How Does Debt Feel?

We tend to assume that the people who feel the financial squeeze are the ones who are actually broke. But you don’t need to be in debt to feel like you are. You only need to experience a loss of “slack.”

In systems design, “slack” is the buffer that allows things to absorb unexpected shocks without breaking. In personal finance, having slack means that you can always find enough pocket money for your purchases.

This is when most daily spending is friction-free and automatic. You buy a coffee, simply tap your phone; no worries about where the next latte comes from. The purchase consumes none of your working memory.

When slack evaporates, however, these automatic, harmless habits are instantly transformed into conscious trade-offs. Suddenly, buying a coffee is an active decision: If I spend five dollars here, what am I going to give up later this week?

Behavioral economists Sendhil Mullainathan and Eldar Shafir found that wealthier individuals, unsurprisingly, rarely think in terms of trade-offs for small purchases. They would often struggle to answer what they gave up to buy a five-dollar coffee, because the money came out of an abundant pool of slack. But a person under financial pressure can likely tell you exactly what they gave up: a bus ride home, a brand of cereal, or a few dollars toward the electricity bill.

This explains why an economic squeeze—like the recent cost-of-living crisis in the UK, where over 80 percent of adults reported a sudden rise in their daily expenses—feels so uniquely exhausting. For millions of households, a previously frictionless environment suddenly became a landscape of conscious, daily decisions.

Cognitive scientists have shown that holding competing trade-offs in one’s mind creates an inherently taxing load on working memory. We require “creative space” to come up with original ideas, solve complex problems, or just remain patient with mischievous kids at the dinner table. When every small choice requires decision-making bandwidth, it is with this exact mental space that we pay the price.

Enter the tunnel

To understand what happens to our creative space when slack disappears, it helps to look at how our mind manages our attention. In 1980, cognitive psychologist Michael Posner famously introduced the “spotlight model.” When everything is nice and normal, our attention operates like a floodlight, illuminating a wide, peripheral field of view. We can focus on our immediate work while simultaneously holding space for long-term goals, creative ideas, and future planning.

As financial pressure hits, however, we experience what’s called “cognitive tunneling.” Our brain switches from floodlight mode to a narrow spotlight. Inside the tunnel, we’re only focused on things that are directly related to the immediate crisis. A disproportionate share of our working memory is focused inward, toward solving a single, urgent question: How do I make it through this week?

In this state, our longer-term needs are heavily discounted. To an outside observer sitting comfortably with plenty of slack, taking out a high-interest payday loan looks like a lack of financial literacy. Or, indeed, if we turn down a job interview because we can’t afford to take an unpaid afternoon off work, we’ll get stuck in the lower-paying role forever.

In reality, a debt spiral is often driven by a series of perfectly logical choices. As environmental scientist Donella Meadows famously observed, a response that treats only the symptoms of a crisis often creates the conditions for the next crisis.

Reclaiming the headroom

Dealing with debt requires a holistic approach, because it’s both a day-to-day problem and a cognitive environment we need to manage.

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When people living through an economic squeeze experience mental fatigue or a short temper, they often feel ashamed. But internalizing financial stress as a personal failure introduces a secondary cognitive tax; it wastes the exact working memory required to actually solve the problem. Recognizing that cognitive tunneling is a predictable biological response to scarcity rather than a character flaw is the first step toward conserving our mental bandwidth.

Relying on raw willpower to navigate an economic squeeze is a structural error, because willpower requires the very executive function that’s depleted by financial stress. A more effective approach is to design an environment that makes life easier.

This type of environment is especially important because the outside world is often actively fighting against us. Institutions—from credit card companies to government portals—frequently impose an administrative maze on people in financial distress, demanding immense executive function just to navigate forms, dodge late fees, or wait on hold to negotiate payment plans.

Because the system will not protect our cognitive bandwidth, we have to ruthlessly protect it ourselves. Staying under budget shouldn’t require exhausting mental arithmetic at the supermarket if a weekly grocery list eliminates the need for making decisions in the store. And maybe this is a good time to unsubscribe from all those “final offer” emails too.

Taking a break from breaking

Inside the tunnel, one’s natural instinct is to view leisure and mental peace as rewards reserved for later. But as systems theory shows, a system without slack cannot self-correct. If we wait until we are financially solvent to start protecting our mental space, we guarantee we will stay locked in short-term survival mode.

Carving out pockets of cognitive slack—a disconnected hour, a walk without a device, an evening where we strictly ignore our bank account—is not a reward. It is a necessary mechanism to cool the system down by providing just enough breathing room to spot long-term solutions or to recognize when it’s time to ask for professional help.

Ultimately, the true cost of debt is not just measured in cash; it is measured in a loss of attention. Money, in its most valuable form, acts as a buffer that protects our attention from being entirely consumed by survival.