Financial Trauma: Symptoms, Causes, & How to Cope

What Is Financial Trauma?

Financial trauma refers to the distress associated with chronic money-related stress, lack of resources, or financial abuse. These difficulties can overwhelm the ability to cope with stress, thus leaving many stuck in a state of heightened anxiety, fear, or anger. While financial trauma is not a clinical diagnosis, untreated symptoms can develop into post-traumatic stress disorder (PTSD).

Symptoms of Financial Trauma

The symptoms of money trauma parallel the symptoms of PTSD. Persistent negative thoughts about finances make concentration difficult, while constant anxiety can lead to insomnia or nightmares. These effects disrupt personal and work life and cause significant distress. According to research, 23% of adults and 36% of millennials experience financial stress at levels that qualify for a PTSD diagnosis.¹

Common symptoms of financial trauma include:

• Hypervigilance: Hypervigilance can manifest as constantly feeling on edge when discussing finances or making money-related decisions.²
• Avoidance behaviors: Avoidance behaviors may include avoiding opening bills, checking bank accounts, or declining a social invitation to limit spending.
• Heightened startle response: Someone experiencing financial trauma may be easily startled by specific triggers. For example, the phone ringing could indicate a debt collector calling, thus causing distress.
• Sleep disturbances: Financial trauma can result in difficulty falling asleep, staying asleep, or insomnia.
• Self-destructive behavior: Self-destructive behavior may include overspending or quitting a job out of frustration.
• Money anxiety: Money anxiety is excessive worry, nervousness, and fear about finances.
• Appetite disturbances: A person may experience a lack of appetite or overeat in response to money anxiety.
• Somatic complaints: Financial trauma can trigger physical symptoms of anxiety, such as muscle tension, tightness in the jaw, gastrointestinal problems, headaches, or migraines.
• Rumination: Rumination refers to excessive second-guessing about past financial-related decisions, choices, or actions.
• Obsessive-compulsive behaviors: A person may obsess about finances (balances or upcoming bills) and engage in checking behaviors to ease this anxiety (financial accounts, financial news, stocks, etc.).³
• Analysis paralysis: Someone with financial trauma may feel frozen when making even simple financial decisions (such as grocery purchases).

What Causes Financial Trauma?

Financial traumas can occur following large-scale events, such as a global pandemic or economic recession, or personal challenges, like unemployment or healthcare costs. Racism, marginalization, internalized belief systems, and sexism can also increase the risk of development.

Possible causes of financial trauma include:

History of Poverty

The impact of poverty on mental health is paramount and can trigger anxiety, depression, substance use disorders, eating disorders, and trauma. Growing up with limited resources can significantly impact how someone views money. Witnessing a loved one struggle with finances can also result in trauma.

Additionally, some research suggests family trauma may have a genetic component, meaning individuals can inherit the “emotional DNA” of family members. These traits can encompass feelings toward money and finances, thus increasing the likelihood of descendants experiencing similar financial traumas.⁴

Increasing Debt

Substantial debt can lead to money anxiety about student loans, car payments, mortgages, business loans, and credit cards. Having a partner or spouse with significant money stressors can also trigger financial trauma, as individuals may feel responsible for helping fix the situation.

Financial Losses

Various financial losses can trigger a trauma response. For example, unemployment can leave individuals incapable of managing and meeting their basic needs. In turn, they may feel anxious and fearful about the future. In other cases, losing a business, child support, or benefits can limit the ability to live comfortably and securely, sometimes resulting in symptoms associated with trauma.

Financial Discrimination

Financial discrimination can stem from racial, cultural, religious, and other societal biases. BIPOC communities, LGBTQIA+ individuals, women, older adults, and members of non-dominant cultural or religious groups experience marginalization that impairs their ability to obtain work and opportunities for upward mobility.

