How to Overcome Financial Trauma

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How to Overcome Financial Trauma

If you have negative feelings around money, or you just don’t know what to do with it, there’s a chance that you might have experienced financial trauma in the past.

If you have negative feelings around money, or you just don’t know what to do with it, there’s a chance that you might have experienced financial trauma in the past.

That doesn’t mean you can’t recover or heal from financial trauma and learn to lead a successful money life—but it might be harder to get your money goals in order.

That’s okay. This guide is going to help break down what financial trauma is and then how to overcome it.

It’ll take some time and energy on your part to live a money-happy life, but it’s worth it.

What Is Financial Trauma?

Financial Trauma TherapistAccording to Lindsay Bryan-Podvin, a financial therapist, financial trauma is trauma that has to do with money. Trauma is anything that makes a person’s life feel threatened. So financial trauma is when your life or well-being feels threatened in a financial way.

Trauma-inducing financial situations can include:

  • Not being allowed to get a mortgage because of discrimination
  • Inability to negotiate consistently so you feel like a failure
  • Growing up in poverty
  • Financial abuse and neglect
  • Filing for bankruptcy

Different things affect different people in various ways, so it’s important not to judge the traumatizing experience and say, “well, it wasn’t that bad,” because trauma is trauma, no matter how small.

Athena Valentine Lent, trauma-certified financial expert and author of the upcoming book Budgeting for Dummies, notes, “A lot of financial trauma is also subconscious, so you don’t necessarily notice it.” This means that you might not recognize your fight or flight response when it happens; you just feel uncomfortable when financial situations arise later in life.

What Are the Signs of Financial Trauma?

Noticing the signs of financial trauma can help you start your road to recovery. Both Bryan-Podvin and Lent had excellent advice for signs to look for.

Bryan-Podvin said there are three things that you need to look for. Just like traditional trauma, financial trauma has a way of showing up. Classic trauma symptoms layered on with money. It could be things that triggered you. Something that’s supposed to be fun, and you’re celebrating, they want to go somewhere, but you can’t afford it, so you struggle. You might have negative memories around money.

  1. Triggering – things that make you feel intensely negative in a variety of way
  2. Avoidance – avoiding things that might make you feel a certain way
  3. Hyper-vigilance – frequently checking bank accounts

Financial Triggered TraumaAccording to Lent, these signs of financial trauma manifest through overspending because you fear the money won’t be there tomorrow. Or stress about spending money and hoarding items because you’re scared. Or hiding from your finances and avoiding discussion of anything money-related.

Who Can Suffer From Financial Trauma?

Basically, anyone can suffer from financial trauma if the situation presents itself. Even those people who are well off. Bryan-Podvin clarifies that financial trauma could occur to even people well off with their money if disaster strikes.

For instance, healthcare debt is the leading cause of bankruptcy in America. And you can’t confirm that you’re always in exceptional health. Even if you’re perfect with your money, something like cancer or autoimmune disease could put you in a world of debt. And that’s not your fault. At all.

But you could still experience trauma from it.

Lent also connects mental illness and financial trauma. If you have an underlying diagnosis like bipolar disorder, you might have financial trauma from your inability to control your spending when you’re manic or depressed. She discloses, “I, myself, have bipolar disorder and have put myself in financial situations I later regretted.”

Experiencing Financial Trauma as a Minority

Minority Financial TraumaMinorities are more prone to financial trauma than other parts of the population because people of color and the LGBTQ populations both live in poverty disproportionately to the rest of America.

I spoke to Rahkim Sabree, financial coach and author of the book Financially Irresponsible, who grew up living in poverty with financial trauma.  He helped his mom manage their household when his parents split during high school. Because of this, he told me that he aspired to be poor. His family was on food stamps and in section 8 housing, and he thought that’s just what people did.

He’s a perfect example of what generational poverty could look like. But, he didn’t end up aspiring to be poor. Instead, he met someone who bought a house. And his mind was blown. “You can own a house?” And he made that his goal. So he did. When he was 26, he purchased his first property.

And that was his way of breaking through generational money trauma.

How to Find Help to Deal with Financial Trauma

Financial Trauma Recovery CoachingBryan-Podvin admits that the wait for therapy is huge, and not every therapist is equipped to handle financial trauma since it isn’t in their schooling. But that doesn’t mean that therapy isn’t a good place to start. Lent states that addressing trauma outside of your financial struggles can help you shift your mindset around your financial trauma in general.

She also recommends reaching out to credit unions in your area. Credit unions are great places to find good resources. They can help you with Section 8 housing and get your money squared away.

