If you’ve ever felt that you can’t think straight when you’re struggling with difficult debts, you’d be right. New research has revealed that debt adds a mental burden which makes it much harder to make decisions.
Although it may sound obvious, studies have proven that debt and money difficulties can weigh heavily on your mind and affect healthy functioning.
The findings come from a study which was carried
out by the National University of Singapore, the Social Service Research
Centre. 200 participants were involved in the research which has gone on to
receive international acclaim.
Each participant was given S$500, a figure
equivalent to approximately three month’s income for a household. This debt
relief was put towards outstanding bills that each participant had to pay, such
as mortgages and utility bills.
The participants were selected for their
differing levels of debt. However, as they all received the same amount of
money, some were left in a better financial position than others. Before they
received the money each participant completed a questionnaire, and then did it
again three months after receiving the money.
The aim of the study wasn’t simply to be
charitable and reduce the debts of 200 people, but to study the effect that a
reduction in debt would produce.
What did the results show?
The questionnaires that the participants filled
in focussed on key areas including cognitive functioning, anxiety and financial
All of the individuals in the study were on low
incomes, but the effect of being able to reduce their debt was marked. The
results of their cognitive testing improved with fewer errors and symptoms of
anxiety also fell.
The cognitive functioning error rate dropped
from 17% pre-debt relief to just 4% after, with generalised anxiety disorders
falling to 53% from 78%.
The other benefit was a move to longer term
goals over instant gratification with a focus on the latter dropping from 44%
The ability to zone in on long term goals is an
essential part of sound decision-making, being able to look past immediate needs
and consider what’s necessary for the future.
Similar results elsewhere
The Singapore study isn’t the only one to study
this subject; other research in the US has arrived at exactly the same
Experts say the results show just why it’s so
hard to escape the debt trap, and why poverty has such a profound effect. One
of the scientists who carried out the work described it as “extremely
challenging” to combat the psychological impairment caused by the burden of
The notion that those people in debt don’t
escape due to a personal failing is also dismissed by this study. Researchers
say that the study conclusively shows that even the most talented individuals
will find debt difficult to escape from.
Possible solutions include debt consolidation,
as well as repairing the credit rating to qualify for cheaper deals elsewhere.