Lack of Resources

A lack of resources can contribute to financial trauma. For instance, food is a basic necessity. Not having enough to survive can be terrifying, especially for parents who must provide for their children. Furthermore, a lack of access to money, health insurance, or government assistance can trigger financial trauma as individuals struggle to cope with the uncertainty of the future.

Signs of Financial Trauma

Financial trauma can manifest differently depending on the person, severity of money strain, and available support. However, this condition often impacts spending habits, work ethic, and overall mentality. Some struggling with money trauma may be overly tight with budgets, while others spend frivolously. People may also become workaholics as a way to combat financial issues and associated anxiety.

Possible signs of financial trauma include:

Financial Dependency

Financial dependency occurs when someone relies on another person to meet their financial needs. Examples include children and their parents, elderly individuals and caregivers, and stay-at-home partners. These populations may also be more susceptible to financial abuse.

Compulsive Spending

People with financial trauma may engage in compulsive shopping or overspending, which may even lead to a shopping addiction. Sometimes, this pattern can be a form of avoidance behavior, as individuals seek to shun anxiety temporarily by ignoring the problem.

Underspending

Financial disorders are similar to eating disorders in that people seek a sense of control. For instance, individuals may become miserly or extremely frugal to calm their money anxiety. These restrictive behaviors can be harmful, especially if someone skimps on essentials like nutritious food or healthcare.

Workaholism

Workaholism is often a response to financial trauma, as individuals may work excessively to avoid future financial difficulties or setbacks. This behavior can lead to burnout, which has serious mental and physical health complications.

Financial Avoidance

Financial avoidance may look like refusing to talk about finances, denial about debt, or refusing to open bills. Those with financial trauma may engage in these behaviors because dealing with money triggers feelings of fear, overwhelm, and worry.

Lack of Financial Boundaries

Experiencing financial trauma or financial abuse in a marriage can impact the ability to set financial limits and boundaries. Someone may not recognize or understand healthy financial habits or behaviors, meaning they may allow others to take advantage of their money illiteracy.

Scarcity Mindset

A scarcity mindset is rooted in the idea that we must be fearful and competitive to ensure we have enough resources (food, jobs, money) to survive. This behavior is a normal response to money trauma but can cause harm to the individual and loved ones. Scarcity thinking can also lead people to keep and hoard objects they perceive as scarce, as seen in hoarding disorder.

Excessive Risk Aversion

When somebody has been financially traumatized, they may be overly cautious about taking necessary financial risks. They may not seek student loans to better their education, obtain a business loan to grow their company, or even put money in the bank due to feelings of mistrust. All of this can impair financial health and be costly over time.

Impacts of Financial Trauma

Financial trauma can be incredibly distressing for those experiencing symptoms and their loved ones. Constant anxiety about money can cause significant relationship problems between partners, especially when gambling or substance use contributes to further financial strain. Chronic or toxic stress can also keep the body stuck in fight-or-flight mode, resulting in high blood pressure, headaches, stomach upset, and other physical pains.

Possible impacts of financial trauma include:

• Family dysfunction: Money trauma can increase the likelihood of family dysfunction, interpersonal conflict, and divorce because of frequent arguments over finances or tension between family members.
• Substance misuse: A person may use substances to cope with financial trauma. Untreated and chronic misuse can eventually turn into a substance use disorder or addiction.
• Gambling: Those struggling with financial trauma may view gambling as a potential “quick fix” out of desperation. Like substance use, frequent engagement can contribute to a gambling addiction.
• Mental health conditions: Money trauma can lead to ongoing mental health conditions, including low self-esteem, generalized anxiety disorder, panic disorder, depression, and suicidal thoughts.^{5, 6, 7, 8}
• Physical health conditions: Long-term stress releases hormones that can wear down the mind and body, causing diabetes, heart disease, high blood pressure, and other health concerns.⁹
• Work impairment: Studies show money trauma can cause cognitive and health symptoms that impair the ability to function well at work, reducing productivity and increasing the likelihood of errors or accidents.¹⁰

12 Tips for Coping With Financial Trauma

Various strategies can help you cope with the effects of financial trauma and learn to overcome associated challenges. Healing and self-improvement are often challenging, so be gentle with yourself as you figure out which methods work best for you.

