Shipshape or sinking ship? Problem debt’s impact on financial and mental wellbeing



Financial and mental wellbeing are central planks that allow us to plan, connect and have control over our lives. Problem debt, low income and some welfare policies can have a harmful effect on people’s financial wellbeing.

This paper uses the Consumer Financial Protection Bureau (CFPB) Financial Well-Being Scale and Warwick-Edinburgh Mental Wellbeing (WEMW) Scales to present the factors that limit the wellbeing of people in financial difficulty, and considers the role debt advice, creditors and government can play in improving the financial and mental wellbeing of the UK population, helping people move on from problem debt for good.

 Key findings

Unsurprisingly, people in problem debt have lower wellbeing scores on average than the UK population.

Some groups typically fare worse than others, with much lower financial and mental wellbeing scores:

  •   Insolvency clients
  •   Those on the lowest incomes
  •   Younger people
  •   Those subject to particular welfare policies 

Debt advice helps people attain financial security in the present and feel able to achieve their goals in the future. However, there are substantial social and economic constraints that stop this happening to a large group of people, including:

  •   Feelings of stress
  •   Lack of meaningful social connections
  •   Lack of meaningful contributions to society


This has implications for the debt advice sector and creditors who have a key opportunity to improve people’s financial health as well as helping them deal with debt. It also demonstrates how all forms of financial and mental wellbeing are compromised by a lack of income and social security, which are essential in underpinning health and setting a course for positive futures.

 Increase awareness and action on wellbeing:

  • The UK’s financial wellbeing should be measured annually by the Money and Pensions Service (MaPS) using an agreed academic index.
  • Problem debt should be named a public health issue.
  • Further research needs to be conducted into the link between financial and mental wellbeing, support networks and debt advice outcomes.
  • Regulation of financial services should utilise measures of financial wellbeing outcomes and behaviours. 

Enable people to maximise their financial and mental wellbeing:

  • Insolvency fees must be removed for people with insufficient surplus income to save.
  • Initiatives should be trialled to improve the wellbeing of insolvency clients during and after debt advice.
  • The planned cut to Universal Credit and Tax Credits should be cancelled and legacy benefits increased by £20 per week.
  • A cost of living review of social security should be conducted.

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