How To Manage Financial Trauma

Trauma…… we’ve all been there one way or another. You may think it is a rare occurrence but that is not farther from the truth.

According to the National Center for PTSD, about 60% of men and women 50% of women will experience at least 1 trauma in their lives.

Trauma has many forms including physical trauma, mental trauma, and even emotional trauma. All of it is very real and takes a lot of strength to cope with.

Weight Of The World On Your Shoulders

Financial trauma is no less debilitating.

To continue our support of May being Mental Health Awareness month, today we will explore the symptoms of financial trauma and what you can do to overcome it.

Let’s get started……

What Is Financial Trauma?

Ever hear of it? According to, financial trauma (or financial PTSD as some call it) is the physical, emotional, and cognitive deficits people experience when they cannot cope with either an abrupt financial loss or the chronic stress from having inadequate financial resources.

I know …… that was a mouthful!

Basically, financial trauma means any financial hardship that overwhelms an individual’s ability to cope, causes feelings of helplessness, and can diminish their sense of self.

Here are clarifications on the definition of financial trauma:

  • Trauma (or PTSD if you prefer that connotation) is the result of living at least 3 months without one’s income being adequate to meet one’s expenses.
  • The symptoms must be so severe that it disrupts home and/or work life and causes the person great distress.

Here are a few examples of life events that can cause financial trauma:

  • Experiencing a foreclosure or job loss
  • Losing a large amount of money from a divorce or being de-frauded
  • An unexpected business loss

Some of the signs of financial trauma to watch out for can include:

  • Chronic financial anxiety (i.e., overspending, spending avoidance, etc.)
  • Negative thought patterns around money (i.e., scarcity mindset… we’ll talk more about that in a future article)
  • Isolation from or physical stress over social outings out of the fear of spending money
  • Limiting beliefs about money

Financial trauma is more common than people realize, in fact states that at least 20% of the U.S. population has experienced financial trauma at least once in their life.

Man Stressed Out Over Bills

In fact, financial trauma is even more common among millennials with over 30% of them having experienced it.

This trauma can become so ingratiated in a person’s psyche, practices, and mindset that reaching stable financial ground may not alleviate the signs and symptoms.

For now, let’s discuss some of the symptoms to keep an eye out for.

Symptoms of Financial Trauma

Here are some of the symptoms of financial trauma:

  • Physical symptoms can include nervous energy, insomnia, and hyperactivity to situations that remind them of their financial problems (i.e., Phone ringing thinking it is a debt collector). It can also cause long-term health issues like heart disease, diabetes, and high blood pressure.
  • Emotional symptoms can include a sense that bad things are inevitable, difficulty enjoying things, or inability to be close to friends or family.
  • Cognitive symptoms can include difficulty concentrating or holding attention, negative thoughts about self, and memory lapses.

You might be wondering why a lack of money can cause all of these types of symptoms to occur? To understand this, we need to under stress’s impact on our physiology.

How Is Financial Stress Different From Other Kinds of Stress?

Evolution has prepared our bodies to handle short bursts of intense energy incredibly well. This is why you don’t see chronic disease among predatory animals. Think about a wolf. The hunt creates some pretty intense stress to deal with. However, when the hunt is one, the wolf can chill and enjoy its catch.

A lack of money creates a totally different kind of stress. It keeps our physiology amped up 24/7. Without an adequate chance to recuperate, all the body’s hormones that we need when truly threatened are turned on overload and stay turned on. Slowly and surely, stress’s impact starts chipping away at our body.

This is why long-term financial stress can cause diabetes, congestive heart disease, psychiatric problems, and a plethora of other ailments in people.

This stress is also what impacts people psychologically. It is what causes people to sap their desire for intimacy and make them prone to angry outbursts. It can also cause irritability, becoming distant, and closed off from talking about their problems.

Guess who is the victim of these negative emotions? The people closest to them.

This is why financial trauma is something to be cognizant of and not taken lightly.