Lent also recommends psychotherapy, as it allows you to swap out your negative coping mechanisms for positive coping mechanisms. And as a survivor of financial trauma, she also believes in the power of positive self-talk. She says, “Another coping mechanism I personally use is to take a break when I become overwhelmed and admit that I now have control. I get overwhelmed easily, close my eyes, and tell myself I’m okay. I also try to remind myself that while something poorly happened to me in the past, sometimes it’s a situation I won’t have to worry about again.”

Sabree recommends his 3E approach to financial trauma onset by poverty or generational trauma:

  • Exposure

You need to expose yourself to new ways of thinking. He wouldn’t have been able to buy his house without realizing that people, regular people, could buy houses. That led him down a journey of self-discovery and realizing he could actually be good with money.

If you’re in a place of financial trauma caused by poverty, expanding your horizons is a great way to get out of your comfort zone.

  • Education

Education is a huge piece of the puzzle. Once you’ve realized that you can change, you need to learn how to change. This is where finding a therapist or financial coach is going to be essential to you learning different coping mechanisms. You want to position yourself to embrace that new reality.

  • Execution

This is the hardest step, in my opinion – because you actually have to put the two pieces of the puzzle together and change your behavior. The trauma will feel less empowered if you learn that you have control. That’s why Lent’s mantra is so meaningful.

But you also need to recognize that it’s hard to change patterns because you have to create a new way of thinking in your brain.

Roadblocks to Recovering From Financial Trauma

All of this sounds easy on paper, but it’s exceptionally difficult.

For example, I grew up going to the grocery store at 10 p.m. at night on a Wednesday with a list of coupons in my hand because that’s when the deals switched over for the week. We could only buy something if it was at least 50% off, and we had a budget of something like $500 a month. A lot until you realized we fed eight people.

And I grew up thinking that anything for dinner above $10 was expensive. When we did go out to eat, it was usually fast food, and we were only allowed to order from the dollar menu.

We wore hand-me-downs gifted to us by neighbors and strangers. The church we attended gifted us leftovers from potlucks and choir festivals. Anytime clothes and food were involved, someone thought of the Chace’s.

Money trauma is no laughing matter.

And today, some of my biggest roadblocks come from either overspending when I get money because I’m afraid I’ll never see it again. Or hoarding the money because I’m afraid I’ll never see it again. Sometimes I’m torn between both, end up spending a bunch of money, and then returning everything to the store days later out of guilt and regret.

I’m not alone. Both Lent and Sabree mentioned their struggles with proper money management that had nothing to do with the knowledge they have about financial decisions. We’re all book smart about money. And we all struggle when it comes to implementing these types of behaviors. Lent and I more than Sabree, because we have bipolar disorder.

Money trauma cannot be fixed by education alone. You have to address the trauma itself.

Now, I have both a therapist and a financial coach. We work through my trauma responses, and they offer accountability for my binging and purging behaviors.

I often repeat to myself that it’s not my fault, but it is my responsibility. I didn’t choose my home life, but I need to be a functioning member of society; my current behavior patterns aren’t serving me. So I’m working to change them.

All this to say, even very smart people who write about money can have money trauma – but that doesn’t make us morally bad. It just means we all need a little help sometimes.

You mentioned financial coaches, what are those?

Another great resource for dealing with some of your behaviors that come with financial trauma is to hire a money coach. Money coaches are different than financial therapists because they help you practice with your money instead of dealing with the root of your traumas.

They won’t be able to address the money trauma specifically, but they can help you change some of your behaviors and money scripts (things you believe about your money) to affect positive change.

Markia Brown is a certified money coach who believes that trauma therapy and money coaching should go hand and hand. Ideally, she says, you find your trauma therapist at the same time as you find your money coach and the three of you create a plan to help you get your money back on track.

Finding a Money Coach

Money CoachYou want to find someone that you can trust implicitly to give your whole money truth to. When I was looking for a money coach, I went with a friend of mine in the personal finance community who I knew had my back.

If you’re not sure how to do that, it’s okay. Reaching out to your local credit union is a good place to start. Or you can look for someone who has a money cert attached to their name.

There are so many different certs – it depends on what you need. You’ll want to look at your needs because your needs determine the level of work your money needs. Some people need a Certified Financial Planner to be guided the best way they need to be. Some people might not need that level of care and a CFEI, which is Brown’s cert, might just do the trick.

Watch Out for Money Coach Red Flags

If you’re not sure what you’re looking for, it can be easy to find someone who’s shady. We want you to avoid doing that. Instead, start by looking to ensure they have money certs attached to their name. This means they’ve been through some kind of training and ensure a quality of care.

