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Debt and Mental Health: How Mental Health Affects your Finances

Work absenteeism as a result of mental health problems is a massively underrepresented issue which costs both businesses and employees. In this article, we explore the relationship between mental health problems and your finances.

Both short term absenteeism – sick days – and long-term periods of absence from the workplace due to mental health problems have a great impact on society and individuals, damaging both personal and business finances.

The UK work force takes on average seven sick days off every year for health reasons. However, the Centre for Mental Health estimates that mental health problems make up over 40% of sick days, equating to 2.8 days off work per employee each year.

The delicate nature of mental health in the workplace can lead to an underreporting of the issue – by both employee and employer - and a stigmatisation of those struggling with mental health issues. This vicious cycle leads to higher rates of long-term periods off work, with those affected unsure how to manage their finances during short and long-term periods of unemployment.

This article presents you with useful guides and information on the relationship between mental health and money. It offers advice on how to alleviate any financial worries you may have, if mental health problems are directly impacting your ability to work, and highlights the different sources of support that are available.

Use this article to get on the right track towards ensuring your finances remain healthy when aiming for a return to the workplace.

Cost to businesses

The total cost of mental health problems to UK businesses is estimated at £26 billion. Equivalent to £1,035 per employee.

Mental health cost to business chart

How can mental health affect your finances?

Mental health problems can affect your finances whether you are in employment or not. Poor mental health can cause issues from money mismanagement to impulsive spending, both of which could potentially lead to damaging debt spirals.

The link between mental health and your finances is complex. Mental health concerns can make managing your money much harder, whether it’s controlling spending, paying bills, or coping with a reduced income after taking time off work. These money worries can add an extra burden to people’s existing mental health struggles and consequently make it even more challenging for them to sort out their finances- it’s a vicious circle.

Furthermore, certain conditions like bipolar disorder can affect the way you see money and makes those with the condition more likely to embark on impulsive and potentially critical periods of excessive spending. If you are living with the condition, Bipolar Lives can help you get informed, access treatment and get help.

When experiencing mental health issues, it’s important to consider your state of mind when you’re thinking of buying something.

Tip: Before making a purchase while potentially experiencing mental health issues, Ask yourself:

  1. Do I really want or need this?
  2. Wait a day and ask yourself: do I still want or need this?

The relationship between debt and mental health


Experiencing mental ill health can affect your finances, especially when you go into debt. As we have seen, some mental health conditions like bipolar can lead to impulsive behaviour and overspending, which can cause a person to get into debt that they can’t cope with.

35% (£18.23 million) of all UK consumer debt is from credit card expenditures. 24% (£12.50 million) of UK adults have debt in the form of a mortgage, while 11% (£5.73 million) of the adult population has a student loan hanging over their heads.

Know Your Money, We Need to Talk about Debt

As well as this form of excessive spending, unemployment is another great trigger for going into debt. Conditions, ranging from anxiety to depression, can limit your ability to work and force you into debt due to lost earnings. Whether you are spending a long period of time off work or are admitted to hospital for treatment, your finances are highly likely to be impacted as a result.

However, there are certain steps you can take to manage your debt if you experience these scenarios.

“As many as one in four people with mental illness are estimated to be in debt. Sometimes this can be the result of a negative spiral that begins with being out of work and having to deal with the complexity of the benefits system, which can trigger someone who is mentally fragile into depression, anxiety and feelings of guilt and shame.”

Richard Colwill, Sane Spokesperson

Managing and paying off your debt

Having debt when experiencing mental health issues can add to your lack of wellbeing, but it’s important not to allow your debt to become a burden or to let yourself become overwhelmed by it.

There are resources available to help you pay off your debt and you may be protected by law if you acquired debt while going through a period of mental ill health, as outlined in the Equality Act 2010.

“It is quite normal to feel stressed if you have lost your job, or are worried about debt or housing. But if you find after a few weeks that these anxieties are affecting your day-to-day life and ability to tackle these challenges, then you should consider seeing your GP. This is particularly urgent if you feel you cannot cope or that life isn’t worth living.”

Richard Colwill, Sane Spokesperson

What to do if you can’t pay your bills?

Depending on the degree to which your condition impacts your ability to work and/or make sound financial decisions, you are entitled by law to assistance. The Equality Act 2010 includes a clause stating that creditors must make reasonable attempts to aid debtors with mental health conditions.