Now for the $10,000 question, what can I do about it?

How To Recover From Financial Trauma

Recovering from financial trauma doesn’t need to take a lifetime to achieve. One of the 1st steps in recovering from financial trauma is to simply talk about it. I know 1st hand about this.

As I have talked about here, we had our struggles with money being the parents of 3 special needs kids and paying off a HUGE amount of medical bills to boot. Looking back, I can honestly say we experienced financial trauma.

Woman Stressed Out

I remember many a night staying up worrying about how to get out of the mess we were in. I dreaded every time pay day came around because I saw all our hard-earned money spent on bills. We never seemed to have enough no matter how much we saved, penny pinched, and basically living with a scarcity mindset.

The turning point came when we started talking about our situation. In fact, this is one of the reasons I started this blog. Not only do I enjoy educating you all on the dos and don’ts that I have gone through, but it has been, to a certain extent, therapeutic to do as well.

The key to getting started is to just start talking about it and confronting it. Once that is started, its power over you will dramatically diminish. There is no shame in admitting that mistakes were made. There is no dishonor or sign of weakness in admitting you need help. In fact, admitting that you need help is a sure sign of strength….. food for thought.

If struggling to find someone you feel comfortable talking to, then reach out to a professional. A good mental health professional can help you work through your trauma and develop coping strategies to get past it.

You can Google for mental health professionals in your area or use BetterHelp to find the help you need.

Another way to cope with financial trauma is to create an action plan. Maybe it is the project manager in me but figuring out a plan to take back control of a situation can be very empowering.

The 1st thing creating an action plan does is enables avoidance of the problem to stop. The point here is to not remove the triggers to your trauma but to recondition them. Fear thrives in the unknown and avoiding a problem exacerbates the unknown. By stopping avoidance, you enable recovery to start occurring.

Another thing an action plan enables is re-writing the narrative. It’s easy to get caught up in the narrative and think our financial situation defines who we are and what we can become. It’s easy to let negative thoughts creep into your head like, “I’m bad with money” or “I’m a terrible and irresponsible person for having so much debt”. None of this is true.

It’s important to keep telling yourself you are worthy of success and to practice forgiveness for getting into this situation. Believe me when I say you can do all the “right things”, practice all the good habits the “experts” preach, and STILL find yourself in a bad financial situation. Don’t let that define you.

Finally, creating an action plan provides alternatives for helping to get out of the situation your in. When sitting down and creating options, new possibilities open up that you may have not considered in the past. It did for me.

When I finally broke down and worked with a professional to help sort out the mess we were in, new alternatives that I never considered were brought to the table. It’s one of the reasons I discovered using my home equity to consolidate some of our debt into 1 easy payment. It’s the reason I picked up a 2nd job for several years to pay down our debt to a reasonable level. It’s also the reason I started exploring personal finance and led me to creating this blog to share my knowledge with you.

Here are some things an action plan opened up for me:

  • I learned how to negotiate my salary. Led to a BIG pay bump.
  • My wife and I both picked up a side hustle. Accelerated our debt recovery.
  • Increased my knowledge in personal finance. Led to creation of this blog.
  • Right sized our finances.
  • Led to a financial freedom plan (another article for another time) that we enacted.
  • Changed our financial situation and our financial life.
  • Empowered us to take back control.

Try these 3 steps and see what it can do to change your financial life.

Where To Go From Here?

Being financially healthy is about determining what works for you, how to live as you desire, and about ensuring self-care and self-compassion is achieved.

Suffering from financial trauma does not have to be debilitating. It does not have to define who you are.

First and foremost, recovering from financial trauma involves regaining a healthy relationship with money, understanding the core principles of money, practicing forgiveness, and implementing these principles on a regular basis.

If stuck on how to get out of the financial situation you are in and cannot see the forest through the trees, there is hope.

You’re not alone. Seek out the help you need and take back control.

Remember….. You’ve got this! 😊

Live The Life You Love, Want, And Deserve!