Next, check out their website. Do they have a private policy in place? Do they have guidelines about their program? Check out reviews on them from outside sources. You want to see that people use and trust them.

After that, head to social media. Social media is a great tool for determining someone’s authenticity. Brown recommends interacting with the coach online and seeing their response. Are they being evasive or just pitching a program? If that’s the case, then they might not have the resources you need to get through your monet trauma. But on the other hand, if they’re full of helpful free information, you know that you’re going to get worlds of more education by working with them.

A huge red flag, according to Brown, is to have someone not answer your questions. Communication is key to having a good relationship with your money coach, and if you’re not the reason for the communication breakdown, that money coach isn’t for you.

How to Work Well With a Money Coach

Brown emphasizes the importance of open communication with her clients. She wants to know all of their dirty details upfront. Not because she wants to shame them or make them feel bad, but because she wants to put together a specialized plan to help you come to terms with your money and have a better relationship with it.

Working with your money coach is going to help change your patterns around money. They help you implement strategies for saving, proper spending, and investing that will help motivate you to do better.

You can even find a money coach that specializes in limiting beliefs to help you change your money scripts.

Depending on what you need, there’s a money coach available for you.

Bottom Line—What Do I Do With Money Trauma?

Money trauma isn’t going to go away if you ignore it. It’s just going to fester and manifest in worse and worse ways.

  1. Get into therapy, find a group course on trauma, or find some other way to address the trauma.
  2. Go to your credit union or bank to find resources about money management skills.
  3. It’s going to take time to unlearn the trauma behaviors that you have. Surround yourself with people who are supportive.
  4. Never stop growing and trying to be a better person.

Trauma can define you if you let it. You can choose to waste away in your trauma, or you can choose to attack it head on. And the second choice, let me tell you, it’s tough. The road isn’t easy. I know I can write this entire article and make it sound like it’s no big deal, but speaking from personal experience, addressing money trauma is a huge deal.

You’re not alone in your money trauma. You’re not alone in your experiences. It’s okay to need help and to reach out.

You can find a financial therapist by going to https://financialtherapyassociation.org/find-a-financial-therapist/

Best of luck to you all.

Financial Trauma FAQs

What is financial trauma?

Defining trauma, and then layering in money stuff. Remember and think that trauma is anything that makes a person’s life feel threatened. That is trauma. Car accident. Microaggressions. Financial trauma impacts different people. Having anything come at you is scary to feel really uncertain about your financial well-being. Not allowed to get a mortgage via discrimination. Or it could be the inability to negotiate consistently. Growing up in poverty. Financial abuse and neglect.

Who can suffer from financial trauma?

Any kind of financial trauma to happen to anyone.

Healthcare debt is the leading cause of bankruptcy.

If a good friend stole your money – that’s also financial trauma.

What are the signs of financial trauma?

Just like traditional trauma, financial trauma has a way of showing up. Classic trauma symptoms layered on with money. It could be things that triggered you. Something that’s supposed to be fun, and you’re celebrating, they want to go somewhere, but you can’t afford it, so you struggle. You might have negative memories around money.

  1. Triggering – things that make you feel intensely negative in a variety of way
  2. Avoidance – avoiding things that might make you feel a certain way
  3. Hyper-vigilance – frequently checking bank accounts, following through on

How can it affect minority populations differently?

In terms of actual symptoms, probably not. But in terms of frequency, probably yes. People who have been traditionally excluded are more likely to experience trauma. (point to the article on minority populations). They experience it more.

How can you find help for financial trauma?

A therapist is good. And the wait for therapy is long and difficult. We can approach financial trauma, sometimes just having access to different things can make a big difference. Every single county in the US will have nonprofits they partner with that can help with credit card debt, financial counseling, and getting them on a waitlist for Section 8 housing. 411.org, or call 411. Getting the resources is huge. Credit unions are also great resources. Having connections with people who have gone through something similar can be helpful.

“Validation goes a long way with healing financial trauma” – Lindsay Bryan-Podvin

What’s the difference between a financial coach and a money therapist?

A financial coach is somebody who just talks about the actions. A financial therapist breaks down the mindset about your behaviors.

Where does a financial coach come into the picture with financial trauma?

Normally or hopefully after you’ve seen a therapist, dissected and healing from that trauma, and now you’re ready to affect some sort of change.

Someone would have a coach throughout the process. No work would happen until the healing is done. What we want to do is to maintain the baseline. It’s our job to take your feelings and turn them into actions. If you feel like you’re an emotional spender, once you’ve healed from that, we create a budget to ensure you’re staying on the right track.

