We Need to Talk About Financial Trauma

Talking about and handling money is one of the most complicated aspects of being an adult. And for many of us, the conversation can get uncomfortable fast. Whether that’s parsing through finances with your partner or negotiating salary at work, the issue can be a source of anxiety and discomfort. And while it’s normal to be a bit reluctant when it comes to cash talk, sometimes your negative feelings toward money come from past financial trauma. A condition you may not even be aware of.

So, what is financial trauma?

“Financial trauma is a financial wound or injury that can cause disruptive behaviors with money,” explains Stephanie Genkin, Certified Financial Planner (CFP), Certified Financial Therapist (CFT-1) and founder of My Financial Planner, LLC. “We tend to think of trauma as something extreme, but it’s not limited to dramatic events.” That means even the smallest incident can forever affect how you deal with money. In the same way that emotional or physical trauma elicits strong responses when survivors are put in certain environments and situations, so too, does financial trauma.

What are some causes of financial trauma?

Again, financial trauma doesn’t have to be a major event that happened in your life. In fact, Genkin stresses the fact that it can happen to anyone across the socioeconomic spectrum. However, often, it is a result of dire circumstances.

“Financial trauma can be caused by chronic stress of having inadequate financial resources resulting in poverty, homelessness or food insecurity,” Genkin tells us. “It can be caused by an abrupt financial loss like a home foreclosure, bankruptcy, a contentious divorce settlement or a large financial loss in the stock market.”

Financial trauma can also be passed on from generation to generation, where you end up mimicking your parents’ negative relationship with money. If for example, your parents had to flee their home country due to war or insurrection, the legacy of the stress that comes with having to penny pinch while starting over and rebuilding can affect how you end up dealing with money, even if you weren’t around when all that occurred.

“Financial trauma generally occurs in childhood and can cause lingering psychological symptoms in adulthood, such anxiety, depression, stress, fear and anger,” explains Genkin.

What are some signs/symptoms of financial trauma?

“Financial trauma is pervasive and largely unaddressed,” says Genkin. “It impacts a person’s relationship with money making it difficult for an individual with unresolved financial trauma to manage money. If untreated and ignored, it can become debilitating.” Below are five signs of financial trauma:

1. Overspending/Compulsive shopping. Sometimes memories of growing up with no money can leave you feeling less than, insecure, vulnerable and even angry, so people tend to overcompensate. Constantly splurging and turning to retail therapy with money you may not have can be a sign of financial trauma.

2. Underspending. Conversely, not wanting to spend at all can also be another symptom of financial trauma. Individuals who were affected by chronic poverty or an abrupt dip in finances may be supremely frugal because they feel as though their security can be taken away at any moment.

3. Workaholism. Again, if you grew up under extreme financial strain and you saw your parents struggle to make ends meet, it’s easy to throw yourself into work and never relent because you’re scared of reverting to those circumstances.

4. Hoarding. In a way, hoarding is a form of blanketing yourself in things, so you don’t feel vulnerable. People with financial trauma may find themselves catastrophizing and having a hard time letting some things go for fear of they may need those items one day. If someone was once homeless, for example, they may have a hard time throwing out or giving away things such as blankets, sweaters or shoes.

5. Underearning. Sometimes your relationship with money can be so strained that you fail to advocate for yourself in the workplace. You may wind up taking less pay simply because you feel asking for more may risk your job. You may also find yourself stuck at one job for fear of failure at something new.

How can you cope with/resolve financial trauma?

Though dealing with financial trauma can be incapacitating, the good news is that anyone can recover from it, assures Genkin. Coping methods include:

1. Getting help. It cannot be said enough, but seeking help is the best way to get to the root of any type of trauma. “Talking to a professional to explore your personal experience [can be helpful]. Financial therapists, for example, are trained to help an individual, couple or family work through financial trauma,” states Genkin. “A financial therapist can help you understand the feelings driving harmful behaviors and guide you into enjoying a healthier relationship with money.”

2. Take stock of your emotions surrounding money. “Examining your triggers to help reduce harmful behaviors with money is crucial. For instance, taking note of when you shop and why may present clues to compulsive shopping or overspending. Knowing workarounds or things to avoid when triggered can also reduce relapses.”

It’s also important to remember that certain methods such as meditation and journaling that help us with our emotional and mental health can also be useful in healing financial trauma. “Regulating your nervous system through mindfulness meditation and breathing exercises can help ground you before opening a credit card statement, checking your credit score or addressing money with a partner,” advises Genkin.

3. Seek a financial planner. While a financial therapist may help you deal with your emotional relationship with money, financial planners can help you with some actionable ways to handle your finances. “Some financial planners even integrate understanding inner feelings about money with external action to improve finances,” Genkin explains.

The bottom line: Financial trauma can happen to any of us. The key is being able to recognize it’s happening and be proactive about having a better relationship with money.