Researchers have found connections between the experience of depression and poverty, debt and stress that leads to depression, and financial stress caused by job loss and the experience of depression. In addition, there is a mountain of research dedicated to better understanding the connection between depression and substance abuse and how best to treat the co-occurring disorders.
One thing that scientists are having a hard time answering, however, is the chicken-and-egg question: Does depression cause financial issues, job loss, and poverty? Or does the experience of job loss, financial stress, and debt cause depression?
As with most questions of this kind related to mental health and substance abuse, the answer is highly variable. Depending upon the person’s experience, it may be that depression causes issues – including drug or alcohol abuse – that intrude on the ability to get or maintain employment. In other cases, it may be that getting fired or living with high levels of debt and money problems triggers depression and/or substance abuse – or that substance abuse comes first and causes depression and financial problems.
Each person is different in how they may come to the experience of the multiple crippling issues of depression, financial struggles, and drug or alcohol abuse or addiction. Everyone who ends up in this situation can benefit from getting professional dual-diagnosis treatment that treats both the depression and substance use disorder as well as learning some basics of financial management that will help them get control of this aspect of their lives as well.
The goal should be to have no debt whatsoever. There’s no need to maintain a balance on your credit cards or have a car payment for the rest of your life.
More debt means more risk, and more risk means more problems when you’re struck by illness or job loss or are unable to work for any reason. Decreasing financial stress can start with getting rid of every debt you have hanging over your head. Essentially, everything beyond your rent/mortgage, utilities, gas, and food can be eliminated from your budget and considerably ease your stress. Here’s how you do it:
- Create a budget. Write down every dollar you spend and put it into categories. Every bill will have a spot on your budget, and every dollar you make will be assigned to one of those categories.
- Pare down the budget. Cut out everything you don’t need. Now redefine the word “need” and do it again. You need to pay minimums on all your bills. You need to pay rent and utilities, and you need to put gas in your car if you can’t walk to work – but you don’t need to buy a coffee every morning, new clothes, or go on vacation. The goal is to get yourself out of debt, so every dollar that isn’t assigned to a category can go toward paying back money owed, and the tighter your budget, the shorter that process will be.
- Pay off debt. Make a list of all your debts from smallest to largest, and with the money left over in your budget after bare-minimum expenses, start paying off the smallest debt first. When that one is gone, the minimum payment you were making to it each month can be applied toward the next largest debt on your list, in addition to any extra money in your budget, until that one is gone as well – and so on, until you are completely debt-free.
Tips to Improving Your Ability to Decrease Financial Stress
- Make a new budget every month. Some people have a different amount of income each month. Others have bills that come in every few months or expenses that only occur during certain parts of the year (e.g., heating bills in winter or car registration once a year). You can manage this by creating a new budget for every month with the same principles of tight budgeting while still managing fluctuating expenses.
- Stick with it. Even if you fall off the wagon budget-wise here and there, it’s no reason to let go of working toward financial freedom. Get back to it and resolve to be more intentional.
- Create a mini emergency fund. Little things will come up all the time, and the only way to manage these issues without creating a financial crisis is to have an emergency fund to cover it. Before you get the ball rolling on your debt payment plan, set aside $500 to $1,000 in a savings account, but only access it in the case of an emergency.
- Add a “big expense” category to your budget. There are a number of different expenses that you will face every year that are not charged on a monthly basis. One way to incorporate these one- or two-time annual costs into your monthly budget so that they don’t catch you by surprise is to create a category just for them. Make a list of all the big payments you will make in a year (e.g., holiday costs, car registration, life insurance premiums, car insurance premiums if you pay them once or twice a year instead of annually, etc.), add them all up, and divide by 12. Pay that amount into a savings account every month and then tap it as needed as the expenses arise.
- Consider working more hours. Sell things you have that you don’t need, get a second job, pick up a side gig – whatever you have to do to burn through your debt repayment faster and get to the point where you can start to relax, invest and save, and give back to the community.
- Use an app for easier tracking. If you’ve got the software to log expenses as you buy things, you’re more likely to keep an accurate budget and stick with it.
Once You’re Debt-Free
Once you’ve paid off your debt, you can continue to improve your financial situation by increasing your emergency fund up to three to six months’ worth of expenses. When this is complete, it’s time to enjoy your money a little bit. Invest for retirement, save for a child’s college, go out to eat once in a while, or go on vacation.
The added benefits? By staying focused on debt payoff and working hard toward financial freedom, you aren’t thinking so much about drugs and alcohol, you build up your clean time, and you prove to yourself that you can set a goal that is positive and reach it. If you can do this, you can do anything in recovery.