America has a growing debt problem: Outstanding balances have risen, missed payments are rising and high interest rates are making everything unaffordable.
The result? Some consumers are changing their lifestyles to deal with debt, adjust how they spend and save, and how they deal with financial pressures, according to new research from Achieve and Money.com.
The survey, conducted in February, asked 2,000 US adults how they felt about their financial situation. Consumers who felt they had more debt than they could control were more likely to report negative emotions and physical effects, leading to behavioral changes.
The findings reflect the latest warning signs that debt is becoming a concern for many households. A recent report from The Century Foundation finds that more than 40% of credit card holders – approximately 111 million people – cannot pay their balance each month. Successive updates from the Federal Reserve, meanwhile, show that household debt is rising while delinquency rates remain high across all types of loans.
Downsizing, saving less and borrowing more
One of the clearest signs of stress is that borrowers often say they have had to cut back on spending to manage their debt.
Of all respondents to the survey, 26% said they had cut back on spending on essentials such as food, clothing or household items because they could not meet their debt obligations in the past year. But that share rose even more among people who felt their debt was out of control: 40% of those who had “more debt than they could manage” said they had cut back on basic spending, and 47% of those who said they had “more debt than they could manage.”
Optional use is often cut, too, but the cuts don’t stop there. Borrowers under stress are also withdrawing from savings accounts. About 3 in 10 respondents with unmanageable debt said they have withdrawn money from emergency savings, and about 1 in 7 said they have dipped into retirement, college or other long-term savings accounts.
In some cases, the trade-off is worse. The survey found that 14% of respondents skipped a monthly bill or debt payment because they couldn’t keep up. That number dropped to 26% for those with more debt than they can manage and 37% for those with too much debt. Those with unmanageable debt were also more likely to report increasing their credit card debt to cover their current obligations.
Shame, anxiety and regret can fuel bad habits
Behavioral changes in research are related to the negative emotional effects of chronic debt. Embarrassment, anxiety and feeling overwhelmed were some of the most commonly reported feelings.
Borrowers who felt they had too much debt were also more likely to feel hopeless about improving their financial situation. While nearly one-third of respondents with no or manageable debt reported those feelings, the share rose to 62% among those with more than manageable debt and 82% among those with the most debt.
Kevin Feig, a Massachusetts-based certified financial planner and financial expert, says the feeling of depression can be hard to shake.
“Everybody wishes they could have a time machine and jump in their DeLorean and make different financial decisions,” he says. “Those with debt especially live in that world.”
Those feelings of regret and shame can spill over into unhealthy coping mechanisms.
Among all respondents, 39% reported that they had experienced more stressful eating or food loss due to their financial situation in the past year. That share rose to 54% among those with excessive debt and to 63% among those with very high debt. One in five respondents overall said they used alcohol or other substances to cope with financial stress, including more than a quarter of those with unmanageable debt and 35% of those with severe debt burden perceived as a burden.
Even relationships can be affected. A quarter of all respondents reported relationship challenges with a spouse or partner related to their finances, but that number more than doubled for people with unmanageable debt.
In fact, the stress of trying to manage high debt can reinforce the behavior that led to the problem in the first place.
“Sometimes it’s a never-ending cycle,” Feig said. “Because of embarrassment or anxiety, people tend to spend a lot of money, because you get high quickly.” The relief is temporary, but the debt is not, he adds.
Why debt (and debt stress) is so hard to break
One of the challenges in overcoming these negative thoughts and behaviors is that people are reluctant to talk about them, says Jaelyn Vickery, a financial expert based in Chicago.
He says: “It is not common in our society and culture to talk about these things with our loved ones or at work in particular. That makes it difficult to identify the underlying issues that cause your feelings of anxiety or shame about money.
In addition, avoidance is common, people are often reluctant to ask for help because of the shame or embarrassment they have about their finances. More than half of survey respondents with unmanageable debt admitted that they often ignore or delay important financial decisions due to stress or confusion. The same share said they are not sure where to go for financial help.
“We live in a world of too much information … I think a lot of people suffer from analysis paralysis,” Feig said.
What can help, he adds, is creating a realistic plan and having an accountability partner you can lean on, whether that’s a financial planner, therapist, trusted friend or family member.
“I think that having someone who believes that you can do it, who has a legitimate plan and who sees the big picture, that there are actually good things after this is over,” he said. “All that helps give people confidence.”
What to do when high debt is harming your well-being
It can also help to think about your debt differently, says Feig. Instead of looking at debt as a mistake, think of paying it off as an investment in your future. Paying off high-interest debt, especially credit cards, can bring returns that are hard to match elsewhere.
From there, focus on your income and make sure you’re spending it intentionally, he said. That means reviewing where your money is going and whether it aligns with your priorities and long-term goals. That process can reveal areas where you can cut back, such as pickups, rush purchases or forgotten subscriptions, and free up money to pay off bills. If you’ve already decided what to do, supplementing your income with a high-paying job or side job may be the next step.
Then choose a payment plan that suits your needs and preferences. For example, Feig likes the debt snowball method — paying off balances from smallest to largest and rolling each payment toward the next debt as you close each account — because seeing immediate results can help people stay motivated. He is also a fan of negotiating with creditors: “It’s an unpleasant or missed thing, but I’ve seen clients who are very successful in terms of reducing their interest rate or … being able to pay off the debt.”
Here are some common credit strategies and where they make sense:
- Debt snowball: It’s great for people who need a quick win to build momentum.
- Avalanche of debt: It’s like a snowball, except you focus on the balances with the highest interest rates first. This is best for borrowers who can stay committed without seeing immediate progress in the number of accounts they owe money on.
- Debt Consolidation: If you can’t get a lower rate with a balance transfer card, personal loan or home equity loan/line of credit, this strategy can save you money by reducing the amount you pay in interest. But it only works well if you can avoid taking new debt.
- Debt management plan: It’s great for people looking for structure and advice from a nonprofit credit counselor. To get a monthly payment, they work with your creditors to work out a payment plan and lower your interest rate.
- Paying off debt: Best for people who need serious intervention, especially those who have fallen behind on their debts. You can go the DIY route – call your creditors and ask them if they’ll accept a lump sum payment if you close your account – or you can pay a debt settlement company to negotiate for you.
More from Mali:
For Most Americans, Financial Success Now Means Being Debt Free
5 Ways to Get Rid of Your Credit Card Debt for Good
How Much Is Debt Payment Really?