Below are 12 tips for coping with financial trauma:

1. Embrace your worth: You are not your job title, bank account, or debt. You are a beautiful spirit with unique gifts and talents to offer the world. Connect with your deepest and highest self through mindfulness practices such as meditation, deep breathing, and yoga to separate from ego (your mind’s understanding of who you are).
2. Seek support: Talking about your financial challenges with friends, family, or professional therapists can lead to better problem-solving and more assistance, resources, and opportunities.
3. Seek a financial advisor: Seek out a financial advisor, financial planner, debt consolidation counselor, or other type of financial consultant. Even if you are financially literate, the advice of an expert can be invaluable.
4. Manage stress: Stress management is crucial, so maintain proper sleep, hydration, exercise, nutrition, and self-care.
5. Decrease shame: Due to the shame and stigma associated with trauma and financial struggles, many people suffer in silence. Know you are not alone, and help is available.
6. Identify your triggers: Knowing what people, places, or things might trigger your money trauma can help you anticipate the minefield and plan your coping strategies.
7. Practice self-compassion: Honor your financial traumas and how they may have impacted you emotionally, spiritually, and financially. Stop self-blame and harsh self-judgment. View past challenges as opportunities for learning, growth, and increased resilience.
8. Apply mindfulness to your financial life: Stop second-guessing the past or worrying about the future. Avoid “future tripping” or writing fiction about the unknown future. You can be responsive rather than reactive in financial actions.
9. Shift from a scarcity mindset to abundant thinking: Shifting from a scarcity mindset to an abundance mindset opens doors to possibilities, collaborations, celebrating the successes of others, and greater prosperity.
10. Practice healthy detachment: Practice healthy detachment strategies to combat financial fears so you can forge ahead with clarity and persistence.
11. Rewrite your money story: Narrative therapy suggests we are the authors of our life stories. Appreciate the power of self-fulfilling prophecy and restructure catastrophic thinking to positive and affirming messages that you can and will succeed financially.
12. Set healthy financial boundaries in your relationships: Use assertive communication to set financial limits with your friends, partner, kids, and anyone with whom you have a financial relationship.

When to Seek Professional Help

Therapy or counseling is a routine and preventative form of healthcare, like going to the dentist. You wouldn’t wait until you need a root canal to see the dentist, so schedule a mental wellness check-up to nip financial trauma symptoms in the bud.

Therapy has many benefits, including alleviating symptoms, increasing financial empowerment, and cultivating a plan for future success. To find the right therapist, ask your doctor, friends, or family for a referral or utilize an online therapist directory. Ensure you feel comfortable with your therapist before agreeing to a treatment plan.

Professional support options for financial trauma may include:

• Cognitive behavioral therapy (CBT): CBT assists clients in restructuring negative beliefs about money. In turn, they can feel innately deserving of financial peace, financial freedom, and an abundant life.
• Eye movement desensitization and reprocessing (EMDR): EMDR for PTSD can help individuals process trauma-related memories through bilateral stimulation.
• Family therapy: Therapy with one or more family members can be helpful if financial issues impact your family system.
• Financial advising: Meet with a planner to assess your financial health and develop short and long-term goals. These professionals will promote your financial literacy and educate you on various options for debt management, budgeting, saving, and investing.
• Consumer Financial Protection Bureau: This government agency gives you access to tools and resources that can help improve your financial literacy and make informed empowered financial decisions.
• Financial Counseling Association of America: This member-supported association can connect you to financial counseling, debt counseling, and other financial services.
• Twelve-step support: Free twelve-step groups, such as Debtors Anonymous, Spenders Anonymous, Underearners Anonymous, or Gamblers Anonymous, can help address money issues and anxiety.