Money can equate to security status and power. Money can also make you feel more worthy or less worthy. For many of us growing up, we attached certain values to money either consciously or unconsciously. These values can also be shaped by traumatic events we experience around money over the course of our lives.
So what is financial Trauma?
It is when we experience a trauma associated with money it can shake us to our core. How we interpret these events can severely impact our relationships and how we interact with money over the course of our lives. In some cases, it can lead us to have an extreme overreaction, anxiety, and unhealthy patterns when it comes to dealing with financially stressful events such as a job loss, a dip in the financial markets or an aversion to using your emergency fund- even when the circumstances call for it.
How does financial trauma show up in our lives?
Often in my practice, it may show up as a senior client who went through the depression and only wants to talk to me about GIC’s as they have been burned in the past and typically have cashed out of the markets when it already went down. They worry a lot about losing money and after having lived through a major economic correction they are distrustful of the markets and have regretted whenever someone like me tries to convince them they need to have equity in their portfolio to protect themselves from purchasing power?
Can such a person truly be convinced to change their behaviour?
Should they? Are they in touch with the financial trauma they experienced during the depression, and will it help them to have this reaction when they are making investment decisions about their long-term financial security? These are some of the questions I grapple with and the answers don’t lead to easy fixes. Often my role as an advisor is to challenge my clients as I don’t think change is possible especially overnight. First of all, for many people in this situation, the fears they are dealing with are unconscious. They may not be willing to face that having all of their money in GIC’s especially in a severely low-interest environment may not be contributing to their financial health. This however is not a discussion I can simply have with their head. It is rooted in the heart and often requires them to examine their thoughts, beliefs and values. A number of these beliefs are rooted in childhood. So the best course of action is to talk about your beliefs with people and professionals you trust and try to understand where your ideas around money stem from and whether or not those beliefs are serving you in your life now.
From Anxiety to Passion- My Story of Financial Trauma
For me personally, as someone who lived on my own since I was 16, I am your classic worst-case scenario person. Watching my mother passed away at the tender age of 36 taught me that life can be very unpredictable and lived in a state of constant anxiety growing up. To manage my anxiety my mission in life was to do my best to control for the things I could control for. I saved as much as I could from the 3 jobs I worked, I did my best to eat healthy on my student budget and I exercised constantly. I was trying to stack the odds in my favour and my financial trauma taught me that I needed to rely on myself and that no one was going to rescue me. This is one of the reasons I am passionate about financial independence for women- because I can identify with the woman who never thought she would need to do this on her own. So, for me I am very aware of my financial trauma, not that it always shows up in healthy behaviours, like being a worrier personality but like with many challenges we face in life- becoming aware of my financial trauma and the unhealthy patterns it can sometimes lead to- is half the battle. Being aware of how my financial trauma is guiding my decisions now is a constant conversation I am having with myself and with others. I encourage you to closely examine your beliefs around money as well. And ask yourself if it is leading you to make sound financial decisions for yourself and your future.
Can you identify some of the financial traumas you experienced over the course of your life?
Ask yourself how is it impacting your life now? It is always a good idea to write down some of your beliefs around money especially the ones you may not always say out loud- that may be the most destructive. Challenge the destructive messages about the money you are telling yourself. Is your belief about your finances really true?
Could your belief be linked to a past trauma? How will you take action around your trauma so that you can develop healthier coping patterns? Can you identify some of the financial traumas you experienced over the course of your life?
Ask yourself how is it impacting your life now? It is always a good idea to write down some of your beliefs around money especially the ones you may not always say out loud- that may be the most destructive. Challenge the destructive messages about the money you are telling yourself. Is your belief about your finances really true? Could your belief be linked to a past trauma? How will you take action around your trauma so that you can develop healthier coping patterns?
What Financial Traumas are you facing and How are you overcoming them?
Linkedin Live community I would love it if you can share some financial traumas you are Grappling with and how you are overcoming them? Sometimes all it takes is a small step where you prove yourself wrong. Typically that means taking action around your fears and anxieties that may be holding you back from building the wealth you deserve!
I have a successful client whose father was a gambler. She would often watch his dad, the provider of the family gamble away the rent, leaving his mother to beg her family for money so they would not be kicked out on the street. Her trauma is around feeling financially vulnerable. My job as a planner is to show her and not tell her that financially she is in great shape. A financial plan has been essential in providing him with that peace of mind. We can review her financial data, assets, liabilities and pension income she will have access to in the future when she retires assuming she lives until 95. We can use very low returns like 4 percent for her to see his worst-case scenario drop in the markets could affect his chances of becoming financially vulnerable and having to rely on others. Each time we have done this exercise, he comes to realize the risk is almost nil. She is a moderate investor. She is a great saver ( over saver in fact) paid off her mortgage. Each time the markets become volatile, I spend less and less time talking her off a ledge because she knows what to expect as we have seen our share of ups and downs in the market over the last 10 years and she has become less rattled each time we experience is based on knowing she is fine based on a 4 percent return on her investments over her lifetime. It can only get better from there.
Is your Financial Trauma wreaking Havoc in your life?
We know that Financial stress is actually the number one stressor for Canadians living through the pandemic. For individuals who are not dealing with their stress head-on and it is triggering a past financial trauma they have not yet addressed, seek help. If you are not sleeping, if you are experiencing depression, engaging in destructive habits such as overeating or drinking seek help. Talk to a therapist, and confront your financial trauma head-on. If you are looking for practical solutions to challenge negative beliefs around your finances, reach out to our team for a complimentary strategy session to build or rebuild your financial fortress. Free yourself from Financial Trauma. It does have to be this way!!!
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