Financial Trauma: Three Strategies Business Owners can use to Overcome it

Have you ever wondered if you need to heal your financial trauma?

Take a look at these manifestations of financial trauma that might need healing and see if they seem familiar.

  • Are you always worried about money, even when you have “enough”?
  • Are you tracking all your spending down to the penny?
  • Are you afraid to spend on anything, or always choosing the cheapest options even when you have enough money?

Maybe you’ve had one or more of these thoughts:

  • “I’m bad with money.”
  • “Money creates trouble.”
  • “I don’t deserve money.”

These are some of the many ways you might notice that you need financial trauma healing.

What is financial trauma?

Galen Buckwalter is a former PTSD researcher who studied the physical, emotional and psychological effects of financial stress on Americans. While conducting this research, he saw that the experiences people were reporting in the financial study were so similar to those who had PTSD that he coined the term financial PTSD.

Buckwalter defines financial PTSD as “the physical, emotional, and cognitive deficits people experience when they cannot cope with either abrupt financial loss or the chronic stress of having inadequate financial resources.” Financial trauma is defined by Forbes magazine as “expenses outweighing income for an extended period of time.”

But the event itself is not what traumatizes people, it’s the support or lack thereof available to those who’ve been through them.

In the financial realm, you can experience so-called big-t traumas: business or personal bankruptcy, divorce, sudden loss of a job, loss of everything through another traumatic incident like house fire or earthquake, war, displacement.

But also, you might need financial trauma healing because of the impact of ongoing chronic stress around money, such as when you are struggling with debt, living in poverty, or bootstrapping a business.

Financial discrimination on the basis of age, body size or ability, race, gender or gender presentation, religion, culture, sexual identity and attractiveness can occur on an ongoing basis and can lead to trauma responses, and a need for financial trauma healing.

Financial PTSD is quite common.

Many people live in poverty. Here are the statistics:

  • 2.4 million Canadians (2022, Statistics Canada)
  • 37.9 million US Americans (2022, US Census Bureau)
  • 3.3 million Australians (2022, Mission Australia)
  • 14.4 million people in the UK (2022, UK Dept. for Work and Pensions)

It goes without saying that living in poverty is traumatizing, and can lead to a need for financial trauma healing, but if you’re doubtful about that, it’s recognized as one of the ACES  (adverse childhood experiences) that lead to many adverse health outcomes.

Job loss is a direct threat to survival, and is also quite common. I couldn’t find yearly statistics like those I mention above, but just for one example, in Toronto in one month in 2023, 23,500 jobs were lost.  That works out to 282,000 people who lost their jobs in Toronto in one year alone. Imagine how many people that would be in a whole country!

A study conducted in 2016 found that 23% of US Americans reported some form of financial trauma.

We can assume that since COVID, that percentage has increased.

2024 data from Experian holds that more than 68% of adults have experienced financial trauma.

Financial trauma, or financial PTSD, does not appear in the DSM (a guide to the diagnosis of mental disorders) but it does describe the traumas that people experience in relation to money that might need financial trauma healing.

Chantel Chapman coined the term “trauma of money.” She uses it because it reflects the reality that any trauma that you or your ancestral lineage have experienced can impact your relationship with money and finances—whether the trauma was specifically around money or not.

Many kinds of trauma, including addiction, mental illness, chronic physical illness, or the death of a parent, can have financial aspects or can affect a person’s financial beliefs and behaviours, and could benefit from financial trauma healing.

How financial and money trauma can affect you

The DSM outlines 5 symptom clusters that characterize PTSD: avoidance, re-experiencing, negative cognitions and mood, and hyperarousal. These categories can be helpful in understanding how you may be affected by financial trauma or money trauma.

Financial avoidance can look like avoiding anything money-related that brings up intense emotions.

  • You won’t check your bank balances, or maybe you won’t even have a bank account.
  • You hand all your money over to your spouse and they handle all the household finances.
  • You avoid opening a bill that comes in the mail or by email.
  • You’ll avoid keeping track of what you have or what you speed.
  • You’ll avoid conversations about money.
  • You might even decline a social invitation because it involves money.

Re-experiencing in the context of financial or money trauma is no different than it is in the case of other traumas.

