Financial trauma
Financial trauma

10 Signs You Live With Financial Trauma and How to Resolve It

15th September 2023

Are you in debt, living paycheck to paycheck? Does money keep you up at night, or find its way into all your conversations? You may be experiencing financial trauma.

"Financial trauma" refers to the emotional and psychological scars that can result from negative experiences with money in the past.

These experiences can range from growing up in a financially unstable household to facing unexpected expenses or financial setbacks as an adult.

We understand that trauma sounds like a big deal, but it is. According to an article in Forbes, financial trauma is when you experience a “dysfunctional reaction to chronic financial stress” over an extended period of time. If your expenses outweigh your income month-on-month, this could be the reality for you.

If you are experiencing financial trauma, it can manifest in several ways, including anxiety and avoidance when it comes to money matters.

Here are 10 signs that you may be living with financial trauma and how to resolve it:

1. You Have A Hard Time Making Financial Decisions

If you struggle to make financial decisions, whether big or small, it could be a sign that you are living with financial stress. This could be due to a lack of financial education or a fear of making the wrong choice and facing negative consequences.

Tips To Resolve

Seek out financial education resources, such as books, classes, or a financial advisor, to increase your knowledge and confidence in making financial decisions.

It can also be helpful to set small financial goals for yourself and celebrate your progress as you work towards them.

2. You Have Difficulty Sticking To A Budget

If you find it hard to stick to a budget, it could be a sign that you are avoiding facing your financial situation head-on. This avoidance can be a coping mechanism for those who have experienced financial trauma.

Tips To Resolve

Start by making a realistic budget that takes into account your income and expenses. Then, track your spending to better understand where your money is going as this can impact financial trauma. By becoming more aware of your spending habits, you can better understand the underlying causes of your financial struggles and take steps to address them.

Consider seeking the help of a financial therapist or coach to work through any underlying emotional issues that may be causing you to struggle with budgeting.

3. You Have A Tendency To Overspend

Overspending can be a way of coping with negative emotions, trying to fill a void or even be a symptom of various behavioural disorders. Overspending could also be a sign of financial trauma if you find yourself constantly overspending.

The outcome can lead to emotional, cognitive, and physical symptoms that may hinder one's ability to function effectively, such as a more extreme version of buyer's remorse. Overspenders often have a tendency to beat themselves up after a purchase, linking their self-worth to their spending behaviours.

Tips To Resolve

Try to identify the root cause of your overspending. Are you using shopping as a way to cope with stress or discomfort? If so, consider finding alternative coping mechanisms, such as talking to a friend or therapist.

It can also be helpful to set limits for yourself when you are facing financial challenges, such as only allowing yourself to make a certain number of impulse purchases per month. Another method is to set a 24-hour cooling-off period for all purchases, often you only want things at the moment. In a day, you may change your mind.

4. You Have A Hard Time Asking For Help With Money

Asking for help with money can be difficult, especially if you have experienced intergenerational financial trauma. You may feel ashamed or embarrassed to admit that you need assistance or fear being judged or rejected, particularly with family. This can negatively affect your mental health.

Tips To Resolve

It's important to remember that asking for help is a sign of strength, not weakness. Many resources are available to help with financial matters, such as financial advisors, community organizations, or government programs. Feel free to reach out and ask for assistance if you need it.

Mental health issues, such as trauma and financial struggle, often go unaddressed due to the stigma and shame associated with seeking help. As a result, many individuals struggle in silence.

For free independent financial advice, speak to Citizens Advice.

5. You Have A Fear Of Taking On Debt

If you have a fear of taking on debt, it could be because you have witnessed the negative consequences of debt firsthand, or because you have struggled with debt in the past.

This fear can prevent you from pursuing opportunities or making necessary purchases, such as a home or education.

Tips To Resolve

It's important to remember that not all debt is bad debt. Some types of debt, such as student loans or a mortgage, can help you make long-term investments in your future.

It's important to understand the terms of any debt you take on and to only borrow what you can afford to pay back.

6. You Have A Hard Time Saving Money

If you struggle to save money, it could be a sign that you are living with financial trauma that has affected your mental health. You may be fearful of saving money because you don't want to face the reality of your financial situation, or because you fear running out of money and not being able to access your savings quickly.

Chronic financial stress can lead to dysfunctional reactions, which are surprisingly similar to those experienced by individuals with post-traumatic stress disorder (PTSD).

Tips To Resolve

One way to start saving is to set small financial goals for yourself, such as saving a certain amount each month.

Automating your savings can also be helpful, as it can make it easier to build your savings without having to think about it.

Consider setting up a savings account specifically for emergencies to have a safety net in case of unexpected expenses. This can help you avoid chronic stress.

7. You Have A Hard Time Talking About Money

If you find it difficult to talk about money, whether it's with your partner, friends, or financial advisor, it could be a sign of financial trauma.

You may feel ashamed or embarrassed about your financial situation, or you may be fearful of being judged or misunderstood.

According to Stephanie Genkin, a Certified Financial Planner (CFP) and Certified Financial Therapist (CFT-1), financial trauma refers to a financial injury that can result in detrimental behaviours related to money.

Tips To Resolve

It's important to remember that talking about money is a normal and necessary part of life for financial health. Consider seeking the help of a financial therapist or coach to work through any underlying emotional issues that may be causing you to struggle with discussing money.

It can also be helpful to find a trusted friend or family member to talk about money with, or to join a support group where you can discuss financial matters with others in a non-judgmental setting.

8. You Have A Hard Time Saying No To Financial Requests

If you find it hard to say no to financial requests, whether it's from friends, family, or charities, it could be a sign that you are trying to avoid confrontation or that you fear being seen as selfish.

This can lead to financial overcommitting, which can harm your financial well-being due to inadequate financial resources.

This can also extend to social commitments. If you go out for an expensive dinner every time someone asks, it might not be long before you can no longer afford it.

Tips To Resolve

It's important to set boundaries for yourself when it comes to your finances. Remember that it's okay to say no to financial requests if it means protecting your own financial stability.

Consider setting limits for yourself, such as only saying yes to a certain number of financial requests per month.

9. You Have A Hard Time Receiving Financial Gifts Or Assistance

If you have a hard time receiving financial gifts or assistance, it could be because you feel undeserving or because you fear being seen as a burden.

This can prevent you from taking advantage of opportunities or accepting help when you really need it.

Tips To Resolve

It's important to remember that accepting financial gifts or assistance is not a sign of weakness. It's okay to ask for and accept help when you need it, whether it's from friends, family, or a financial advisor.

Try to reframe your thinking and recognize that accepting help is a way of taking care of yourself and your financial well-being.

10. You Have A Hard Time Managing Multiple Debts

It can be overwhelming and stressful if you struggle to manage multiple debts. This can be especially true if you have numerous small debts all over the place.

Tips To Resolve

One way to manage multiple debts is to consider a debt consolidation loan. A debt consolidation loan enables you to pay off multiple debts with one new loan. If you are considering a debt consolidation loan, it's important to do your research and choose a reputable lender. You should also check the APR and term of your existing debts and compare those to the APR and term of the consolidation loan. Taking a loan over a longer term may reduce your monthly repayments but will mean that you pay more back over the term of loan.

If you are experiencing financial trauma, it's important to seek out support and resources to help you manage your emotions and improve your financial situation. Remember that it's okay to ask for help and that you are not alone in your journey towards financial stability.

If you are living with financial trauma, make sure you seek out the right support and resources to help you improve your financial situation.

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