How can I stop debt ruining my mental health?

March 16, 2018 11:22 PM

I'm 36, self-employed, and owe ~$75k in debt. My debt's causing panic attacks all the damn time. Help.

So... I owe a ton of debt and it's really screwing things up.

The basics: I owe about $10k in credit card debt (at about 12% APR) and another $65,000 that's a mix of personal loans ($35,000 or so at 12% APR) and student loans ($30,000 at 6% interest).

I was laid off this past September and started my own single-employee S Corporation afterwards. I give myself a salary of $50,000 a year and will pay myself distributions apart from that. I also took a separate, temporary part-time job to make extra $ paying ~$2500 a month. That job is indefinite/project based and I don't know how long it will last.

I don't know how much money I'll make this year, and am still learning the ropes of running a business. I live with my partner, who makes ~$110,000 a year. We rent an apartment, and don't have any kids. I don't want my partner to help with the debt at all--I refuse to freeload and make my problem someone else's.

I feel overwhelmed by my debt right now--my minimum payments are over $1700 monthly and I feel like I have to throw every single free dollar at making extra payments or I'm going to be fucked forever. Most of the debt comes from when I was in my twenties, had money for the first time, and didn't understand how credit cards work.

I use YNAB to keep tabs on my finances, do CBT exercises, and have a therapist I speak with via Talkspace.

Lots of anxieties around money as well. I grew up in a household where my father started using hard drugs when I was a teen; we ended up filing for bankruptcy, losing our home/car/everything, and going on public assistance as a result. Both my parents are now legally disabled and on SSI.

At this point, I have panic attacks multiple times a week that are all money-centered, and wake up in the middle of the night freaking out that I'll never be out of debt. Any time I go out to eat, hang out with friends, or treat myself, I feel like a scumbag for not putting that money towards paying off debt.

It sucks and I'm freaking out over money pretty much every minute of every day. Hive mind, y'all got any advice?

posted by anonymous to Work & Money (23 answers total)

we ended up filing for bankruptcy, losing our home/car/everything, and going on public assistance as a result

The thing that leads to losing the home and car is the underlying drug problem and such that created the financial difficulties, not the bankruptcy. Even if you wind up bankrupt--and I'm not saying you should file, although you certainly could, it'd take a lot of weight off--then the consequences of that are more like "you'll have a bit of a harder time finding a house, especially if you're in an expensive market", not "you'll end up homeless". My dad didn't have a drug problem but did have severe mental health issues, and it took me a lot of years to work out that his financial problems were not as a result of financial ruin being inevitable, but because he still had the same problems after bankruptcy that he had beforehand, and I'm not him.

You aren't your parents and you don't have their problems. You have a plan and you're responsible and you're going to be okay. Your worst case scenario is that you have somewhat less money and/or somewhat worse credit than you'd like to have, here. Focus on that and which of those directions works better for you. I have like $150k in student loans and incredibly mediocre credit that used to be trashed... but I have a decent job, and as a result I still have a car that I like, and a nice apartment, and I work hard, and I'm entitled to have some money to spend on fun things as well as paying off the debt. You deserve some nice things for as hard as you've worked, too, and you can have SOME nice things and still get out of this just fine.

I'd go at least talk to a bankruptcy attorney about what your finances might look like post-bankruptcy. Not that you have to file, but that'll give you a good picture of whether what that does to your credit would be worth whatever monthly financial benefit you'd get. Then you can make decisions about your finances based on some actual facts and not just being constantly freaked out, and even if you decide to continue like you are now, it will be because you decided to do it, not because you're stuck with this.
posted by Sequence at 12:03 AM on March 17, 2018 [10 favorites]

I feel overwhelmed by my debt right now--my minimum payments are over $1700 monthly and I feel like I have to throw every single free dollar at making extra payments or I'm going to be fucked forever.

That's catastrophizing, not a financial plan.

Grab ahold of this repayment calculator and make an actual repayment plan that you're confident will get rid of your debt, even if somewhat slowly, if you stick to it.