If your creditor is aware of your mental health background, your creditor can:

  • Pause collection of your debt temporarily
  • Prevent passing your debt on to a debt collection agency
  • Only contact you at set times
  • Only contact you by pre-agreed methods
  • Use trained, specialised staff to handle your case
  • Allow extra time for you to gather necessary information

Borrowing money with a mental health condition

Some mental health conditions could cause you to borrow money which you may not be able to pay back because of your financial circumstances. Whether you have borrowed money from a lender, have a bank overdraft, taken out a loan or used a credit card, if you are unwell to the degree that you cannot make logical decisions about your finances, you may be what’s referred to as ‘lacking capacity’.

You lack the capacity to borrow money if:

  • You cannot understand or remember information about the borrowing facility you used
  • You cannot analyse the information regarding the borrowing facility to decide whether you want to use it
  • You cannot inform people of your decision

How to prove I was lacking capacity when I borrowed money?

It may be a difficult process to prove you were lacking capacity when you borrowed money. If you took out a loan a long time ago, you may struggle to provide evidence that you were lacking capacity at the time of taking out the debt, especially if you weren’t receiving medical treatment at the time.

To clear your debts or agree a new payment plan, most lenders will need evidence of your diminished capacity when borrowing.

If there are records from when you borrowed money, for instance at your local bank branch, you may be able to prove you were lacking capacity to borrow. However, if there aren’t any official records of your borrowing, the lender’s employees might not recall your application.

It can be even harder to establish that you lacked capacity if you borrowed money online. This is because when borrowing money online, it’s unlikely that you have face-to-face contact with the lenders’ staff members, making it trickier to confirm.

How to guard against borrowing money when you lack capacity?

The lender will know you lack capacity and refuse to loan money to you under the Equality Act 2010 if:

  • You or another party has informed a lender that you lack capacity
  • Someone acting under Power of Attorney has informed the lender that you lack capacity
  • They are aware you have an appointee for your benefit payments
  • The lender has been informed that you are under a Court of Protection Order
  • You struggled to understand the details of the loan at the time of taking it out
  • You explained the reason for requesting the loan was to buy something the lender considered ‘out of the ordinary’
  • You talked of unrelated issues when the lender explained the borrowing facility

Unable to work

As well as causing debt from poor money management, mental health conditions can affect your ability to work, leading to short term money problems and even long-term debt.

While the ability to earn money to support yourself is important, the most important thing to remember is that getting well is your highest priority. If you are unable to work, whether it’s for a short period or for the long-term, you should concentrate on getting better before considering returning to work.

If you are going to be absent from work for any length of time, it’s worth knowing what you’re entitled to financially and what your employer is obliged to do to support you.

What am I entitled to if I’m unable to work?

Statutory sick pay (SSP)

If you are too unwell to work, you are entitled to SSP, should you fit the eligibility criteria. By law, employers must pay up to 28 weeks of SSP. On SSP you’ll receive £94.25 per week minimum; some employers will pay more, particularly if your workplace has a sick pay scheme, also known as an occupational scheme. This is worth checking with your employer, should you have an extended period off work.

Statutory sick pay is regularly adjusted. Check gov.uk to determine the current rate - when you are registered, this is what you’ll be paid for the duration of your time on SSP.

Eligibility criteria

To qualify for SSP you must:

  • Be classed as an ‘employee’ by your ‘employer’ in your contract
  • Have been off work ill for a period of at least four consecutive workdays (excluding weekends)
  • Earn £118 per week minimum

See the full eligibility criteria on gov.uk

How to claim SSP?

To claim SSP, you’ll need to inform your employer. They might have a deadline in place by which time you need to inform them of your illness, in order to be able to collect SSP. This is usually a seven-day period.

If your time off work is relatively short – less than seven days – you won’t need a ‘fit note’, commonly referred to as a sick note or doctor's note, from your GP. A fit note refers to your ability to work consistently.

Have you been refused SSP?

It’s possible that your employer might refuse you SSP. You should discuss your rights with your employer, should you believe you’ve been treated unfairly. And don’t be afraid to talk to your employer if you think you are entitled to SSP or have been paid less than what you’re owed.

If you need further support, use the HRMC resources on gov.uk.

Tip: Check your employment contract to discover how much your employer will pay you during a period when you’re too unwell to work.

What benefits am I entitled to if I get ill?

Those who are unable to work because of mental health conditions may be able to claim benefits.

Personal Independence Payment (PIP)

PIP is a benefit provided to support those with the extra costs of living with a long-term mental illness or disability.

For an exhaustive list on how PIP works, visit gov.uk.

PIP can be claimed by anyone with a mental health condition who needs day-to-day help, as well as those who have trouble with mobility and require any assistance getting around.

PIP ranges from £23.20 to £148.85 per week, and is available to those who meet the eligibility criteria aged over-16, but have not yet reached the State Pension age.

