Few people go through life without experiencing a financial traumatic event of some sort, either as a child watching their parents go through it or experiencing it yourself as an adult. Look no further than the pandemic to see countless recent cases.
Such events can lead to undermining money habits that can harm your finances, your relationships, or both.
Growing up in a financially volatile household, especially if your family is barely scraping by, can leave a deep mark and influence how you handle money as an adult, no matter how successful you are financially.
“Every day is an emergency when you are poor. You’re always one bad bill away from losing it all,” Mars Nevada, an ad agency art director, told Delyanne Barros, host of CNN’s “Diversified” podcast. “Having that kind of existential threat [and] being aware of that as a child confuses you in a way that I don’t know if it’s ever happened as an adult.”
Children can internalize stress and anxiety when they see their parents struggling financially, said Ed Coambs, a licensed therapist, financial counselor and author of “The Healthy Love & Money Way: How The Four Attachment Styles Impact Your Financial Well-Being.” .
So how you handle money as an adult may be an emotional response to those stressors, Coambs said. One response might be to become very restrictive in how you spend money and be critical of your partner’s spending. Or the opposite may turn out, she noted. “You may be too carefree with money, thinking it’s better to live today because tomorrow it might be gone.”
Similarly, traumatic childhood experiences that may have nothing directly to do with money, such as feeling unloved by a parent or being sexually abused, can still result in money-related behaviors that harm your financial health and lives. relations, coambs noted.
For example, spending too much to boost your self-esteem can lead to not only unmanageable credit card debt, but also painful criticism from your partner, which can feel like the threat of rejection you felt as a child. And that, in turn, can lead you to become financially secretive.
Financial trauma in adulthood can have a long tail
Sometimes, of course, financial trauma strikes in adulthood, not childhood.
A particularly pernicious example is being financially blindsided by a spouse. For example, learning that your spouse is having an affair can be traumatic. But that trauma is compounded if you also learn that your cheating spouse spent a lot of money on the other person.
“It’s very traumatic and it can overshadow sexual betrayal. It’s a double whammy. It becomes very problematic because [you] I didn’t know that,” said Debra Kaplan, a licensed therapist and author of “The Battle of the Titans: Harnessing the Forces of Sex, Money, and Power in Relationships.”
So, for example, some people may respond by becoming very risk averse with their money. “The shock becomes ‘How do I trust? I can’t trust myself because I believed this person. I don’t know what’s real. So they end up not spending because they don’t trust it,” Kaplan said.
Finding healthier ways to cope
If you suspect you have undermining financial habits that are driven by emotions from a traumatic experience, there are ways to unpack the situation and establish a healthier relationship with money.
Financial therapy is a burgeoning field that typically combines the psychological expertise of a licensed therapist with the skills of a certified financial planner in money management and financial behavior change.
Sometimes you can get both in the same person. But if not, you may want to see a therapist first, recommended Alex Melkumian, a licensed marriage and family therapist and founder of the Center for Financial Psychology in Los Angeles.
“Meet with someone who has a medical background to dig into your money story and find out why you behave the way you do. Then when you process those experiences, you can meet with a CFP to dig into the numbers,” Melkumian said. .
In any case, always check a professional’s credentials and experience before working with them.