  • You relive the money-related traumatic event. That can include experiencing the related physical phenomena, such as a racing heart or sweating.
  • You have memories, dreams or even nightmares related to the event that recur and intrude upon you, unwanted, and disturb you.
  • You experience repeated distressing thoughts about the situation or about money in general.
  • The physical signs of stress may begin to show, including digestive upsets, headaches, fatigue and muscle aches,

Negative and mood cognitions in the context of money include negative beliefs about yourself and money. Some examples include,

  • “I’m bad with money.”
  • “Money creates trouble.”
  • “I don’t deserve money.”
  • “Money is bad/evil.”
  • “I’m bad for wanting money.”
  • “Spending money is bad.”

Negative mood includes depression, hopelessness, helplessness, anxiety, irritability, fear, to name only a few.

Hyperarousal in the context of financial trauma, can mean experiences like,

  • constant worry (even when you have enough money in the bank)
  • loss of sleep because of worries or tension
  • jumping when the phone rings (because it could be collections), or
  • your heart racing when you see an email from the utility company.

It could also be tracking all your spending down to the penny, or being afraid to spend on anything, or always choosing the cheapest options even when you have enough money.

Financial trauma healing

Trauma recovery is trauma recovery, whether financial or otherwise.

As outlined by Judith Herman, in her book Trauma and Recovery (affiliate link), there are three phases to trauma recovery:

  1. safety and stabilization,
  2. remembrance and mourning, and
  3. reconnection and integration.

For financial trauma healing, you might think that safety and stabilization is about addressing your financial situation.

But before you can do that, or as you do it, you will need ways to create safety for yourself emotionally, and for your nervous system. This is why having a guide or companion can be helpful in the process of financial trauma healing.

Shame can be of the major emotions associated with money trauma. It’s an indicator that financial trauma healing might be beneficial for you.

It’s no surprise that you would feel shame around money and finances. The entire economic system in which we live is designed around scarcity, making it register to our nervous systems as a threat. The shame response is one of the ways we respond to threats. Many, many Canadians feel shame around money. 

The antidote to shame, and an important step on the path to financial trauma healing, is empathy. If you find it hard to offer empathy to the parts of you that are feeling shame, it can help to confide in a trusted other who can give you the empathic response that’s needed.

Once you have the capacity to attend to yourself and your emotions–especially shame–either by developing the skills or assembling a team of supportive others, then you can begin the next phase of financial trauma healing: mourning the losses or difficulties you experienced either during or as a result of the money traumas you have experienced.

Herman says, “Trauma resolves only when the survivor develops a new mental ‘schema’ for understanding what has happened.”

Putting words to the feelings associated with the memories or the past events is important.

You may also take a compassionate look at what happened, and at the consequences it had on your life, so you can come to a new way of understanding what happened that is rooted in this moment, and in your healing process.

In this way, you build or internalize new, helpful beliefs about yourself and money.

Next is the reconnection and integration phase. This comes after some work on letting go of your old ways of thinking about and being with yourself and money.

In the reconnection or integration phase of healing financial trauma, you take what you’ve learned into the world. You start making new money memories by taking new actions in your world of money and finances.

You can also integrate the new, compassionate way of accompanying yourself when you encounter difficulties with money.

 The role of fault tolerance in financial trauma healing

Developing fault tolerance is an important aspect of healing financial or money traumas.

Fault tolerance is an engineering term for the quality of a system that is designed to be able to withstand the failure of any component without shutting down.

Similarly, the compassionate witnessing and accompaniment you have developed during the first two phases of your financial trauma healing journey are what will enable you to encounter difficulty without emotional collapse or overwhelm—or when emotional collapse or overwhelm arises, you have tools to care for them.

We live in a capitalist economy and an exploitative world that makes finances and money difficult for us on purpose. You are most likely going to continue to have difficult moments with money as a result.

In the Trauma of Money method, we ask the question, “Whose shame is this?” We can extend that principle to help us become aware of the source of many of our difficulties. “Where is this difficulty coming from?” We are not to blame as individuals. We are likely having to navigate systems that make things difficult for us. It can be helpful to keep this in mind as you continue on your journey of healing your money and financial traumas.

If you are looking for support to understand your money challenges and recover from your financial trauma, you can learn more about working with me here.

About the author 

Shulamit Berlevtov  -  Shulamit (she/her) is the Entrepreneurs' Therapist. She is working passionately to mitigate the entrepreneurial mental health crisis through keynote speaking and educational workshops and by supporting women entrepreneurs 1:1 to prevent burnout and preserve their peace of mind as they ride the emotional rollercoaster of running a business.

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