I heard a lot about financial trauma and financial anxiety at FinCon. And I’m thrilled at this public conversation. Financial trauma is defined as “a financial wound or injury that can cause disruptive behaviors with money,” according to Stephanie Genkin, Certified Financial Planner (CFP), Certified Financial Therapist (CFT-1) and founder of My Financial Planner, LLC.
I remember a story my dad told me. It’s one of his earliest money memories (childhood money stories can have major impact!). He had four beloved great aunts. He would visit their home and they doted on him like a grandchild. One of them had a small nest egg that she’d saved after scrimping and pinching pennies. When Social Security Administration discovered this, they cut her widow’s benefits.
This story may have taught him that if you have any money, someone will come along and take it away from you. Even if that’s not what he internalized, I sure did! I had that feeling about money for many years – that there was no point in having any, because somehow it would disappear.
I had an experience as a pre-teen that reinforced that thought. A schoolmate stole a fairly large amount of money from me. When I told the principal, he took no action. Et voila! Now I had proof, so my repeated thought became a belief.
Some examples of financial trauma would include:
- a parent losing a job, plunging a family into precarious financial straits
- growing up with a single mom, suddenly thrust into a lower income household after divorce
- fleeing your home country and becoming a refugee
- foreclosure, bankruptcy, job loss…. the list goes on.
The good news is, financial trauma can lead to positive money behaviors.
We can’t stop anxiety from being a part of our lives. Nor would we want to.
Why is there a picture of my cat here?
Because this cat looks chill most of the time. But when he hears a sudden noise, or someone new comes into the house, it’s a four-alarm fire. All his senses go on high alert.
This ability to feel fear was a gift from his ancestors. Their anxiety kept them alive long enough for them to have babies. Therefore, he wouldn’t exist if it weren’t for their anxiety.
We’re no different. Fear can be a gift.
Financial trauma can force us to take extreme action to fix our finances.
Just like you could lift a car off your child if they were pinned underneath, financial trauma can give us impetus to make changes that will impact future generations.
Of course, when a person is in the middle of a crisis, to talk about learning lessons or looking for silver linings comes from a place of privilege.
… those who grew up in resource-poor environments … are more likely to value immediate rewards over delayed rewards compared to those who are similarly primed and grow up in resource-rich environments.Dopamine Nation (affiliate link)
You’ve heard of the famous marshmallow test? Rich kids ace it. This is why it’s wrong to judge people’s “dumb” money moves as a moral failing. (I’m talking to you, Dave Ramsey.)
The good news is, once you’re out of the danger zone, post-traumatic growth can occur.
Jeff Underwood, a new friend I met at FinCon, put it this way:
“…my financial trauma of 2008 gave me the financial discipline to buck the social norms and take the road less traveled on my path to financial freedom.”
In her podcast episode: How Your Money Anxiety Might Actually Help Build Wealth, Katie Gatti from the Money with Katie Show says:
“…financial fear can be pretty damn useful. It can help us rein in our spending, prioritize saving, and focus on wealth accumulation. But… we also need to know when that fear becomes paralyzing, or makes us live a smaller life…”
Financial trauma in my life
In 2008, got out of debt as a single mom of four. A lot of my hustle came from the financial trauma that occurred just before it. I’d stayed far too long in a bad situation, largely due to fears about caring for my children alone.
Ultimately, the skills I learned in that period serve me to this day.
More recently, I’ve experienced financial anxiety due to a sudden divorce. While I was financially independent when I met my husband, that was no longer the case. My fear around finances was almost paralyzing.
The benefits of financial trauma in my life
18 years ago, financial trauma motivated me to begin building an online business. That business still produces passive residual income for me every month.
Recently, financial trauma moved me to get a part-time job so I could afford medical insurance for myself and my kids. I’m especially thankful for the company match on my 401K.
I began educating myself about financial trauma. Education is an antidote to irrational fear and panic. I can also help others with my newfound knowledge. What are we here for, if not to help other people with our stories?
I launched a new digital product called Making Money Blogging as an additional income stream. (And also, because I love love love teaching women how to make money from home!)
My financial trauma toolkit
Here are a few resources I’m loving lately to help me navigate my thoughts and emotions around money.
The Financial Anxiety Workbook – A Step-by-Step Workbook to Stop Worrying about Money, Take Control of Your Finances, and Live a Happier Life
I’m currently obsessed with this book and its author, Lindsay Bryan-Podvin, a financial therapist. She combines financial literacy with the emotional and psychological side of money.
One thing I’ve learned about anxiety? Avoidance causes the cycle of anxiety to be reinforced. Meaning, when we avoid what we’re anxious about, it gets worse. I love this book because in addition to giving you effective tools to manage anxiety, it has guided journaling prompts for promoting self-discovery.
Mint.com – if you’re feeling anxious, you might be overwhelmed by everyday tasks. I love using Mint to track my spending and organize it into categories. I used to do this by hand in a journal, but automating it is simplifying my life and that’s always good! Mint.com is part of the Intuit family of products (QuickBooks, etc) and totally FREE.
Journaling – this is a free, simple tool that’s accessible to anyone. I find myself doing a ton of journaling lately. I use my Bullet Journal, or a document in Google Drive, since I can access it from anywhere on my phone.
Writing our thoughts down makes them far less intimidating and creates some psychological distance, enabling us to look at them with more skepticism.
Money Honey– A Simple 7-Step Guide for Getting Your Financial $hit Together
Does anyone else love simple? This book by Rachel Richards is written like a fun chat with a cool friend over Starbies. Personal finance does not have to be complicated or even boring. It’s actually fun and all the cool kids are doing it, kwim?
Have you experienced financial trauma? How did it cause you to grow? I’d love to hear more of your story in the comments, or if you prefer, email me at clauth at gmail dot com.