Financial Trauma: What It Is And How To Address It - Yo Quiero Dinero (2024)

Working on your mental health is as crucial to your financial journey as building wealth is. Find out why healing from financial trauma is key to this journey.

“Trauma” as a word is not thrown around often. Especially among communities of color, people tend to disregard or ignore mental health issues, due to stigma, shame, or fear or judgement.

If you’re here, chances are you:

• Identify as a first-generation wealth-builder
• Have a unique experience with money
• Are motivated to start your financial journey

But did you know your financial journey is deeply connected to your mental health journey?

Defining Financial Trauma

Trauma is a response to a emotionally triggering event. Financial trauma is, then, the emotional response to an event or series of events around money.

Dr. Galen Buckwater, a research psychologist studying our relationships to money, defines financial trauma 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.” The key here is that it is chronic, meaning the stress that you experience around your finances occurs over a long period of time.

As is the case with any type of trauma, you may experience emotional responses, cognitive responses (like thought patterns or beliefs), and/or physical responses.

What can cause financial trauma?

• Inheritance of toxic money beliefs
• Chronic debt
• The sudden loss of a job
• The loss of a home
• Unstable income
• A chronic inability to pay all of the bills
• Low-wage work
• Entering the job market during a global pandemic and recession…

In communities of color, it can often be a combination of any number of the above circ*mstances.

Signs of Financial Trauma

Unfortunately, financial trauma is not uncommon. In fact, about one third of millennials experience it. Zooming in even more, we know first-hand that people of color experience it in higher rates. In many of our episodes, our guests touch on their own money story; many of these are rooted in a particular traumatic event or chronic stress around money.

What are some signs of financial trauma?

• Chronic financial anxiety (things like overspending, avoidance, etc.)
• Negative thought patterns around money
• Physical stress over social outings, out of fear of spending money
• Limiting beliefs around money
• Isolating from relationships, out of fear of spending money

These signs may not even go away, despite reaching stable financial ground. It is considered financial trauma when it has become so ingrained into your habits, practices, and mindset. So what can you do about it?

Addressing Financial Trauma

Aracelis Gomez of the Latina Investor talks to us about how she has made progress on her financial journey through facing her financial traumas. Like many other issues, we cannot address what we cannot identify.

• Continue identifying your money traumas, which could look like writing down each time you feel stress in the context of money. The more specific, the better. Write how you are feeling, what triggered the feeling, and your thoughts as you experience the stress.
• Reconceptualize financial self-care, not to mean financial indulgence (which may even stress you out), but rather steps you can take to alleviate stress in the near future.
• Create a plan for changing your actual financial situation, because the reality is that all the internal, mental work can only take you so far. If you’re still struggling to make ends-meet, the stress will still be there. Can you negotiate your salary at work? Is it time for a career pivot into a more lucrative industry? Is it time to start a side hustle? Would planning for your future through investing ease your anxiety? As you ask yourself these questions, remember this: this is not a reflection of you. As women of color, our society dealt us a sh*tty hand. Now, it’s up to us to change that.
• Consider seeking a trained mental health professional, because this journey won’t be easy by any means. We like BetterHelp for their ease of use, accessibility, and affordability. Use code “dinero” at checkout to get 10% off your first month!

Want to learn more? Check out podcast episode all about financial trauma, featuring Rahkim Sabree,here!

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