When people think of money, it can stir up a lot of emotions or memories of their upbringing. Countless Americans grew up in struggling households where they couldn’t afford certain things or learned unhealthy financial habits. Financial trauma can affect all aspects of everyday life.
If you feel like you’re the only one who’s facing obstacles, you’re not alone. In fact, according to research from Experian, 68% of Americans have experienced financial trauma. Here, I’ll explain these concepts, the mental barriers to saving, the causes of impulsive spending, and how to heal from a generational poverty mindset.
What is Money Trauma and Financial Therapy Exactly?
Money trauma is like a deep emotional wound or a physical response to intense money stress. People who experience it change their perception of money. Often, they feel threatened about their financial well-being when they face losing money or a lack of it. It may be due to experiencing poverty, being unemployed, or going through financial abuse. An individual who carries money trauma may have challenges accumulating wealth, as they may have emotional baggage around managing their money.
Financial therapy is a type of counseling that combines mental health care and financial guidance. It’s designed to help individuals heal from money trauma and change unhealthy money behaviors.
Mental Barriers to Saving
Emotional blocks, mental habits, or cognitive biases may cause people to spend their money immediately rather than save for their future goals. There are several core psychological barriers.
First, it can be challenging for people to save toward a financial goal because the goal isn’t tangible or may not feel real. For instance, you need to pay your credit card bill and buy groceries in the present moment. However, the concept of saving for an emergency or for retirement, which may be decades away, is hard to put into perspective.
Also, some individuals have a scarcity mindset, believing that money will eventually run out. So, if they’re constantly dealing with a tight budget, they may feel mentally exhausted. As such, the brain may prioritize seeking instant gratification, making it difficult to save money. Furthermore, when people receive a bonus or raise at work, they might categorize it as a reward and choose to treat themselves in the moment, rather than thinking of it as earned money that should be set aside.
The Triggers of Impulsive Spending
When an individual impulsively spends money, it’s usually due to their emotional state, social media influences, marketing strategies, and their environment. These factors may interfere with long-term planning in exchange for instant gratification.
Buying on impulse may be a way to soothe one’s emotions. People may feel stressed, sad, or even bored, which could be triggers for mindless spending. It doesn’t help when scrolling through social media posts to see that friends are going on a fancy vacation or sporting new designer clothes. It can make them feel FOMO (Fear of Missing Out) or compel them to buy the same things to keep up with their social network. Others may want to rebel by splurging because they want the freedom to spend however they wish without feeling restrained.
Buyers may perceive that they’re saving money when they come across a discount, BOGO deals, or coupons. These marketing tactics trick the brain into focusing on how much is saved rather than what is being spent. Also, when you go into a store without a shopping list in hand, you could easily get distracted by non-essential items.
Intergenerational Money Trauma
The money beliefs you formed may have come from your grandparents or parents. For example, immigrant parents who experienced economic hardship may pass on extreme saving habits to their children. Or communities affected by systemic oppression may create protective behaviors. Additionally, families that lived through the Great Depression may have a scarcity mindset and exhibit signs of hoarding. You may be able to relate to these narratives or have been exposed to them without even realizing it. As you can see, these experiences and behaviors can be passed down from generation to generation.
Rewiring Your Money Mindset
Your brain’s way of thinking about money has likely been shaped by years of experiences. You will need to rewrite your money mindset to move from a place of scarcity to one of greater confidence and to attract wealth.
You can start by coming up with old money myths or scripts you heard during your childhood or what your parents taught you. You may have been told negative things about money. Write them down and question if it’s really true.
It’s helpful to acknowledge that your current financial situation is different from what you experienced as a child. As an adult, you have more control than you did when you were young. You may need to retrain your thoughts and beliefs to shift from negative statements to positive ones.
For instance, you might be used to saying “I can’t afford to buy this.” Now, you can turn it around and say something like “I’m choosing to spend my money on other financial goals at the moment.” Or, “I can save money every week to work towards buying this item.” These phrases will help you feel like you’re in control of your situation.
Healing From Money Trauma
There are some strategies to help you heal. One way is to practice self-compassion and not make yourself feel bad about your financial decisions. Some people find it helpful to talk to a professional such as a financial therapist. You could also unpack your money narratives from childhood and rewrite new money beliefs. Another way is to find healthier coping mechanisms to help you improve your spending habits.
Lastly, you can empower yourself by becoming financially literate through books, podcasts, or workshops. A popular book you can check out is The Trauma of Money, a helpful resource.
Simple tools always at your disposal are meditation and breathing exercises, which can help calm your mind and body.
FAQ
What’s the root cause of impulsive spending?
Buying on impulse is typically rooted in a combination of emotional triggers, marketing tactics, environmental cues, and social media influences. Some people spend impulsively due to feelings of loneliness, stress, anxiety, and boredom. When shoppers buy a product, their brain typically releases dopamine, which makes them feel good.
How do you overcome compulsive shopping?
You can try to make it harder to make purchases by implementing a 1- to 2-day waiting period and unsubscribing from retail store emails. Remove your credit card information from your online accounts. It’s also helpful to categorize your wish list into wants and needs, so you can prioritize purchases that are most important to you.
How do I heal from my money trauma?
Recovering from financial trauma requires you to uncover past financial scars, change your money mindset, and create positive memories with how you handle money. There’s no one-size-fits-all solution, as individuals have varying levels of money trauma, and some techniques may work better than others. It’s important to take small steps and be consistent. Remember to be patient and give yourself grace as you go through this healing journey.
Our articles provide information purely for educational purposes and do not constitute financial, tax or investment advice. You should always consult with professionals like licensed financial advisors or accountants before making any decisions. We aim to provide up-to-date and accurate information, but we make no guarantees regarding the accuracy or completeness of any content. All our examples are provided for illustrative purposes and may not reflect your personal results. We are not liable for any losses or damages arising from your reliance on the information provided.money t
Sources:
- https://www.mentalhealthacademy.com.au/blog/financial-therapy-understanding-money-trauma-and-financial-anxiety
- https://www.livingopenhearted.com/post/healing-financial-trauma
- https://www.simplypsychology.com/articles/financial-trauma-guide
- https://www.thetraumaofmoney.com/
- https://www.fairway.com/articles/generational-financial-trauma-how-it-holds-you-back-from-your-goals
- https://www.experianplc.com/newsroom/press-releases/2023/new-research-reveals-over-two-thirds-of-adults-have-experienced-
