If, until now, you thought that getting your finances in order was a purely mathematical exercise, you’re going to be surprised. It’s time to put the spreadsheet away and start tallying up your feelings instead.
Money trauma is a term that describes negative money-related behaviors or feelings that persist after experiencing financial stress. In addition to lingering feelings of anxiety and depression, trauma can also influence your behavior – often to the point of self-sabotaging your financial future. But money trauma can be healed if you learn to recognize it, identify its source, and do the work to change your thoughts, feelings, and behaviors.
This trauma can be caused by a situation of financial scarcity or financial abuse, such as a partner not allowing you to have a bank account or credit cards in your name. If you’ve ever been through an extreme financial event, like losing your home or declaring bankruptcy, those scars can last a lifetime. Even short-lived financial trauma, like layoff, can create anxiety that will resurface long after the circumstances have resolved.
Even if you have not personally experienced a catastrophic financial event, you may still exhibit symptoms of financial trauma. Culturally, we live in an economic system that plays on wealth and power, fueling our anxieties for fear of missing out. No wonder so many of us have a sometimes strained relationship with money.
Financial educator Chantel Chapman has created a course called The Trauma of Money that explores the causes and solutions to personal and cultural financial trauma. Here are some of the ways Ms. Chapman says it can manifest in your life:
- Financial avoidance: You avoid and ignore everything that has to do with money. For example, you may pay your bills late or not at all; you might not even open the returns. You don’t know how much debt you have or who you owe money to, and you don’t know how much you’ve saved or if you’re on track for retirement.
- Palisade: You accumulate large sums of money for fear of never having enough. You might have an excessively high savings rate and be stingy with your money. You never pay the bill when you go out to dinner with friends or family and complain about the cost of almost everything. You give up most worthwhile experiences because they cost money, and you consider yourself frugal when you really are cheap.
- Overspending: You spend everything you earn and more, going into debt. Even if you know you can’t afford something, you find ways to buy it using credit cards, lines of credit and loans. You don’t have a plan to settle this debt – you’re just hoping someone will send you a new credit card offer in the mail so you can keep pretending.
- Unreasonable risk taking: Looking to “make it big” on a single financial transaction in order to gamble recklessly or permanently sign up for pyramid schemes. Your ventures never pan out and often leave you in worse financial shape than before, which only makes you more desperate to find the next big thing.
- Extreme risk aversion: You have a lot of anxiety about the stock market, so you keep your money in low-risk, low-return investments like savings accounts and guaranteed investment certificates. While you won’t risk losing money, you won’t generate the returns you need to retire comfortably and provide financial security for your family either.
- Financial infidelity: If you’re hiding purchases, bills, debts, or investments from your partner, that’s a huge red flag. If you’re not being honest about your household finances, it’s either out of shame or deception, which isn’t a good sign.
It takes a dedicated and concerted effort to recognize which of our financial anxieties are justified and which we cling to out of comfort and familiarity. If you’re really struggling to make ends meet, it makes sense to worry about money. But if your bills are paid and you are able to save, excessive financial anxiety will only lead to more negative thoughts and feelings, as well as self-destructive behavior.
Sometimes just recognizing that you are acting irrationally because of money trauma is enough to curb the behavior, but more intense and persistent money trauma may require help from a professional. therapist to fix it. Whatever the case, make the effort to resolve it. If you don’t let go of your money traumas, you’ll never be able to use your money for what it’s really used for: enjoying your life.
Bridget Casey, MBA (Finance) is the founder of Money After Graduation, an online financial learning company. You can follow her on Instagram at @bridgiecasey and Twitter at @BridgieCasey.