Financial trauma can be a factor affecting business owners, leading to fear of business debt. For business owners, financial challenges are an inevitable part of the journey. However, for many, the weight of financial trauma can amplify the fear and anxiety associated with business debt.
Understanding the impact of financial trauma is crucial aspect of navigating these challenges effectively. In this post, I’ll detail the impact of financial trauma on business owners and why it can make the fear of business debt even scarier.
Mental health impact of debt can lead to financial trauma
Much of the mental health impact of debt is related to the moralizing that goes on around debt, and the pressures to pay it off.
Before COVID-19, 56% of Americans said that their debt was negatively impacting their life. The addition of a pandemic and added financial stress has likely increased that number.
The pressure of having debt, and feeling bad about it, creates money shame and stress. Chronic stress that goes on for years has a deeply powerful effect on your mind and body. Just like an engine revving too hot for too long, eventually something has to give.
Long-term financial insecurity and pressure from lenders and debt collectors to pay bills can lead to thoughts of hopelessness and helplessness. Debt can lead to anxiety and depression, which can increase headaches, affect sleeping patterns and impact a person’s ability to focus, Depression can also lead to difficulties working, and challenges keeping a job.
The stresses related to debt can lead to an adverse change in behavioral symptoms such as changes in appetite, procrastination and nervous behaviors. (For more information about mental health and debt, see How Debt Can Harm Your Health.)
In perhaps the cruelest turn, the mental health problems caused by debt and financial insecurity lead to difficulties dealing with money, leading debts and bills to increase even more.
And of course people—perhaps you’re one of them–feel deep shame about your debt or money.
It’s no wonder you feel all kinds of emotions. Many of us experience psychological trauma responses as a result of money stressors and debt.
The psychological toll of business debt and financial trauma for business owners
Financial trauma refers to the deep emotional distress and lasting psychological effects that individuals experience as a result of significant financial setbacks.
Whether it’s debt, bankruptcy, foreclosure, or a downturn in business, the impact of financial trauma can be profound.
Business owners who have experienced financial trauma may carry the weight of past failures and setbacks. These experiences can evoke heightened anxiety, fear, and avoidance of financial risk.
Business debt anxiety can be amplified by your past
For business owners who have experienced financial trauma, the prospect of taking on debt can evoke intense feelings of fear and apprehension.
Debt is often a necessary tool for growth and expansion. But debt, or our thoughts and memories about it, can feel like a threat.
The fear of repeating past mistakes or facing another financial crisis can paralyze business owners, making it difficult to make sound financial decisions and take calculated risks.
Factors contributing to heightened debt anxiety in business
Several factors contribute to the heightened anxiety surrounding debt for business owners who have experienced financial trauma.
Fear of Failure
Past financial trauma can instill a fear of failure. These fears can lead business owners to see debt as a potential catalyst for another downward spiral.
Loss of Control
Financial trauma can erode feelings of control and confidence, leaving business owners feeling vulnerable and powerless in the face of debt.
Negative Self-Image
Business owners may internalize feelings of shame, guilt, and inadequacy stemming from past financial setbacks, leading to a negative self-image that amplifies debt anxiety.
Avoidance Behaviors
In an effort to avoid the pain of past financial trauma, business owners may resort to avoidance behaviors, such as delaying necessary investments or expansion plans. This avoidance can hinder business growth and success.
Overcoming business debt anxiety and building financial resilience
While the impacts of financial trauma on debt anxiety are significant, there are steps that business owners can take to mitigate these effects and build financial resilience.
Working with a financial therapist (like me), you can grieve and heal the emotional impact of past financial stresses and challenges, and make meaning from them.
You can learn how not to take past or future mistakes or failures personally.
When you can be kind to yourself in difficulty—financial or otherwise—you can weather difficulties, especially related to debt and better.
Shifting the mindset from one of fear and avoidance to one of opportunity and growth is part of what you will do when you work with a financial therapist.
This can help you re-frame your relationship to debt, viewing it as a strategic tool for achieving business objectives.
Working with a financial professional such as a CPA or CFP to develop a clear and actionable plan for managing debt (such as cash flow management and debt repayment strategies) can provide a sense of control and confidence in navigating financial challenges. Even better when the professional you choose is trauma-informed. (Check out the list of Trauma of Money alumni here to see if there is a professional here that can help.)
My story with scary business debt
In my money healing journey, I had to unlink ideas about debt as a consumer and debt as a business owner.
A big piece of that was understanding that debt in business is leverage and what matters as a priority is how the debt impacts cash flow.
The biggest effect this misunderstanding had on me was to stunt my business growth.
As a consumer with past challenges with scarcity and debt, I had fears about taking on business debt. The financial traumas I had experienced when living in poverty as a single mother, and while in an abusive relationship, and the shame I had experienced, made debt scary to me.
In the end, my unhealthy relationship to debt was a factor that led to the closure of my group practice—although I can only see that in retrospect.
Instead of exploring how debt could be the lever that would propel the business to the next level, I tried to do it all myself.
I was afraid of asking for money, unsure how to navigate business financing. I was deeply afraid of the shame that would arise if, for any reason, my business didn’t do well and I couldn’t meet financial obligations. Those fears prevented me from finding the money I needed to bring my business to the next level.
Instead, I tried to do it all – running the business, managing the team and providing therapy to trauma survivors. Inevitably, the stress of carrying this weight meant that I behaved in ways that harmed my relationships with the associates in my business.
Ultimately, I let go of the group practice business. That was the right choice for me at that time given what I knew and was experiencing then.
But today, I see how my fear of debt, and my shame-based belief that debt was to be avoided at all costs prevented me from even considering what often is a very important lever for business growth. I feel sad about that to this day.
These days, I’m looking at adding a tiny home to our farm property. The tiny home is an essential part of my future financial safety and well-being. But I don’t have the cash up front to pay for it.
I’m confronting my fears about debt again. It’s a slow process to see what the parts of me that are afraid need in order for me to be able to move forward with this project. But at least I’m engaging with the idea and open to figuring out ways I can use debt as a lever to secure my future, rather than letting my beliefs and fears declare that debt is out of the question.
Because financial trauma can leave psychological and emotional imprints, it can cast a long shadow over your mindset and behavior, amplifying the fear and anxiety associated with debt.
In my story, you can see how that played out. Maybe you have a similar story.
Financial traumas are threats to your survival.
No wonder you would feel anxiety and fear when you think about taking on business debt.
However your fear doesn’t have to run the show.
By understanding the psychological impacts of financial trauma and implementing strategies for resilience and growth, you can overcome debt anxiety. You can cultivate a healthier relationship with your money and finances.
With the right support and mindset, debt can be viewed not as a barrier to success but as a stepping stone to achieving business objectives and realizing long-term financial stability.
If you’re a business owner who wants care for your fears related to debt and money, you can book a free call with me here to get started.