As a starting point, even if the entire $75k you currently owe was costing you 12%, paying it down at $1700/month would get rid of it in under five years. The student loan portion is substantial and is only costing you 6%, so it will in fact be somewhat less than five years.

To get rid of debt as fast as possible, weight your repayments toward your most expensive loans to the greatest extent possible.

For example, if you're able to defer repayments on your student loan and just let that blow out until you've paid off all your 12% debt: $1700/month will clear $45k of 12% debt in two years and seven months, by which time student loan debt's 6% APR will have grown it from $30k to around $35k; continuing at $1700/month will clear $35k of 6% debt in one year and ten months, so you'd be debt-free in four years and five months. If you're being charged monthly fees it will go a little slower, but not much.

So in fact you don't have to throw every single free dollar at making extra payments in order to avoid being fucked forever. Breathe. What you're already doing will already work, and you're completely capable of juggling your budget to make it work faster or slower as your needs dictate.
posted by flabdablet at 12:42 AM on March 17, 2018 [31 favorites]

Without seeing all your household expenses, it's hard to see the whole picture, but I think this is really just a matter of putting one foot in front of the other to keep taking steps.

First, put all your $2500 additional monthly income right into the debt. Use that to pay the $1700 in minimums. Not sure if that $2500 is pre-tax or after tax. If it's after tax, and you've got $800 more, put that toward the CC debt. Otherwise, if you've got any income from your $50k job, put that to your CC debt, even $50 or $100. Pay it whenever you have it - it doesn't have to only be monthly. It can be every other week if you want. Just pay down that CC and get it paid off. That will be one load off your back, and give you a sense of accomplishment.

Then do the same with the personal loan, then the student loan. In that order.

I understand not wanting your partner to pay your debt, but can they assume a heavy responsibility for household expenses for the next few years, especially given that they make 2x what you're making? That's a completely reasonable ask, and even if you didn't have the debt, I wouldn't recommend splitting the costs 50-50 with your discrepancies in income.

To help quell your anxiety, make some spreadsheets. Show yourself what you're bringing in, what you're spending, and how you're paying down the debt each month. Give yourself a budget for fun. After you pay off the CC, your fun budget can go up a little bit.

I read a lot of frugal living blogs, and many of them recommend Dave Ramsey for his approach on how to become debt-free. His website is mostly a sales pitch, but you can find his books at the library (for free!).

Another site with a large community of people who are actively working to get out of debt is Get Rich Slowly. Sometimes just reading about others' successes (and failures) helps quite a bit.
posted by hydra77 at 12:46 AM on March 17, 2018 [1 favorite]

Do you have a plan for how you are going to dig out of this?
Do you have a reasonable business plan with some idea of how you can expect your earnings to change over time as your business grows? Use that to make a budget that includes what you need to live on and what you need to be paying back every month and how that should change of time.

Then use your CBT skills to do a reality check. Does the plan make sense? Does it get you where you want to be in reasonable amount of time? Does have some check points and contingencies built in? (For example, if your part time job ends, have you thought about how else you might make money and how long it might take to put that in place?)

Then execute on your plan. Maybe have separate account for money earmarked for debt repayment if it doesn't leave your account immediately. Commit that you won't spend the money earmarked for debt on anything else AND IT IS OK TO SPEND THE MONEY THAT IS SUPPOSED TO SPENT ON LIVING EXPENSES including what you are allowing yourself for fun. If it is in the budget, it is OK to spend it (and if it's not in the budget you don't) Make the budget from a rational place where you understand that small fun expenses are reasonable and appropriate and then use that to calm the guilt by reminding yourself that this expense is in the plan.

When you start to panic remind yourself "You've got this" "You have a plan. You are committed to following it" "It will all be OK in the end" The panicked brain is not being realistic - give yourself a very specific, concrete plan that you can use to calm down the panic and believe in yourself. You've got this!
posted by metahawk at 12:53 AM on March 17, 2018 [1 favorite]

I don't want my partner to help with the debt at all--I refuse to freeload and make my problem someone else's.

Does your partner currently have spare money just sitting in a savings account earning some piddly savings account interest rate?