It’s less about healing and more about growth.

Tips for Addressing Financial Trauma With Money Coaching

First, you have to find somebody you can be transparent with. If you can’t be transparent, it’s not going to work out. You need to have that level of comfort so that you’re not hiding things from them. Depending on your situation, you may aim to be your own money coach, while also getting help from peers and professionals.

Ideally, you can connect with someone who’s willing to be part of your therapy. You should be able to work with your coach during therapy to do the therapy homework. This allows you to ensure that your homework is done before you return to your financial therapist.

Be as honest as possible. Overshare, if that’s a thing. You need someone to know your entire predicament upfront. You can minimize the level of surprise you can go through for your coach.

Get financially naked. Let it all out. I would rather you overshare than not tell me enough.

Talk about bankruptcy, talk about your credit situation, talk honestly about savings patterns.

Any other tips, tricks, or advice?

Always ask for recommendations from your therapist. They may already have people in mind.

Start at your home bank or credit union. They may have someone or recs for companies they partner with. Banks and credit unions offer. They are typically Certified Financial Providers.

Or a simple online search. Read reviews. See if you can get a free consultation to feel them out. If they have references.

When it comes to money, there’s no stupid question. You want to check for red flags.

If you found someone on social media and they’re not answering questions or being evasive. A lot of time they’re saying things because they’re buzzwords and not because they know what you’re talking about.

Review their website. Read their customer reviews and become familiar with their terms and conditions as well as their privacy policy. Prevent unwanted results by ensuring it is a legitimate business with a proven track record.

If you’re talking to them and having conversations with them. If they’re acting like they don’t know what you’re talking about, if you’re not the problem in that communication mishap, then that’s not the person for you.

There are so many different certs – it depends on what they need. Your needs determine the level of work they need. Some people need a Certified Financial Planner to be guided the best way they need to be. Some people might not need that level of care.

A book that I read that I really feel that was the best for me that helped me identify my traumas: Financially Irresponsible.

What coping mechanisms can you use when you’re triggered by financial trauma?

Same coping mechanisms. Education helps, but in the moment, one of the first things you can do get grounded. 5-4-3-2-1. Get you out of that overwhelmed state.

Everyone is different for what senses. Do the opposite of what you’re experiencing. If you’re taking short shallow breaths, do the opposite. If you’re feeling hot, dunk yourself in ice. Once you’re feeling better, you can take action toward addressing the trauma.

Rahkim Sabree – Financial Coach and Author of Financially Irresponsible

Financial trauma is a newer topic. What I realized is that people are touting financial literacy for disenfranchised communities. There are too many generalizations.

My experience growing up: my parents were teenagers when I was born. My parents separated during mid-teens, and I became aware of the household finances because I would help my mom out. I knew we had Section 8 and food stamps. I would budget a monthly allowance.

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Because of those experiences, I aspired to be poor. Without having that conversation, I was going to get an apartment, apply for Section 8, apply for foodstamps. I observed my mom doing these things. And I aspired only to that level of financial achievement.

On the other side, getting out of that environment:

  • Exposure
  • Education
  • Execution

I got out of the environment I was in, I started interacting with people who owned property and I was like wow I could do that.

The education was learning how to buy the house. Positioning yourself for embracing that new reality.

The last piece is where you have to come face to face with those traumas and negative money stories you might have.

For me, that looked like a series of what if questions, if I were to purchase a property, what if I ran into a major repair needed? Who is going to be able to bail me about? This almost stopped me in my tracks. The stall for that was community. The experts, friends, Rahkim is valid, but what if it doesn’t happen.

Today I am 6 years a homeowner. I had to replace my roof 2 summers ago. I replaced my water heated last summer. I had a good 5-6 years without having to address those things.

Because I was able to buy my house, and serve as an example, through the work that I do. I am directly responsible for the purchase of at least 4 other homes. That representation piece also matters. He was able to do it at 26 on one income. Why can’t I do it?

Within my own practice, I use the 3Es for their mindset.

How do we help you see that this is possible? Whether that’s from the perspective of debt, income, how do you get educated to position yourself, and then what are the steps that you need to do to hold yourself accountable?

Moriah Chace
Moriah Chace
Moriah Chace is an award-winning, queer Gen Z author known for promoting financial literacy. Moriah's financial articles have appeared in The Motley Fool, Buzfeed, Bankrate & Bigger Pockets, Moriah is a leading voice in helping people take control of their finances. As a lover of all things DIY, she spends her free time fixing up cars from the 90s and vintage RVs.

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