How to Cope with Financial Stress and Trauma

Financial stress and trauma can take a toll on your mental and physical well-being. Seeking professional help to face the causes of money stress can provide relief.

The mere existence of an annual survey called the Financial Stress Index is a sign that financial stress is not only prevalent, but deserving of our attention.

Thirty-eight percent of Canadians are more worried about money than anything else, and one in three Canadians say financial stress is causing them anxiety, depression, and mental health challenges, according to the 2022 Financial Stress Index conducted by FP Canada, a national organization for financial planners [1].

Most of us have experienced money stress to some degree, but it can become debilitating enough to qualify as a type of PTSD. This kind of financial trauma locks you in a state of perpetual fear which can prevent you from facing your situation or moving forward.

Preventing permanent damage from financial stress and trauma requires self-awareness, patience and in some cases, professional help.

What is financial stress?

The Financial Health Institute based in Denver, Colorado, defines financial stress as “a condition that is the result of financial and/or economic events that create anxiety, worry, or a sense of scarcity, and is accompanied by a physiological stress response.”

But of course there’s no single definition of financial stress, and it may look and feel different for each of us.

Causes of financial stress

External factors play a part in our experience of financial stress. The 2022 Financial Stress Index found the top three external causes of money stress for Canadians to be:

Rising grocery prices (68%)
Rising gas prices (56%)
Inflation’s overall impact on the cost of goods and services (55%)

These and other external factors, like rising interest rates and rent prices, are compounded by our personal financial situations and the disparity between where we are and where we want to be.

According to the 2022 Financial Stress Index, 32% of Canadians are stressed about saving enough for retirement, 31% are concerned about affording current expenses, 31% worry they aren’t saving enough for a major purchase or expense, and 26% say debt stresses them out.

Signs you’re financially stressed

A little bit of stress here or there is normal, but persistent stress (as money stress tends to be) can have adverse effects on both your psychological and physical health.

Financial stress can manifest as anxiety and depression, which may in turn affect your motivation to exercise and eat well, leading to further downturns in your overall physical health.

How to deal with financial stress

Taking measurable action to improve your financial situation is one way of overcoming financial stress. Things like:

Creating a budget.
Saving more money.
Paying off credit card debt.
Building an emergency fund.
Having a financial plan.
Consulting with a financial professional.

Other actions to consider include:

Writing it down. Sometimes getting a point of stress out of your head can allow you to focus on other (more constructive) things.
Setting manageable goals. Break big financial goals down into multiple smaller goals, and make a specific plan for how you will celebrate each milestone.
Setting calendar reminders for bills. Paying everything on time if you can will save you unnecessary stress and late fees.
Seeking debt relief if you need it. If debt has become unmanageable, options like credit counselling or consumer proposal might be worth considering.
Talking about it. This is difficult because of the many taboos around money, but bottling up your feelings won’t work. Set up regular times to review your finances with your spouse or family, find a friend with whom you can share, or even seek out a financial therapist.

What is financial trauma?

Living through significant or devastating financial events — even in childhood — can result in financial trauma. The symptoms of financial trauma are often similar to that of financial stress, though more pronounced; it can disrupt your personal or professional life, and cause great distress.

Causes of financial trauma

Fifty-five percent of Canadians say their adult lives are impacted by childhood experiences about money, and 42% saying these experiences have left them anxious or worried, according to a 2021 survey by Meridian Credit Union [2]. Negative childhood experiences can include enduring poverty or financial insecurity, or major events like a messy parents’ divorce that affects family finances.

But financial trauma needn’t stem solely from childhood; any major financial event can have lingering effects. Things like foreclosure, a bad investment, being a victim of fraud, bankruptcy, or even a prolonged period of unemployment can lay the groundwork for financial trauma (sometimes referred to as financial PTSD or debt trauma).

Signs you’re financially traumatized

Three common signs of financial trauma are avoidance, obsession, and distraction.

For example, you might feel overwhelmed by your debt and bills entirely even if collectors start calling. Or, you might start obsessively checking your account balances and searching online for answers to unanswerable questions. Or, you might distract yourself from the problems at hand by watching too much television or using substances.

Likewise, if you find yourself overreacting to certain economic events, it might stem from trauma. For example, news about food prices increasing due to inflation might be particularly triggering if you’ve experienced food insecurity in the past.

Acute physical symptoms of financial trauma while in a triggered state include:

Nervous energy.
Insomnia.
Hyperactivity (eg: jumping when the phone rings because you’re worried about debt collectors calling).

Emotional signs of trauma include:

An inability to feel close to friends or family.
Not enjoying activities that should be fun.
Feeling an impending sense of doom.
Becoming entrenched in negative thoughts or having trouble concentrating.

How to deal with financial trauma

Recognizing that something’s wrong is the first step to dealing with financial trauma. A counsellor, support group or financial therapist may be able to help you better understand your triggers, gain perspective, and remove unwarranted biases, fears, and beliefs about money that have been holding you back.

Once you have dealt with the emotional, physical, and cognitive effects of the trauma, you can create a tangible action plan to deal with the financial problems themselves.