Debt Fatigue: What It Is, How It Works, Example

What Is Debt Fatigue?

Debt fatigue occurs when a person becomes overwhelmed by the amount of debt they've accumulated and the seeming futility of ever getting it all paid back. Debt fatigue may result in a debtor giving up on their loan payments and overspending again, making the situation even worse.

Understanding Debt Fatigue

Debt fatigue can happen when a large portion of a person's debt payments go toward interest rather than principal and the total balance they owe barely seems to budge. Whether it's student loans, mortgage payments, or credit card bills, working to pay off debt can feel like a futile exercise.

Experiencing debt fatigue may eventually cause a debtor to declare bankruptcy as a last-ditch effort to resolve the situation and break free from their debts.

Debt fatigue can make a debtor feel stressed, depressed, burned out, and hopeless about ever digging out. Because it can often take years or even decades for debtors to repay their loans, it is easy to hit a wall, especially if a debtor has made significant cutbacks to their lifestyle and spending habits to stay on track.

In some cases, debt fatigue will cause a debtor to simply give up and start to overspend again, adding to their debt burden. Increasing their debt load won't help a debtor's financial situation, of course, and may even drive them to insolvency.

To make debt fatigue less likely to occur, a debtor should aim to stop incurring additional debt and devise a realistic repayment plan that allows the debt to be fully repaid as soon as possible. In some cases, it's helpful to seek advice from a nonprofit credit counseling agency.

Example of Debt Fatigue

Let's say Jamie took out a student loan to pursue her MBA. Subsequently, she applied for another loan to buy an apartment and save on rent payments. In total, her debt commitments came up to $450,000. She makes monthly payments of approximately $1,000 to service her debt with the money she makes from her job after classes.

To maintain her payment schedule, Jamie avoids luxuries, skimps on vacations, and rarely goes out for dinner with her friends. After 10 years of making those payments and living a relatively frugal lifestyle, Jamie starts suffering from debt fatigue. She feels left out of her friends' lives and is tired of thinking twice before she makes even the smallest purchase.

Frustrated with this state of affairs, she eventually snaps and starts spending lavishly, eating out, and taking expensive vacations, all of which goes on her credit cards. Her spending spree results in massive credit card debt, and pretty soon she's even more fatigued.

How to Combat Debt Fatigue

Overcoming debt fatigue requires planning, persistence, and endurance. Anyone who's facing large debts should adopt a strategy for paying them down as soon as possible, such as the debt avalanche and debt snowball methods.

Because debt often feels like it will last forever, a debtor should focus on the reasons they want to be out of debt and their goals for life after debt. It can also be helpful for a debtor to set small goals along the way and treat themselves to a small, inexpensive reward, like dinner out or a movie with friends, whenever they reach a milestone.

Because owing large debts is extremely common, if a debtor has friends and family in a similar debt situation, they might consider banding together to help each other remain accountable.

The Bottom Line

Debt fatigue, like debt itself, can happen to the best of us. But don't despair. Instead, create a plan to put yourself—not your bills—back in control.