The payment you’ll receive depends on the severity of your condition - how your condition limits your ability to work and live independently - rather than your specific condition itself.

Eligibility criteria

To qualify for PIP, you must:

  • Have experienced difficulty with day-to-day living, and/or had problems with mobility for more than three months
  • Believe your situation as it is will continue for at least the next nine months (unless you are terminally ill and have been diagnosed with less than six months to live)
  • Have lived in England, Scotland or Wales for at least two of the last three years

See the complete eligibility criteria on gov.uk.

How to claim PIP

To claim PIP, you’ll need to get in touch with the Department of Work and Pensions (DWP) by telephone call or text. If you are unable to make the call yourself, need assistance or would feel more comfortable with support, a relative or friend you can trust can call on your behalf, but you’ll need to be present when the call is made.

You’ll need the following information:

  1. Your contact details (e.g. address, phone number, email address)
  2. Date of birth
  3. National Insurance Number
  4. Bank details (account number and sort code)
  5. Your health professional’s name & their contact details and address
  6. Dates and addresses for time spent abroad, in hospital or in a care home

Next steps

  1. You’ll be sent a ‘How your disability affects you’ form
  2. Fill in this form using the supporting notes (help in filling in your form)
  3. Return your form to the DWP (the address is pre-filled)
  4. A health professional will assess the level of assistance you require
  5. If you qualify, you’ll be invited to an assessment
  6. After your assessment, you receive a letter determining your PIP status

Have you been refused PIP?

If you have been refused PIP, you can challenge the decision by asking for a mandatory reconsideration.

“We support our service users with discounts they can claim, such as PIP and ESA winter fuel allowance from certain providers. Utility companies will provide discounts for people with a disability. For example, water companies will reduce costs for someone living with OCD and energy companies offer warm-home discounts for some customers.

One of our main pieces of advice is for our service users to always ask for help if they need it. That is to avoid them getting caught in a downward spiral and facing pressures that can come from concerns around finances and the effect that can have on their mental wellbeing.”

Amanda Gabrielsen, Operations and Development Manager - Norfolk Integrated Housing and Community Support Service, Together for Mental Wellbeing

Universal Credit

You may qualify for Universal Credit if you are unable to work because of a mental health condition. Universal Credit is a monthly benefit (bi-monthly for those in Scotland), used to cover general living costs.

You might also be able to claim Universal Credit if you are working on a low income because of your condition, perhaps because you had to reduce your working hours, which had the knock-on effect of reducing your income.

Universal Credit is, as the name suggests, a universal financial benefit, designed to replace a range of wider benefits. Universal Credit replaces:

  • Child Tax Credits
  • Housing Benefits
  • Income Support
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)
  • Working Tax Credits

If you claim any of the benefits listed above, you cannot also claim Universal Credit. Eventually all these benefits will be replaced by Universal Credit. Most new claims for the above benefits have been replaced by Universal Credit as of December 2018.

Eligibility criteria

There are a few criteria you must fulfil to receive Universal Credit:

  • You’re out of work or on a low-income salary
  • You’re over-18 (exceptions can be made for 16-17 year-olds) & under State Pension Age (or your partner is)
  • You and your partner have less than £16,000 in savings

Tip: The number of children you have may have an impact on the amount of Universal Credit you receive.

How to claim Universal Credit

You can apply for Universal Credit online. If you are living as a couple with your partner, you’ll need to apply as a couple (you do not need to have marital status).

On some occasions, you’ll need to book a meeting with a work coach. You’ll be informed if this is the case during your application process.

You’ll need the following information:

  • Your banking details
  • Your email address
  • Some documentation related to your housing (rent payments)
  • Proof of income (payslips)
  • Details of savings and investments
  • Childcare costs if applicable

You’ll also need identification documents when you register online, to verify your identity:

  • Driving license
  • Passport
  • Debit/credit card

Be careful to reference the correct information to ensure you get paid the amount owed to you in a timely fashion.

What to do when mental health impacts your ability to work

If you have recent experience of a mental health condition which is limiting your ability to work, this can be a troubling and stressful time. You may not yet have taken a significant amount of time off work, but if you can see your periods of absence lengthening, there are a number of steps you can take to access support from your employer, mental health charities and the state.

Here are some practical steps:

  1. Discuss your situation with your employer
  2. Seek advice from a mental health professional
  3. Research your eligibility for benefits

Ask your employer to make adjustments to your work-life balance. Explore if your employer offers working-from-home opportunities. Consider adopting flexitime or going part-time.