If so, and your relationship is committed and solid, consider an arrangement where they lend you a substantial chunk at an APR that's well over what the bank is paying them but well under the 12% your credit card and personal loan debt is currently costing you. This is neither freeloading nor making your problem somebody else's: rather, you're offering your partner a business arrangement that benefits both of you.
posted by flabdablet at 12:54 AM on March 17, 2018 [30 favorites]

If your partner is willing to help, let them. Accepting help from a loved one when you're in a bad place isn't "freeloading." Also consider that your anxiety about your debt could be negatively impacting your relationship; when one person is constantly stressed about something, it puts stress on the other person too. That's a huge reason to allow your partner to help. It would benefit you both.
posted by kitty teeth at 2:24 AM on March 17, 2018 [18 favorites]

i did what flabdablet suggested and it was amazing. being able to remove the debt quicker due to the favourable interest rate meant that both of our lives improved immeasurably, in both the short and long term. i had similar resistance to the idea, but now i could not recommend it enough.

i will say that you and i have similar backgrounds and even though now i am out of debt and am financially thriving, the concepts of money and spending money and continuing to earn money continue to terrify me and cause major anxiety. it is worth addressing your feelings about this while you're working your way out of the debt so you can enjoy being not in debt when you get there!

good luck with your journey!
posted by eastboundanddown at 2:41 AM on March 17, 2018 [1 favorite]

I paid off my SO's considerable credit card debt in turn for interest-free repayment fairly early in our relationship. Later, I paid off their student loan debt on the same terms. It has helped us as a unit a /lot/, financially, while we maintain separate accounts.
posted by LucretiusJones at 3:00 AM on March 17, 2018 [8 favorites]

My dad didn't have a drug problem but did have severe mental health issues, and it took me a lot of years to work out that his financial problems were not as a result of financial ruin being inevitable, but because he still had the same problems after bankruptcy that he had beforehand, and I'm not him.

Sequence is really hitting it with this. My parents were terrible with money because of, among other reasons, their volatile relationship and their mental illness issues. At almost-40, I'm *still* detangling what is real about my perceptions around finances and what is trauma from us losing our house, having cars repo-ed, having to move all the time when I was a kid.

I've recently starting having actual money conversations with my mother and with some close friends and it helps a lot because, first of all, it's comforting to understand that most of us made financial mistakes along the way but dealt with them in a variety of ways that either worked or didn't and, secondly, it helps me move past being a poor kid who never got a talk about money because we never had any to speak about.
posted by Merinda at 3:43 AM on March 17, 2018 [2 favorites]

The thing that leads to losing the home and car is the underlying drug problem and such that created the financial difficulties, not the bankruptcy.

This is a problematic statement on so many levels one barely knows where to begin. Statistically, the thing that drives women into poverty is divorce.

Anonymous, the problem here is that you don't have a plan, you have a shovel with which you are desperately flinging money at your debt. You need an actual, quantitative plan that includes three months of emergency savings, a comprehensive budget, and a debt repayment spreadsheet. Have you considered taking your figures to r/personalfinance or working with a debt specialist?
posted by DarlingBri at 3:59 AM on March 17, 2018 [1 favorite]

Borrow money at a mutually helpful interest rate from your partner! You waking up with panic attacks and being terrified every minute of every day is already making your problem their problem. You can write up a contract with repayment terms and interest rates.
posted by jeather at 4:26 AM on March 17, 2018 [2 favorites]

I’m going to disagree with everyone saying borrow money from your partner. The problem isn’t that it’s freeloading. The problem is that financial transactions have an effect on relationships, and asking your partner to effectively take on substantial debt that you feel uncertain-unto-panic about being able to repay may be a real strain.
posted by Smearcase at 7:16 AM on March 17, 2018 [4 favorites]

Just want to echo what others have said about household expenses. If you are splitting them 50/50 that is unfair to you now and will be unfair to your partner if/when the tables turn and you make significantly more. Split shared expenses based on your respective net income. That is fair. Also, you can make a plan as mentioned above. You are going to be OK. You don’t have to be your parents; you can be yourself, learn as you go, and have an entirely different future. Many of us have made that journey. You are making it now. Good luck!
posted by Bella Donna at 7:36 AM on March 17, 2018 [1 favorite]

I'm going to chime in here to make my usual plug, which is that my partner and I, in similar straits, went to one of those debt-repayment organizations, where you pay them and they pay your creditors. Because we did that, I could never understand the point--they're just doing what we would do anyway, right? But it ended up having several benefits. One is that you have to give up access to open credit, closing accounts. This was helpful for my partner and me because we are really good a living within our means if we have no choice, but not so good at it if we do.

