15 ways being in debt can haunt you


Being in debt is about more than simply having to pay money back to bankers. The financial burden causes you to delay life plans and creates stress that affects your overall health.

Before you open a new credit card, consider these 15 ways debt can haunt you. 

1. Debt Puts Your Life on the Financial Edge
If you have as much debt as you can handle and do not have an emergency savings account, you are essentially setting yourself up for disaster. "If anything goes wrong, everything collapses," said Eric Roberge, a Boston-based certified financial planner and owner of the firm Beyond Your Hammock.

This is particularly true if your credit cards are maxed out. When something goes wrong — like the car breaks down or the roof leaks — there are fewer options if you do not have wiggle room in your budget. "It's like walking a tight rope without a net. That's really scary," Roberge said.

Instead of taking on additional debt, start putting money aside each month — no matter how small the amount — until you have the financial reserves in place to tackle an unexpected emergency. Once you have an emergency fund in place, you can take additional cash flow and start paying down outstanding debts.

2. It Disconnects You From Your Values
When you are on the edge financially, it can be difficult to make life choices that are aligned with your long-term values. Debt can prevent you from volunteering at the local soup kitchen. It also might close the option of working fewer hours so you can spend more time with family.

If you are in a cycle of working more hours to chip away at debt, it can be difficult to devote time to things that are truly meaningful. That is why Roberge steers the conversation beyond dollars and cents when working with clients.

"Sometimes as a financial planner I have to stray from the numbers and connect people with the bigger picture," he said. "If family and security are important values, I can show clients that there is more than one way to achieve those things."

For example, Roberge said that instead of buying a house and taking on more debt, you might rent a place at a lower price point in order to free up cash flow to tackle existing debts.

3. It Postpones Your Life Goals
Roberge works with a couple who want to take six months off from work to travel the world before starting a family. The problem? They are carrying $35,000 in debt.

"They're 30, and they have a healthy cash flow, but we have to make sure their debt is wiped out so they can get through that six-month period when they won't have any money coming in," he said.

Roberge set the couple up on a five-year plan where they funnel $2,500 extra per month toward their loans. They were doing great — until they slipped up and made a large purchase.

"They bought $10,000 worth of furniture, which erased the gains they had made in the past few months," he said. "They can still eventually get where they want to go, but now their plan will be delayed by an extra six to 12 months."

If you have a long-term financial goal in mind, it might be best to avoid large purchases for the short-term and instead keep your eye on the prize. Otherwise, it's too easy to let small delays completely waylay future plans.

4. It Decreases Your Credit Score
It is not uncommon for people in debt to let a few payments slide. Unfortunately, a few missed payments can have a dramatic effect on your credit score, the three little numbers that unlock financial opportunities.

"A lot of people will potentially take your credit score as a reflection of who you are and how you do business," Roberge said.

No matter how much you owe, try to make at least your minimum monthly payments. That way, your financial crunch will not turn into something much worse.

"Your credit score can impact everything," Roberge said. "People may not get offered a job because their credit is bad. Some may be denied a rental apartment."

5. It Creates Feelings of Powerlessness
Carrying substantial debt creates feelings of powerlessness, said Bruce D. Sanders, consumer psychologist, retail consultant and author of "Sell Well: What Really Moves Your Shoppers." The good news is that exerting just a little control over your debts can go a long way toward repairing your self-esteem.

"The perception of progress generates optimism," Sanders said. "The momentum of closing accounts gives a sense of both movement and progress."

Consumer behavior research has found that the number of credit accounts a person closes at the beginning of a debt-reduction program is a good predictor of eventual success, Sanders said. Interestingly, the dollar amount of the closed accounts does not have nearly the same psychological impact.

For that reason, Sanders suggests tackling loans with the smallest balances first. The emotional boost from closing your first account — no matter how small — can be enough to carry you through to your second closed account, which can push you ahead to the third. Soon, you will feel confident about regaining financial control.

6. It Triggers Marital Problems
When interest on debts accrues over time, it often turns a small loan into a much larger debt.

"This type of financial burden can cause a marriage to disintegrate," said Rochelle Odesser, a certified financial planner and vice president with Madison Planning Group in White Plains, N.Y. "The couple may be living in the same house, but do not have the intimacy and hopefulness that they once had about their future."

Worse yet, when one partner feels financially deprived, he or she might start to blame or discount the other person's needs needs. "They have lost the ability to care about each other and share experiences in a positive way," Odesser said.

Couples need to remember that they are in it together and to find mutually agreed upon strategies to approach debt reduction.

7. It Prevents You From Buying a Home
Odesser works with a couple who took on substantial debt to pay for their nuptials. "Five years after their wedding, and they are still paying off the credit cards they used for their wedding," she said. "They have put off other steps in their life that they would like to accomplish, like buying a home."

