Depression and debt: how your mental health links with your money problems

To mark Mental Health Awareness Week, we look at why more people need to acknowledge the link between mental wellbeing and financial issues.

The link between mental illness and money problems is becoming more and more apparent.

It’s no coincidence that one in four people with a mental health problem is also in debt, because they form their own vicious circle: the grinding effect of living in poverty can lead to depression, while the medical effects of depression can make financial problems inevitable.

In fact, they are so interconnected that it can be difficult to untangle cause and effect.

It’s so baffling that even mental health professionals struggle to make the connection, meaning many people suffering from depression are left to face their money woes alone.

As we mark Mental Health Awareness Week (14-20 May), we take a deeper look into this troubling issue.

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How mental health problems affect your money

A 2017 report for the Money and Mental Health Policy Institute, called ‘Seeing through the Fog’, examined the way that depression affects our ability to manage our money.

It highlighted that sufferers struggle to deal with the complexity of money matters, because the condition impairs ‘focus’ and ‘working memory’. It also affects our ability to plan and make decisions, and it damages our ‘psychomotor functioning’, so that routine tasks become arduous and insurmountable.

As one respondent in the study put it: “I had no notion of how to budget, and during my most depressed episodes I just didn’t have energy or concentration to track where the money was going.”

Perhaps even more fundamentally, a diagnosis of depression will focus in part on the sufferer’s lack of motivation, and motivation is absolutely essential to keeping on top of your finances. Or as one respondent said: “Its the inability to face things that drags you down. Everything takes an incredible effort.”

A combination of all these things makes it more likely for sufferers to fall behind on payments, miss deadlines and face penalties.

They struggle to prioritise their spending or shop around for products, and when all these issues lead to money problems and debt issues, they then struggle to find a way out.

At the same time, other symptoms can propel them into further debt, most notably impaired response inhibition, which is the ability to suppress impulses.

It means people make financial decisions without thinking them through, and it lies behind the fact that 95% of people with depression say they spend more when they are ill.

Once people find themselves with financial problems that they cannot face, let alone deal with, it’s hardly surprising that this will feed into their anxiety and depression.

Depression and debt: how your mental health links with your money problems

Lack of understanding

Compounding the problems faced by individuals caught up in the vicious cycle is the fact that few people understand depression and its link to financial problems.

There have been great strides taken in the attitudes towards depression in recent years. A study by Mind in 2014 found that 91% of people felt that we should be more tolerant of people with a mental illness, and 78% of people believe that “mental illness is an illness like any other”.

It’s partly a result of the success of high profile campaigns such as Time to Change and Heads Together, and a growing awareness that one in four people will suffer mental illness at some point in their lives.

However, tolerance and understanding are not necessarily the same thing. A survey last year by the National Centre of Social Research found that one in five people agreed with the statement: “One of the main causes of mental illness is a lack of self-discipline and willpower.”

And when depression leads to financial problems, there’s very little understanding of that either.

Merlyn Holkar, the researcher who put together the ‘Seeing through the Fog’ report wrote: “It is often presumed that people with low motivation or a short-term approach to financial management are simply lazy or careless and that they could easily address these problems if they so wished.

However, for many mental health problems, a problem with motivation may be medically recognised as a fundamental component of the disorder.”

Coupled with a lack of understanding is a dearth of tolerance.

Polly Mackenzie, director of the Money and Mental Health Policy Institute says: “There remains a huge stigma of blame when it comes to debt, and the idea that it’s always your own fault. In reality, debt is usually caused because of life events or illness, not profligate spending, and mental illness can be a major component.”

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Docs are in the dark too

Alarmingly, it’s not just the typical man or woman in the street who doesn’t understand the interconnectedness of debt and depression, many medical professionals are in the dark too. In fact awareness amongst them is so low that it’s not common practice to ask about it, or to engage with the problem.

Mackenzie explains: “We work with mental health professionals, who see that people have mental health problems and that those same people have financial difficulties, but they don’t necessarily see those things are linked.”

Mackenzie points out that getting the NHS to change its approach and engage with a new idea is always difficult because it’s such a complex collection of different organisations.

However, she knows she has a compelling case for encouraging the NHS to join the dots, because: “We know people with financial difficulties are four and a half times less likely to recover from their mental health issue.

"If you can fix the financial problems, you improve their chances of getting back on track with their mental health.”

She adds that this doesn’t mean the NHS has to offer debt advice, it can simply be a case of encouraging people to take advantage of services that are already available.

Learning from debt advice services

Joined-up thinking is more prevalent in the debt advice community. The Money Advice Trust runs a training module on money and mental health for debt advisers, and there are some specialist debt services for people with mental health problems.

They recognise issues that are specific to mental health, such as people with anxiety who struggle to make calls to creditors or people with agoraphobia who cannot go out for face-to-face meetings with debt advisers.

The help is out there, but Mackenzie wants to see it more widespread, and so widely understood that it is always considered as a possible factor when someone seeks debt advice.

Likewise, she wants to see financial companies play their part. Mackenzie points out:

“If they were an alcoholic they could make sure they didn’t have alcohol in the house, but the online shops are always open, and their bank account is always available, so they cannot remove the temptation to spend.

"People need tools to help them take control. Financial companies have the ability offer these tools.

“They can, for example, block spending on credit cards at night, or stop spending on gambling, but they only offer these on corporate cards and not to individuals. We want to see these tools available to everyone.”

She is also working with financial companies to see whether they can identify warning signs before they manifest as major issues.

She is looking into the role of transaction data, so financial institutions can spot if someone is suddenly shopping a lot at night, or if someone with an immaculate financial record is suddenly struggling.

She says she wouldn’t expect banks to get into the business of diagnosing mental illness, but that, “It would provide an opportunity to offer support, and get ahead of the problem.”

In the interim, it is up to all of us, as friends and family, to look for the signs and do something about it. This means understanding the link and taking it seriously.

Mackenzie says: “We all have days when we feel a bit low and we struggle to get out of bed. Likewise, I’m sure we have all bought a bar of chocolate to cheer ourselves up when we feel a bit down, it’s a reality of everyday life, so you can see how problems become trivialised.

“People think that someone with depression who struggles to get out of bed for days on end, and compulsively spends online is ‘like them but more so’, so they don’t realise they need help.”

It’s a difficult discussion for anyone to raise; after all, it means tackling not one taboo, but two of them at the same time. However, you cannot afford to wait for the sufferer to ask for help.

As one respondent to the ‘Seeing Through the Fog’ report said: “You don’t want to phone anyone to discuss the problem as you feel a failure.” It means choosing the right time, asking the right questions, and making it clear that this isn’t a discussion about failure and blame, but one of support and understanding.

It’s not easy, but the rewards for tackling such a difficult issue make it worth every effort.

Mackenzie points out that by encouraging people to accept their mental health challenges and get help with their money worries, you can turn what has been a vicious circle of debt and depression, into a virtuous one that dramatically improves their chances of better managing both their money and their mental health for the long term.

Need help clearing your debt? Get free advice 

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