What is Financial Trauma?
We talk a lot about trauma here at Copper Well. Trauma is a major focus of my clinical practice, so is personal finances. For a lot of people, addressing the financial distress involves addressing trauma too. A lot of the time, this means treating financial trauma. When we are in a financial stressful situation - especially a prolonged one - financial trauma is likely to ensue.
What is financial trauma?
Many, many people have experienced adverse events in their lives that have led to trauma diagnoses such as PTSD. However, many of us discount the traumas we have experienced because they don’t fit into what we of as “a trauma event.” A trauma is any moment when things substantially changed for the person. Their outlook on themselves, the world, or their relationships takes a negative turn. Sometimes we can’t even immediately identify what these moments are. Trauma doesn't always present itself through nightmares and flashbacks either. Avoidance, indecision, and shame can be symptoms of trauma as well.
Financial Trauma can be extremely painful and complex because it often is not a singular event, but a string of events or a prolonged state of scarcity. Financially traumatized people are also constantly facing retraumatization and triggers because money is something we interact with daily.
When a trauma is related to money, finances, or the economy, we call it financial trauma. This type of trauma can have a profound impact on our ability to make and manage money, as well as how we feel about money. Some research estimates that 1 in 4 Americans has experienced financial trauma. This issue disproportionately impacts younger generations. 1 in 3 millennials are estimated to have PTSD like symptoms after a financially stressful event. This research was conducted before the COVID-19 pandemic! I can only imagine how many people have experienced a financial trauma since then. I am very curious to see how this impacts our Gen Zs and Gen Alphas as well.
What causes Financial Trauma?
That negative turn in our money relationship can be linked to many, many events. Some of the more commonly seen events are:
Poverty, especially in childhood, especially when prolonged
Scarcity of necessities such as food and clothing
Bankruptcy
Financial abuse
Job or income loss
Large or unexpected medical bills
Not being able to provide for loved ones
Receiving money (or other expensive items) with manipulation, guilt, or harmful expectations attached
Economic events (recessions, wars, pandemics, resource scarcity)
The causes of financial trauma are vastly varied, and the events that cause trauma for one person may not be traumatizing at all to another. This is all due to our genetic makeup, buffers, other resilience factors, and the individual’s relative experience of what happened. I haven’t seen much research yet, but I am confident the COVID-19 pandemic along with other recent national and international events have been traumatic in some way to nearly everyone. It is a tough and unpredictable world we’re living in. Continue to follow along with the blog to learn ways to bolster your resilience.
How do I know if I am experiencing financial trauma?
You’d have to seek out a mental health professional to really know if what you’re going through currently is related to a past trauma. However, I can give you some clues and signs to look out for.
Avoidance - not opening bills, not checking bank accounts, not applying to new jobs when needed
Overspending - getting into the habit of spending whatever resources you have because you don’t know when they will be taken away
Underspending - hoarding resources or excessive concern around saving money
Sleep problems
Anxiety or discomfort during transactions
Indecisiveness - another form of avoidance. Putting off large and small financial decisions
Shame
These are just a few ways that trauma can show up in our lives. These and other responses to trauma are not good for our money relationships. Remember, trauma impacts how we see ourselves, the world, and our relationships and not in a good way. Money is so intimately attached to all three of these things. We might lose faith in ourselves and our competence in managing money. We may see the world as a less friendly and safe place. We may lose faith in our ability to prosper in this world. And the big one - our money relationship. If money suddenly left you before or caused you some kind of pain; it might be harder to trust that it will be there for you in the future. Our money relationship might have to be healed and cultivated.
How can I start to heal from this trauma?
Of course, we want to heal and repair our relationship with our money and ourselves. When my clients do start to heal, they are often shocked by the abundance they start to notice.
Separate yourself from your money
Like any relationship, we can become codependent in our money relationship. Try to avoid thinking of your financial situation as being a reflection of your worth. Your worth does not change just because your bank balance does.
Stop Avoiding
If you feel emotionally capable, try to stop avoiding dealing with your money issue. Open your bills as soon as you receive them, and pay them if you can. Check your bank balance and accept where you are today. Avoiding these issues doesn’t make them go away. Confronting them can help you gain clarity and a more concrete idea of how to move forward. That being said, try to set yourself up for success and do these financial tasks when you are not already on the edge of a breakdown.
Schedule a Money Date
You have to spend time with your money in order to have that healthy relationship you want. Schedule a time when you (and your partner if you have one) and sit down and gaze deep into the eyes of your finances. Spend this time reviewing your financial goals and your progress towards them. Wine and dine yourself in the process. Make this date more pleasant by setting the mood with things you enjoy. This could include uplifting or relaxing music, a favorite meal or dessert, etc. Again, choose a time you feel confident you won't be stressed from the get go.
Rename and Reframe your Shame
All that shame you have over the debts you have incurred or investment that didn’t pan out? Change how you label them and think of them. For example, instead of labeling an expense in your budget “Credit Card Debt,” label it “Life Changing Experience I Had In Paris.” While you are working to improve your finances, remember what these expenses add to your life or what you learned from them.
Seek a Professional
During a money date, spend some time contemplating or researching professionals that might be helpful on your healing journey. This could include a financial planner, manager, coach, therapist, etc.
I would encourage anyone who suspects they are dealing with trauma to seek a trained trauma therapist who can assess and treat. In my practice, The added benefit of seeking mental health care from someone who provides financial therapy is they can also guide you in cultivating a better money relationship.
Post Traumatic Growth
On your journey through healing from trauma, I hope you recognize the ways this experience made you stronger, more resilient, more creative, and more successful. When we heal from trauma, we are able to put what happened into perspective and realize the survival skills we acquired. Never forget that the challenges you have experienced in your life don’t have to hold you back. You deserve healing and post traumatic growth.