For most people, hosting a lavish party — no matter how exciting — is not worth the life trade-offs that come with overspending. If you are about to tie the knot, consider ways to cut the cost. Instead, save some cash for the many decades you and your loved one will spend together.

8. It Leaves You Stressed and Depressed
In February, the American Psychological Association issued findings from its Stress in America survey of more than 3,000 adults. Money and finances were the top stressor, as they have been ever since the survey began in 2007.

A separate study published in the Journal of Family and Economic Issues found that if you carry credit card debt or have overdue bills, you are more likely to experience feelings of depression. In fact, according to the research, depressive symptoms tend to rise as short-term debt increases.

The good news is that if you feel stressed or depressed, you can do something about it. Debtors participating in the Stress in America survey who said they had the support of family and friends reported much lower stress levels than other debtors.

The takeaway? You are not alone. Reaching out to those who care about you and sharing your troubles can have a huge positive impact on your overall state of mind, even if loved ones are not in a position to help financially.

9. It Keeps You From Starting a Family
The average cost to raise a child from birth to age 18 is almost $250,000, according to a 2014 report released by the U.S. Department of Agriculture. That number does not even include the annual cost of college, which ranges from an average of $18,390 for a public university to $40,920 for a private school, according to the USDA.

Children are expensive. If you do not have your financial house in order, it can be difficult to find the financial resources necessary to make ends meet. That can mean delaying having children. Such a decision might be the price you pay to have a little extra time to pay down debt, save some money and get financially ready for kids.

10. It Causes Weight Gain
A 2010 German research study published in the journal BMC Public Health found that people who are deeply indebted are more than two times as likely to be obese as those who are financially successful.

Roberge has seen this phenomenon firsthand. "I talked to someone who gained weight from their debt because they were depressed," he said. "They feel like they're totally out of control with their finances. They are desperately seeking something they can control."

The good news for those seeking a sense of control is that the same feelings can be achieved through money mastery. The hardest part is getting started.

11. It Could Lead to Docked Wages
Many U.S. states allow wages to be garnished for unpaid debts and obligations. According to a recent report released by payroll solutions giant ADP, student loans and consumer debt are included in the third most common reason for garnishments, after child support and tax liens.

12. It Causes You to Neglect Your Health
Debt causes problems that stretch beyond psychological health. According to the APA survey, nearly one in five Americans have skipped or considered skipping a doctor visit because of financial concerns.

Whenever possible, try not to postpone preventative care. Putting off a doctor visit, no matter the short-term cost, can create a sizable financial burden down the road if an ailment goes undiagnosed and progresses.

13. It Lowers Your Self-Esteem
Research from The Ohio State University finds that young, college-educated professionals actually get a self-esteem boost from debt — and the things it can buy — in early adulthood. However, that begins to change as time goes on and the impact of their debt becomes more apparent.

"By age 28, they may be realizing that they overestimated how much money they were going to earn in their jobs," said the study's lead author, Rachel Dwyer, as quoted on the university website. "When they took out the loans, they may have thought they would pay off their debts easily, and it is turning out that it is not as easy as they had hoped."

14. It Leads to Even More Debt
People who are in debt can easily develop a negative mentality and believe there is no hope, said Elle Kaplan, CEO and founder of LexION Capital Management in New York. "Unfortunately, giving into short-term emotions by throwing in the towel will do nothing but dig a deeper hole of debt," she said.

Taking the short-term approach and spending money to make yourself feel better about being in debt can have catastrophic long-term effects. Sooner or later, the piper needs to be paid. The longer you wait, the worse off you will be when that time arrives.

Kaplan said she always tells her investing clients to take a long-term approach to building wealth, and adds that the same mindset should hold true for getting rid of debt.

"You should realize that with a rational mindset and a long-term plan, almost any financial problem is solvable, even if it seems impossible at the time," she said.

15. It Turns Small Problems Into Large Problems
When you are on the financial edge, a seemingly small setback can quickly escalate into a much larger problem that is more difficult to remedy. For example, your car might keep breaking down, forcing you to buy a new one.

"If you have a lot of debt, you may have let some of your payments slide, so you may not have good credit," said Roberge. "Without good credit, you can't get a car loan. You need the car to commute to work."

Instead of waiting until your debt gets out of hand, remember that making small payments toward your debt now can make a large difference later, when you need some space in your budget. "Small things are very impactful," Roberge said.

Many of us are knee-deep in debt. The solution to the problem is as simple as it is hard: Find ways to decrease spending and start to funnel those freed-up funds toward paying down outstanding debts. As the saying goes, even the longest and most difficult of journeys starts with just a single step.

From GoBankingRates.com: 15 catastrophic ways being in debt haunts you