The last few years have been a mental and financial rollercoaster ride for many Canadians. At the start of the pandemic, many experienced job loss or reduced hours, which affected their income. Then inflation hit peak levels, increasing the overall cost of daily living. Today, Canadians continue to cope with high interest rates, making it more difficult to borrow, pay off debt, and save.
Interest rates have leveled off, and many financial forecasters are expecting them to go down by mid-2024. However, Canadians are still feeling the financial stress and it’s impacting their mental health.
The Psychological Impact of Debt and Bankruptcy
Dealing with phone calls from collection agencies, worrying if you’re going to lose your home, and fighting about money with your partner are common side effects of debt and can often have psychological impacts.
According to Financial Planning (FP) Standards Council Canada’s 2023 Financial Stress Index, money remains the top stressor for Canadians for the sixth year in a row. The index reports that 48% of Canadians experience sleep loss over finances, and 36% have experienced mental health challenges, including anxiety and depression, due to their finances.
Money was found to cause more stress than personal health (23%), relationships (17%), and even work (16%). Moreover, financial issues often exacerbate personal health, relationships, and work issues.
Impact of debt on personal health
Research has found that household debt is a significant predictor of health outcomes. Debt has been linked to mental health issues, including depression and mental disorders. The stress experienced as a result of debt has been found to influence many personal health behaviours, including diet, physical activity, and substance use.
Impact of debt on relationships
A recent poll by Simplii Financial found that 38% of Canadians say money is a cause of stress in their relationship. The rate was even higher at 46% among younger couples aged 18 to 34. Nearly 32% of couples in this age group said they’ve broken up with a partner over money issues.
Impact of debt on work
The National Payroll Institute’s Annual Survey of Working Canadians found that employee debt takes a toll on their performance at work.
Thirty-seven percent of survey respondents said they were feeling financially stressed. Of this group, 40% said they were unable to prevent the stress from negatively impacting their job performance. Previous research has also determined that stressed-out employees are costing employers billions of dollars.
Common Sources of Financial Stress
If you’ve ever experienced significant debt, you’re likely familiar with the psychological toll this can take. Some common sources of financial stress include:
- Budgeting and managing household expenses
- Living paycheque to paycheque
- Struggling to save for the future
- Dealing with emergency or unexpected expenses
Stress and Bankruptcy
The process of filing for Bankruptcy can take stress to the next level. Not only are you dealing with financial uncertainty, but there are also feelings of failure, a loss of self-esteem, and shame. While the intention of Bankruptcy is to provide honest Canadians with a second financial chance, there is still a negative stigma that surrounds it.
What’s important to remember is that you aren’t alone. Canadians from all ages and walks of life struggle with financial stress.
Who’s Struggling With Their Finances?
According to the Government of Canada, 54% of Canadian households report having trouble with their financial well-being. However, there are certain groups in Canada that are particularly financially vulnerable, including:
- 56% of women
- 66% of low-income households
- 65% of Indigenous peoples
- 70% of recent immigrants
Coping With Financial Stress
If you’re feeling stressed out and mentally burdened by your debt, there are actions you can take to improve your situation, including:
- Make a budget. A budget is a plan for your money. A budget helps you determine how much money you have coming in (income) and how much is going out (expenses). If you find you’re spending more than you’re making, you have two options – find ways to spend less, or make more money. If you’re not sure how to create a budget, check out our monthly budget template. The Government of Canada also has budgeting resources and a free budget planner.
- Start an emergency fund. An emergency fund is a pool of money you save for unexpected expenses. For instance, if your car breaks down, your furnace stops working, or you lose your job. Having an emergency fund can help you handle emergency expenses without having to take on additional debt.
- Credit counselling. If you’re struggling with issues, such as how to create a budget or how to manage credit, consider reaching out to a credit counsellor for help. A Licensed Insolvency Trustee (LIT) can assess your financial situation and provide targeted counselling to help you manage your debt.
- Speak to a financial professional. Many people have difficulty discussing their financial issues however, the FP Canada Index found that Canadians who work with a professional financial planner are less prone to financial stress and regrets. While dealing with debt can feel isolating, there is help available.
- Consider therapy. In addition to getting financial advice, you might consider individual or couples therapy to deal with feelings of anxiety and depression, or to mend relationship issues caused by financial difficulties.
- Exercise. There’s plenty of research to support the connection between exercise and improvements in your overall health and sense of well-being. Exercising helps to reduce the negative effects of stress, increase self-confidence, and lower symptoms of depression and anxiety.
How to Get Help: Speak to a Licensed Insolvency Trustee
If your debt is causing feelings of depression and anxiety or putting a strain on your relationship, it’s time to seek help. Money issues and stress often go hand in hand, but you don’t need to deal with this debt alone. A Licensed Insolvency Trustee (LIT) is a debt professional with the qualifications and experience to assess your financial situation and recommend the debt relief option that is right for you. Once you have a plan in place, it’s only a matter of time before you eliminate your debt and work towards your fresh financial start. We are here to help. Think about your future, and when you’re ready, contact us at 1-888-371-8900 or contact us online.
