You've probably heard the world "financial trauma" floating around, but you have no idea what the hell it actually means. So let's talk about it.
The first thing to know is that financial trauma isn't an official mental health diagnosis, but it is a life altering experience. Someone with money trauma may or may not have a diagnosis based on the symptoms they experienced. There are a million and one ways to define trauma. While the DSM-5 (aka the bible for psychology) has a very specific definition to diagnose PTSD, money trauma often has a much more broad definition.
Money trauma is any significant, life altering, event that fundamentally changes the way that you think about or interact with money. Money trauma often impacts people in three fundamental ways: 1) it changes their sense of safety or stability, 2) it changes the way they think about themselves as it relates to money, and 3) it makes life feel scary and unpredictable.
Here are some common examples of life events that can cause money trauma:
Chronic homelessness or food insecurity
Acute or chronic illness that causes significant financial strain
Financial infidelity
Financial abuse
Divorce or job loss leading to significantly reduced income and financial strain
Home foreclosure
Bankruptcy
What might financial trauma look like in real life
Imagine a child, let's call her Sophia, who grew up in a stable, two parent home. Both parents brought home enough income and there was always enough money to pay for the bills, and even a little extra to go on a family vacation once a year. Then one year, mom gets really sick, loses her job, and half of the income is gone. No one tells the kiddo what's going on, but suddenly things start to feel very tight. Suddenly, the family vacations and Sunday afternoons at the movies disappear. Some days Sophia goes to bed hungry because they don't have enough food to feed everyone. They have to sell their house and leave the school they've always loved. They jump around from apartment to apartment, sometimes sleeping in their car for a few days between places.
This might seem like an extreme example, but it happens all the time. Even if a year later mom gets another job and everything goes back to normal, Sophia won't ever forget that period of time. Because it's not about how long it lasted, it's about the idea that security can disappear in an instant. And you can't always prevent financial trauma. Sometimes it's the result of poor money management. But oftentimes financial trauma can come from an unexpected catastrophic illness, accident, and even divorce. Financial trauma can make the world feel unstable, and it can destroy your sense of confidence.
Symptoms of financial trauma
Many people with financial trauma don't understand their reaction to money is a trauma response. Sure money feels stressful, but doesn't it feel like that to everyone? It can be hard to identify that their relationship to money is unhealthy. Often times, it seems like the money itself is the problem.
If you find yourself caught in the following cycles, you might be having symptoms connected with financial trauma:
Craving a sense of security that you can never achieve
Feeling like you're bad with money or lacking confidence
Avoiding opening or paying bills, looking at bank statements, or coming up with financial plans
Experiencing feelings of shame or guilt when making big purchases that you can afford
Intense preoccupation with making "enough" money
Working several jobs or overtime constantly, even when you make enough to cover your financial goals
Difficulty saying "no" when other people make financial asks / Always saying "no" when people make financial asks, even if you can do it
Impulsive spending or overspending
Physical symptoms (stomachaches, headaches, indigestion) when thinking about or engaging with money
Difficulty letting go of objects, even if they have minimal or no value
Letting others in your household take control of the finances
The list goes on and on. If you're experiencing these symptoms, it might seem like the easy solution is to make more money. But for folks with financial trauma, you could make millions of dollars and still feel that it isn't "safe" enough. These symptoms aren't a result of the money in your bank account, they're a symptom of the emotional trauma that you experienced.
The good news is that there are many effective trauma therapies that can help you address your feelings of anxiety, stress, and unease when it comes to money. Please check out Psychology Today or The Financial Therapy Association to find a financial therapist who can help you heal your relationship with money.
The best time to start is now.
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