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Pay off debts, or make your mind clearer

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A new study by the National University of Singapore shows that debt repayment not only enables you to move towards financial freedom as soon as possible, but also helps to reduce the mental burden of low-income people and make people's minds clearer so as to make better decisions.


Researchers at the Centre for Social Services Research of the National University of Singapore recruited 196 low-income people from a project to apply for debt relief. These people have received debt relief of up to 5,000 Singapore dollars (about 25,000 yuan), which can be used to repay mortgages, pay electricity, gas and municipal debts. This amount of money is roughly equivalent to the family income of the subjects for three months. Although the amount of debt relief received by the subjects is the same, the level of debt is not the same. Researchers used surveys and cognitive function tests to understand the anxiety level and cognitive abilities including decision-making ability of the subjects before and after debt repayment.


Researchers found that debt servicing helped reduce the mental burden of subjects, who reported generalized anxiety symptoms from 78% before debt servicing to 53% after debt servicing. Cognitive function test results showed that the average error rate was 17% before debt repayment and 4% after debt repayment. This shows that mental burden affects the subjects to make better decisions.


The study was published in the latest issue of the Journal of the National Academy of Sciences. "Our research shows that because debt affects people's mental function and decision-making, it can be a huge challenge for even the most active and talented people to get out of poverty," the researchers said.


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