“Money can’t buy happiness” is something that people with money say. And it’s true, to an extent. A 2018 study of World Gallup Poll data of 1.7 million people in 164 countries found that the ideal income for individuals is $95,000 a year to get the satisfaction the Rolling Stones couldn’t get, while $60,000 to $75,000 was the range for “emotional well-being.”
Of course, $95,000 a year in New York City or San Francisco is a lot different than $95,000 in Boise or Des Moines. Even still, a jump from $95,000 to $100,000 likely isn’t going to give you as much of a happiness boost as you might think. Though, eclipsing the six-figure threshold probably feels nice.
That’s all just evaluating what’s coming in, though. What about what’s going out?
Carrying excessive debt can be emotionally draining, and if you’re working to pay down debt, you might feel like you’re on a giant hamster wheel. Here are five emotional benefits of becoming debt-free.
Debt-free living benefits
1. Improved mental health
In a 2019 review of 52 existing studies around mental health and debt, Healthline reported that over a quarter of people who said they had mental health problems were also in debt.
Student loan debt in particular seems to have significant effects on mental health. According to a recent Student Loan Planner survey of 2,358 people—mostly ages 18 to 39—more than half of high student loan debt borrowers have experienced depression as a result of their debt. A whopping 68% of respondents said they have six figures of student loan debt. If you’re in this situation and are looking to improve your finances for peace of mind, you can opt for different alternatives by comparing student loan refinance rates.
In a 2016 Purdue University study, researchers found that lower debt levels can improve happiness almost as much as higher income.
2. Self-esteem boost
It can be easy for people to create a façade that EVERYTHING’S FINE. Buy a brand-new car with a $600 monthly payment that you can’t afford to put gas in. Swipe your credit card to get the latest Apple product even though you’re eating Ramen every night for dinner. It’s all good.
We all do weird things to create an illusion of feeling good about ourselves or having value. But staying in your lane by making more realistic purchases and improving your credit score can potentially provide a bigger self-esteem boost than rolling up to a party in a pair of Yeezys. (They’re ugly, and no one’s impressed. I just saved you thousands of dollars. You’re welcome.)
3. Reduced stress and anxiety levels
There are enough stressors and anxiety-inducers out there that if you can curb one, you’re doing yourself a big favor.
According to an American Institute of Certified Public Accountants (AICPA) survey of 1,000 American adults, 28% said they experienced stress around everyday finances. Meanwhile, about a third of respondents said they generally worry about debt and a quarter said their stress and anxiety around debt led to sleeplessness.
Additionally, the Student Loan Planner survey found that 90% of borrowers had severe anxiety because of their student loan debt.
4. Improved cognitive function
Multiple studies have found that debt can debilitate cognitive function, leading to things like worse decision making. A 2019 study from the University of Singapore, for example, found that reducing debt for lower-income people improved their psychological and cognitive function significantly.
There’s no word on how this affects dumb indebted rich people, though.
5. Better relationships
Money is one of the top strains on romantic relationships. And can be in non-romantic relationships too, with mobile payment apps like Venmo seemingly eliminating the “I’ll get you next time” factor.
But when it comes to relationships, debt can be the catalyst that illuminates other issues in a relationship like lack of communication and coping skills. Of course, if one person carries a much heavier load of debt, that can lead to feelings of resentment.
Communication is key, and regularly talking about finances—including not just debt but budgeting, long-term financial goals, and everyday spending—can help improve your overall communication skills.
And if that doesn’t help, there’s always couples counseling.
-Purdue University and University of Virginia study of 2018 Gallup data
-Student Loan Planner survey
-American Institute of Certified Public Accountants survey
-University of Singapore study
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