How to Sleep at Night When You’re Overwhelmed with Debt / by Jennifer Chan


It’s no surprise that financial stress negatively impacts mental health.  Because my blog is mainly geared towards 20 and 30-somethings, I'm guessing most of you are burdened with student loans, as well as potentially consumer debt.  Hindsight is 20/20. While we may look back now with some regret about the financial choices we've made a few years ago, most times debt is unavoidable. If you had to put yourself through post-secondary education, support your family, or both, please know I'm giving you an online slow clap. That sh** is hard. If I ever had to choose between being debt-free and incurring debt to cover basic necessities for loved ones, I would obviously choose the latter in a heartbeat. Life happens. If you're gainfully employed now, I believe that you have the ability to overcome this financial setback and give yourself the gift of future financial independence.

Not everyone loses sleep over debt. Some people are genuinely at peace with their financial situation. Up until a few months ago, I was not one of those people. Just ask my girlfriend or my rabbit, I was probably the worst person to live with. I would constantly bring up the topic of my student loans, toss and turn restlessly at night and even grind my teeth in my sleep (which would wake her up and she would often have to rest her hand on my jaw so I would stop). Not to mention my constant self-sabotage, which would largely consist of me refreshing my online bank account wishfully hoping my student loan balance would go down.

Unfortunately, none of those “coping mechanisms” worked.

After lots of trial and error, I narrowed down five strategies that have significantly helped me sleep well at night while living with debt:

1.     Create a Budget that Works for You

If you have debt you need a budget. This is not optional. A separate post on this topic is forthcoming, but just know that it will take a few months to develop a solid budget that works for you.  When you’ve mastered your budget, you will know exactly how much money per month you are diverting to your debt. If your budget is accurate, you should be able to figure out approximately when you will be debt-free. Of course you will come across unexpected expenses or your salary may change, but you should still roughly know when that sweet time will come. Once you have a finish line in mind, a huge weight will lift from your shoulders since you have a realistic repayment plan in place.

2.     Don’t Look at the Balance of Your Loan Unless You’re Making a Payment

This is so, so, so important. Do not torture yourself by looking at something you cannot change until your next paycheque. In my case, my student loan is not with my main bank, so I'm not even forced to look at my loan balance on a daily basis. Now, this wasn't intentional, I just ended up moving my daily banking to a different bank that didn't charge my fees. 

Technically, I don't even have to really check my loan balance if I don’t want to, since I always make bi-monthly payments towards my student loans, which are well-above the minimum payment. Currently, I only look at the balance once, which is usually at the end of the month. I do this to see if I am on track towards my debt-free goal, and it helps me map out my next month’s budget.

Once I stopped obsessively looking at my student loan balance, my mental health quickly improved.

3.     Have an Emergency Fund

You’re probably thinking, “What does this have to do with my debt?” Well, nothing really. But it has a lot to do with getting a good night’s sleep. Some personal finance bloggers recommend that your emergency fund should have 3-6 months of expenses, others suggest it should be 3-6 months of your net salary. Personally, if you are in your twenties or thirties and do not have kids, mortgage or a car, I think you should be fine with an emergency fund with $4,000 - $5,000. That number is also flexible depending on where you live. If you live in an expensive city, that will probably be sufficient. If you’re living in a more affordable city, you could probably lower your emergency fund to $3,000. Again, it depends. But one thing is for sure, never underestimate the security that comes with a padded emergency fund. In the beginning of my debt repayment journey, I had a minimal emergency fund. I viewed my emergency fund as “extra money” that should have been put towards debt. I wanted to throw every single penny towards lowering that number. What was the result? Yes, I lowered the balance of my loan, but I also became anxious about not being able to cover any unexpected expenses. My anxiety didn't decrease in the slightest.

Even if it's just $100.00, you need to contribute a little bit of each paycheque towards building an emergency fund. Yes, even while you're paying down debt. Trust me, the security is worth it.

4.     Read Other Debt Repayment Journeys

There’s stories all over the internet written by people who are no different than you. Know that someone somewhere has less income and more debt than you. If none of your friends or family are in debt, look for motivation elsewhere. I love reading personal finance blogs because it reminds me that I'm not alone in this journey to eliminate my debt asap and increasing my net worth. Also, reading other people's frugal mindset reinforces my own belief on frugality.

5.     Don’t Beat Yourself Up

We are our harshest critic. While we may tell our friends that they shouldn't be so hard on themselves, we never seem to give that advice to ourselves. Listen, I went through two post-secondary degrees without ever learning how to budget. I even took a course on business law in law school while not being able to tell you how much money I was spending on restaurants per month. It seems ridiculous now, but I have to give myself a break. I was never taught basic personal finance in high school. Unless you had a parent sit down and teach you the specifics, you won’t really know. People make mistakes. It's all about taking action as soon as possible to learn from them and use them to get you farther ahead than where you were before you made them. Do not beat yourself up. Firstly, it’s not productive. Second, you need all your optimism to fuel your determination to beat your debt into submission.

I hope these five strategies help you as you embark on your journey towards debt-free. Please feel free to let me know what strategies worked for you. I believe in you and I hope you finally have a good night’s sleep!