credit Karma - Americans say their financial situation worsened in 2023, what will 2024 bring? 12/07/2023 Americans say their financial situation worsened in 2023, what will 2024 bring?  - Intuit Credit Karma

4. National Library of Medicine The association between student loan debt and perceived socioeconomic status and problematic drinking and mental health symptoms: A preliminary investigation 04/2023

5 USA Today - Most student loan borrowers have delayed major life events due to debt, recent poll says 04/18/2024 Most student loan borrowers have delayed big life events due to debt (usatoday.com)


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