Overspending, lack of money are signs of financial trauma
The LightHouse Arabia
We are a community out-patient mental health and wellness center providing quality psychological and psychiatric care.
Financial trauma in children
Our childhood is meant to be a time of innocence when children mostly exist in a magical realm and don’t have to consider financial hardship or worry about money. Sadly, things are not always this ideal in childhood.
When financial hardship enters one’s life at this stage, they are not as equipped as adults are to manage.
Children don’t possess reasoning or perspective taking skills which can help to scale a problem. Children also don’t have an emotional regulation gauge; their level of worry can be overwhelmingly frightening. When children become flooded, they don’t move from the problem to the solution, they aren’t strategic or able to move into coping.
When exposed to such kind of trauma for long periods at a young age, “small ‘t’ financial traumas” can be wounding and scarring, adding that children will also be exposed to unavailable or preoccupied parents.
Parents, who cannot attune or notice children due to the psychosocial impact of poverty upon children, may numb and try to avoid the struggle with substances or behaviors to defuse their emotional pain which further removes them from their children and may introduce other traumas.
This can further lead to dysfunctional family dynamics, as conflict or lashing out occurs when problems are insolvable or when one encounter “learned helplessness”.
Childhood is a time when essentials such as “psychological safety and stability” are as important as food and water. It helps nurture the child into “stable, adjusted and well-regulated adults who can eventually thrive and meet their highest potential.
According to Maslow’s hierarchy of needs, a psychological motivational theory consists of a five-tier model of human wants. Maslow felt that humans had an inborn drive to be self-actualized, or to be the best version of themselves. However, we can only reach these ultimate goals, if a number of more fundamental requirements, such as food, drink, sleep and warmth, security, love, and self-esteem, are satisfied.
When living in financial hardship, the basic human needs are threatened, forcing the individual to delve into survival mode, which further catalyses to “nervous system dysregulation, such as fight, flight, freeze or fawn states and keep us from accessing our higher states or higher order functioning”
Financial trauma in adults
While financial trauma can take its roots in childhood, it can also surface well into one’s adulthood.
Adults who have experienced financial stability when they were young can develop financial trauma when they are met with personal challenges such as job loss, illness, divorce, global recessions, inflation, and wars – all of which can hinder an individual’s financial health.
The circumstances which are largely outside of our control turn our world upside down and can cause acute stress and emotional dysregulation. We react and manage worse when our financial trauma feels self-induced, such as mismanagement, overspending, mistakes, and recklessness, then comes the ‘shame’ train. Individuals are more likely to experience a “full trauma reaction” when they go down a path of self-blame.
Shame and guilt during financial trauma go hand-in-hand, as adults often believe that they should “intrinsically be good with money and not encounter issues.”
However, during a period of struggle, adults can feel “inadequate, unacceptable and unworthy.
We can begin to covet money, be unable to hold balance in our mindset, feel desperate to make money or save money. We want to redeem ourselves and often this means becoming extreme in our attitude towards finances, money and spending.
As adults, many individuals cannot accept their role in their hardship and cannot “integrate the level of psychological pain and threat that financial hardship and poverty brings and this is where trauma develops.
We become stuck with a reliving and reexperiencing of what we did, how we brought this pain on and who we have let down and endangered. It’s psychologically overwhelming and it shuts down our higher order functioning that would allow us to soothe and defuse our nervous system and bring our executive functioning back online that allows us to be strategic and cope and heal.
Financial trauma can also lead to the individual being avoidant of arising issues, causing them to continue mismanaging their finances.
The situation is so triggering and activating that you numb or dissociate from the issue. This is either flight or freeze mode. Clearly, this can deepen the problems.
Relationship roles
While financial trauma is individualised, it is quite common, and can be seen in other adults, parents or spouses.
The mismanagement of money can lead to tremendous guilt and shame, “at not being good enough to provide for and safeguard those around us.”
They may deprive themselves and become very miserly towards themselves as this is their atonement for mistakes, they believe they have made. They may also inhibit others spending to protect them from undergoing the trauma and shame they are encountering.
Overspending and financial trauma
When navigating through financial trauma among individuals I have noted that a commonly encountered issue in my clinical practice is that “adults who have had developmental trauma with money in childhood, present with overspending and inability to regulate spending and debt issues.”
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Their experience of poverty in childhood has led to a scarcity and deficit mindset which they are always compensating for or mitigating against. Money is used as a means to “soothe emotional or psychological pain,” which makes the individual feel “entitled to” such kind of behaviours.
They want to distance themselves from their financial trauma history and living without limits financially makes them feel buffered from the past pain. However, this is a short lived and temporary way of being, which is underlaid with anxiety and insecurity and deep vulnerability.
Spending equates to rewarding
Spending can be tremendously rewarding, however this can be temporary as “hedonic happiness gained from money and material things only really last as long as the moment.”
Citing references from neurosciences, spending on others is not only rewarding but the happiness and positive emotion gained lasts longer.
We feel more like our true selves and we feel more connected to the other. The empathy circuits in our brain literally light up when we spend on others.
However, when it comes to overspending, it can be an indicator of several things.
These include, numbing and avoiding realities or our pain, wanting to project an image of success or limitlessness to others.
Signs of compulsive spending include:
It can be related to our parents overindulging us as children or not allowing us any contact with realities of life and how to have a realistic relationship with money. Overspending can also be indicative of inability to set boundaries. Often it signifies we aren’t living mindfully or deliberately. We aren’t engaging with money as a healthy adult but in a childlike way that causes us to spend mindlessly and then later regret at our leisure.
Combatting overspending
When considering overspending I think the root of the issue must be addressed, which is what is an individual’s relationship with money, what governs it, what influences it, whether they hold a money complex. this requires reflection time and exploration of their journey and earliest experiences with money and spending.
This can be done individually or with a therapist who can help deepen insight and raise awareness of events and influences that must be processed, addressed and maybe resolved.
Individuals must be educated around a healthy, smart relationship with money.
We may not have great or helpful blueprints regarding money and spending, therefore reading books, listening to podcasts, seeking help from financial experts and therapists can significantly change our confidence with money and spending. We should have no shame in trying to increase our financial literacy and learning the tips, tricks and smartest strategies around budgeting, credit scares, savings and long-term financial planning.
Having an “integrity partner or buddy” who hold the individual accountable in terms of spending can also be helpful.
They can help you pause and reflect and not simply have emotion action fusion, where you feel psychological discomfort and then immediately self-medicate with spending.
Journaling one’s spending and logging every spend can lead the individual “to being more mindful and deliberate about each purchase.
Savings and financial trauma
A traditional construct around money is that you ‘save for a rainy day’, prudent and wise living is to hold on to money in case you may need it. Old age is often taken to account in such scenarios.
This way of being isn’t wrong, but one must avoid binary thinking.
However, threats and future-oriented thinking around money can cause individuals to lose a healthy rewarding relationship with money.
In certain traditions people are told you should be paid for your labour before the sweat dries on your brow, similarly you should enjoy your earning whilst you still feel the effort you have made.
We can save whilst enjoying our earnings, there can be a lifestyle where we can spend without guilt if we are attending to all parts of us. If we spend to let the child in us play and have fun, we spend on others to share experiences and build connection, we give to be socially responsible and bring ease to others, we save to let the wise adult plan for our future.
Dr Tara Wyne, who works as The Lighthouse Arabia’s clinical director and clinical psychologist explained financial trauma, speaking to Arabian Business.