Another benefit was that all the chaos of what to pay, how much to pay, and so on, turned into a fixed amount withdrawn from our checking account on every payday. Predictable, and regular. Not easy--when we first started the plan, we had very little left over and it was a real challenge. But predictable and regular.

Because it was predictable and regular, we could see exactly when we were going to be debt-free. Our plan worked out to four years, and we will be done with it in another six or seven months. Fixed-term loans have always been better for us, and knowing that, if we stuck to this plan, we knew when our end-date was, relieved so much of that anxiety about when and whether and how we'd ever get out from under our debt.

The organization negotiates with your creditors for you, establishing a monthly payment and, often, negotiating a lower interest rate on high-interest rate loans. This can lower the overall cost of your debt.

Our organization, Greenpath, is a non-profit recommended by our credit union, and I have been very happy with them. When we started, I had a coach who helped me with cash-flow planning, using a method I still use now because it's so useful. They also have a dedicated student loan department, who can help you strategize about how to deal with student loan debt, which is its own whole challenge.

When I first talked to a counselor at Greenpath, they told me that the most common response of most of their clients to getting into the program is, "why didn't I do this sooner?" That's exactly how I felt. If I hadn't clung to the illusion that we were going to be able to get things under control on our own, we could have been done years ago, and had less total debt to deal with. That's not by way of beating myself up, but more by way of saying that it was great to get into the program when we did, it would have been even worse to wait longer, and it would have been even better to start sooner.

Good luck.
posted by Orlop at 7:51 AM on March 17, 2018 [12 favorites]

You and your partner have a combined income of $200k per year.

Your debt, by stressing everyone out, is already your partner's burden too.

You could have this stress for years, and not accept their help, or you could accept their help, and not have this stress.

Accept their help. Partnership means solving things together. If they don't have issues with money and you two are solid, work something out.

With your combined income, lack of kid-related expenses, etc you could knock out that ruinous 12% debt in a year.
posted by zippy at 8:39 AM on March 17, 2018 [6 favorites]

I also had a good experience with Greenpath. This was almost 15 years ago now, but I can still remember the panic attacks, middle-of-the-night sweats, the shame and foggy brain that my debt gave me. A steady plan helped. Some therapy helped. Some radical honesty with my family and friends helped. But mostly, just having Greenpath do the negotiating and monthly debit for me made all the difference.
posted by minervous at 10:52 AM on March 17, 2018

There is a program called Debtors Anonymous. It is not everyone's cup of tea but it is free. There a book by Gerald Mundis that is basically DA without the 12 step stuff that you can get at the library. I have found the suggestions for how to live a sane financial life very helpful. Good luck.
posted by cairnoflore at 11:24 AM on March 17, 2018

If you do go the route of a low interest loan from your partner, this needs to be discussed thoroughly, preferably with someone that can help you both clarify both of your relationships to personal and joint money, as well as getting to what a loan would mean to emotionally to both of you as a couple. After that, you need to work with a lawyer to set up a legal document for terms and repayment. Don't let this just hang out in the wind with a verbal agreement and good faith. That's how animosity and split-ups happen.

Plan it out, write it up, set it up so the payments are pulled immediately from your account and paid automatically into a separate account of your partners. Everything is contractually clear, all payments are made without either of you thinking about it after it's set up. You both benefit financially going forward and there will be no lack of clarity and therefore no animosity, whether the relationship stays strong, or falters for other reasons.

High five each other when the last payment is made, and feel good that you have won at adulting and solved a financial matter together.