Discuss your situation with your employer

Employers have a duty of care to you, as their employee. In a nutshell, this means they are obliged, both legally and in a business sense, to look out for your mental and physical wellbeing.

24% of people would feel uncomfortable disclosing poor mental health at work, according to the Mind Workplace Wellbeing Index 2017/18

This duty of care will manifest itself in different ways from employer to employer. However, a duty of care means your employer must take reasonable steps to ensure your safety and wellbeing.

Discuss your situation with your employer to see what kind of help they can offer, whether it’s financial, an adjustment to your work-life balance or access to medical insurance programmes or counselling. The sooner you seek help, the less likely it is that you will need to seek benefits.

Seek advice from a medical professional

Your doctor may be able to diagnose your mental health condition. This can be helpful in a number of ways. It allows you to seek appropriate medication, and steers you towards lifestyle advice, which will guide you onto the right track sooner rather than later. Together, these things can help get you back to work and continue to support yourself financially.

Consider applying for financial support

If you’re off work for a considerable period, you may need assistance managing your finances so you can pay for everyday expenses including rent, bills and groceries.

You may qualify for SSP, PIP and Universal Credit, so check the eligibility criteria above.

Addressing your debt can be an important step to reducing your money worries and improving your mental health condition. Ultimately the goal is to recover over the long term, and a return to work can help aid your recovery as well as lessening your money troubles as your earnings will be boosted.

Getting back into work

When you feel ready to return to work after a long period of ill health, and your doctor confirms that you are ready for a return to the workplace, it can be a stressful period of change in your life.

On the whole, returning to work will be a positive experience for most, with the structure and purpose of work, as well as the social interaction of the workplace, providing a boost to your self-esteem.

However, it’s possible that you may worry over how your colleagues will react upon your return, or you may be concerned that the same set of circumstances which caused you to feel too unwell to work will repeat.

If you are feeling anxious about returning to work, the NHS has some great resources to ease your transition back into the workplace after prolonged periods of stress, anxiety or depression.

Again, remember that these concerns can also be alleviated by discussions with your employer. You might consider agreeing an adjustment to your circumstances on your return to work, for example.

Phased return to work

If it’s impossible to return to the same workplace or you’d rather seek a fresh start, in order to find a more supportive and understanding employer, it’s worth asking about flexible hours so you can explore whether you can find a better work-life balance.

Alternatively, you might wish to only work part-time as you progress through your recovery. Many people who’ve lived with a mental health condition, upon their return to the workplace, find their transition is easier when they are provided with support from a colleague, whether through a buddy system or as a mentor. You might also want to check if there’s a suitable environment where you can take a break, when you need to unwind.

Your rights when applying for a job

You may be worried, when applying for a new job, that you will be discriminated against if you reveal that you have a mental health condition or have had mental health issues in the past.

Be aware that, under the Equality Act 2010, it is illegal to discriminate against anyone with a mental health condition. This means you won’t be asked invasive questions about your mental health when signing an employment contract.

When you start your new job, it is up to you whether you intend to reveal your mental health background and the extent to which you do so. You may wish to reveal your past mental health issues to allow your employer to put mechanisms in place to help you get the support you need to flourish in the workplace.

Checklist for supporting mental health at work

  • Discuss any concerns you may have with your employer
  • Find a friend or colleague you can talk through issues with and get support from
  • Recognise what triggers your mental health issues
  • Put structures in place to stay in a positive mind frame
  • Take regular breaks
  • Set realistic and achievable goals as a benchmark for your success
  • Celebrate your successes

Road to recovery

Mental health struggles can have a massive impact on your finances, both by being the root cause of your financial worries due to reduced earnings from time off work, as well as fuelling the mismanagement of your money and ultimately triggering debt.

An important thing to remember however, is that there is support and guidance available. Statutory Sick Pay, Personal Independence Payments and Universal Credit are all part of the benefits system which can support you as you go through a period of mental ill health.

If you have been too ill to work for a significant period, your overarching aim is of course to return to work so you can support yourself, however it’s important to prioritise your health and get better first.

Useful resources

There’s no shortage of mental health charities which can provide useful information and advice on how to manage your finances when dealing with a mental health condition. If you have spent a significant amount of time away from work, these resources can help you prepare for a healthy financial future.

The information contained in this article was correct at the time of publication. Government driven benefits can regularly change in value and criteria. Keep up to date by checking www.gov.uk

Written by Rhiannon Philps

    Published on 12-11-2019

    Updated on 20-11-2019

I am a financial writer for KnowYourMoney.co.uk. I spend the majority of my time writing and researching financials guides and articles for consumers.

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