What Is Debt Fatigue?
Debt fatigue occurs when a debtor becomes overwhelmed by the amount of debt incurred and the seeming futility of the debt repayment process. Debt fatigue may result in a debtor giving up on making loan payments and overspending again.
- Debt fatigue refers to the feeling of hopelessness and depression that overcomes a debtor when their debt can seem insurmountable.
- It may result in the debtor overspending again to incur more debt and becoming trapped in a vicious cycle.
- Debtors can combat debt fatigue through smart planning strategies.
Steps To Getting Out Of Debt
Understanding Debt Fatigue
Debt fatigue can happen when a large portion of payments go toward interest and the overall amount of debt owed does not appear to dramatically lessen as payments are made. Be it from student loans, mortgage payments, or credit card bills, working to pay off debt can feel like an impossible obstacle to overcome.
Experiencing debt fatigue may eventually cause a debtor to declare bankruptcy as a last-ditch effort to resolve the situation.
Debt fatigue may cause a debtor to feel depressed, burned out, and hopeless about the debt repayment process. Because it can often take years or even decades for debtors to repay their loans, it is easy to hit a wall, especially if a debtor has already made significant cutbacks to their lifestyle and spending habits to stay on track.
One of the worst and most immediate effects of debt fatigue is that the debtor may start to overspend and incur more debt again. Increasing the debt load will not help a debtor's financial situation and is likely to drive the debtor to insolvency.
To make debt fatigue less likely to occur, a debtor should make efforts to stop incurring additional debt and make a realistic repayment plan that allows the debt to be fully repaid as soon as possible. In some cases, it's helpful to even seek external help from a debt relief or settlement company.
By not dragging the debt out for any longer than necessary, the debtor will start seeing more dramatic results of the debt repayments sooner, preventing them from becoming overwhelmed by the overall debt burden.
Example of Debt Fatigue
Let's say Jamie took out a student loan to pursue her MBA. Subsequently, she applied for another loan to save on rent payments post-graduation by purchasing an apartment. In total, her debt commitments came up to $450,000. She makes monthly payments of approximately $1,000 to service her debt from her job after business school.
To avoid defaulting on her payment schedule, Jamie saves on luxuries, skimps on vacations, and avoids going out with her friends. After 10 years of making those payments and living a relatively frugal lifestyle, Jamie starts suffering from debt fatigue. She feels left out of her friends' conversations and is tired of thinking twice before spending her salary.
Frustrated with the state of affairs in her life, she snaps and starts spending lavishly, eating out, and taking expensive vacations with her credit card. But her spending spree results in massive credit card debt.
How to Combat Debt Fatigue
Overcoming debt fatigue requires planning, persistence, and endurance. Those facing large debts should create a strategy for beating it as soon as possible, such as the debt avalanche and debt snowball methods.
Because debt often feels like it will last forever, a debtor should focus on the reasons they want to be out of debt and their goals for life after debt. It can also be helpful for a debtor to set small goals and budget to allow themselves a small reward, like dinner out or a movie with friends, whenever they reach a milestone.
Because owing large debts is extremely common, if a debtor has friends and family in a similar debt situation, they might consider banding together to help each other remain accountable.
What Are Symptoms of Debt Fatigue?
Feelings of hopelessness, depression and anxiety can accommodate debt fatigue as a borrower becomes increasingly skeptical about the debt repayment process. The borrower may give up on paying off debt, declare bankruptcy, or even double down on the spiraling debt by spending even more, exacerbating the problems.
How Do You Stop Feeling Overwhelmed by Debt?
There are different techniques that can help a debtor get a handle on the negative feelings that accompany debt, starting with making all efforts to stop incurring more debt. Creating a realistic payment plan can help manage anxiety, as it establishes a potential end to the debt. Seeking help from friends, family, or a debt relief or settlement company may also help.
How Do You Get Out of Spiraling Debt?
The first step is to stop the excessive spending and to take a blunt account of what you actually owe. Other steps include: creating a realistic budget and sticking to it, picking up extra work to increase your income, and seeking help from friends or family or a debt settlement company.
How Does Paying Off Debt Make You Feel?
There are psychological benefits to paying off debt, including feelings of relief and peace. Getting out of debt can also help boost self-confidence, particularly if the borrower is able to stay out of debt moving forward.