Conversely, if either of you do not feel comfortable as you explore your ideas and attitudes toward money, you can put the idea of a loan behind you and come up with a different plan. Once again, you've both won at adulting--specifically at moving forward in your relationship.
posted by BlueHorse at 11:59 AM on March 17, 2018 [3 favorites]

Bankruptcy starts to be the right option for your debt when you owe more than your annual income. Student loans always need a different strategy when you can't discharge them in bankruptcy.

Having said that I agree with everyone who has said that you just need to have a realistic plan with an end date. Lots of people I know have dug themselves out of big debt holes and really, once they had a plan they could stick to they were fine. Having gotten themselves out of debt they've gone on to have a savings safety net, and investments and retirement plans and so on.

The only other thing to ask is whether your unstable income is also contributing to your anxiety about your finances. Is your S-Corp income of $50k sustainable for the long term? Do you want to be self employed or would you prefer to be employed?
posted by plonkee at 12:02 PM on March 17, 2018

You need to invest some money in an actual therapist. From the way you describe your situation, it's not clear to me that you're actually struggling to keep your household funded. That means you're currently suffering way more from the anxiety than from the debt itself. I understand--I grew up in a financially chaotic household, I remember the shame of not being able to afford things, the constant fear of the next expense around the corner we might not be able to meet.

But you are not your parents, and you are not in your parents' situation. Being in debt is not inherently shameful. It happens. It turns lower income and inexperience in your young adulthood--both perfectly normal--into years of misery and self-torture. You can't sustain this kind of tension for several years. For some people, CBT just doesn't work for rooting out childhood trauma. You need someone to help you understand that you are not just repeating your parents' behavior and you don't need to be as terrified of financial challenges as when you were a child who had no control over a criminally irresponsible parent and yet had to be dependent on them. You have power over your life now. You need help feeling that viscerally.

And you can't live at a level of great asceticism, denying yourself every pleasure, for five years. It's not a question of being wasteful or self-indulgent, it's a question of basic human psychology. You wouldn't think you could train for marathons for five years without eating well and looking after your health, right? This is just the mental equivalent. If you have YNAB, you know you can allocate for pleasure spending. Allocate it, and spend it.

(A word of caution about below-market interest-rate loans among related parties: depending on the circumstances, actual market interest may be taxable income for your partner and the difference between the two rates may count as gift income to you.)
posted by praemunire at 3:27 PM on March 17, 2018

One helpful thought technology I haven't seen yet is a simple reminder that I have learned: I have choices.

Growing up in a household with addiction issues, life can seem like a place where there's things that must get done, and we're either getting them done or we're getting run over by them. "I have choices" is a reminder to myself that everything I choose to do is a legitimate choice, whether that's eating rice and beans and paying off all my debt, or making the basic payments and not thinking about the long term, or not making the payments and choosing to file for bankruptcy.

This helps me out because when I get locked into that way of thinking, it doesn't feel like I have any choices. When I say this to myself, it reminds me that even if I'm avoiding thinking about the issue and having panic attacks about what might happen, I am making a decision that is working for me right now. And if I see some other option that might work better, I have the option to choose to do something else.
posted by billjings at 5:02 PM on March 17, 2018

After that, you need to work with a lawyer to set up a legal document for terms and repayment. Don't let this just hang out in the wind with a verbal agreement and good faith.

If your relationship is not solid enough to accommodate a multi-year interest-bearing loan, properly planned and tracked but not legally contracted and not involving a lawyer - if either of you thinks there is any chance that the thing will end in acrimony - I recommend skipping the deal entirely and just living with a slower pay-down schedule.

But if your relationship is rock solid, there's no reason not to use that solidity to benefit both of you financially.
posted by flabdablet at 8:51 AM on March 18, 2018 [1 favorite]

Consider grabbing a used copy of All Your Worth by Elizabeth Warren. This is the book that made the most sense and worked for me. It's extremely helpful in helping you understand your money and making a LIVABLE, balanced plan to escape the debt as well as the debt panic. (I recommend it so much I feel biased about it, but read the Amazon reviews for other people's thoughts.)
posted by sldownard at 11:33 AM on March 18, 2018 [1 favorite]