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What is Financial Trauma and How Does It Affect You?

coins spilling out of a money jar

When’s the last time you honestly assessed your relationship with your finances? 

Do you dread opening your mailbox? Perhaps you feel like the only mail you’ll get will be from agencies wanting more money that you don’t have? 

Do you ignore calls or jump when the phone rings for fear that it will be yet another bill collector? 

You may be suffering from the effects of financial trauma. Whether you have inherited these attitudes from financial instability in your past or a sudden economic loss, you are not alone. Money can be a source of stress for many people. 


Typically, when we think of trauma, our first thought is not about our financial situation. We think of trauma as originating in childhood, a relationship, wartime, or arising from sudden frightening events. Trauma is defined as “a deeply distressing or disturbing experience.” Financial trauma is simply trauma related to finances.  

Galen Buckwalter, PhD has stated that 23 percent of adults and an astonishing 36 percent of millennials experience financial trauma that would qualify them for a diagnosis of Post Traumatic Stress Disorder.

Sources of Financial Trauma

So where does FT come from? Just like other forms of trauma, it comes in three forms:

  • Acute trauma: This type happens suddenly, such as the loss of your home or income or a large and unexpected expense.
  • Chronic trauma: This is an ongoing trauma that may be rooted in how you were raised. Chronic financial trauma can be rooted in the area where you were raised, racial or cultural biases, or inherited anxiety surrounding money. 
  • Complex trauma: Complex financial trauma is when you have multiple, harder to define combinations of chronic and/or acute traumatic incidents relating to your financial state.
coins spilling out of a money jar

Effects of Financial Trauma

Unchecked financial trauma can have devastating effects on its sufferers. Emotionally, you may feel sad, angry, scared, or ashamed. This can lead to depression and anxiety, which may develop into PTSD or suicidal ideations. Relationships may suffer as you isolate due to shame or fear of spending money.

The toll financial trauma has on the body can manifest in a variety of ways. It may be cheaper or easier to meet your daily needs through unhealthy means. Financial trauma may lead to food insecurity. Similarly, a healthy diet may be inaccessible, causing you to opt for processed, high fat, or high sugar options rather than nutrient rich ingredients. Physical consequences, such as elevated blood pressure or sleep disturbances, may arise. It can also lead to poor lifestyle choices, gambling, or substance abuse problems.

Hope for the Future

There is life after financial trauma. Whether your financial trauma is generational or brought about by a sudden loss, there are many people who have confronted their trauma and healed from it. Even without landing a windfall of money, you can move past your fear of answering the phone or checking your mailbox. 

By acknowledging your feelings about your financial situation and honestly reviewing your financial status, you too may be able to bring about the changes needed to set your affairs in order.

Healing from Financial Trauma

Research into treatment of trauma can offer some valuable insights into financial trauma. Avoiding our trauma will not make it go away. We must confront our own thoughts and feelings about money before we can heal.

If your financial situation has become out of hand, take action. You may benefit from a money managing app or financial advisor. Financial trauma is as valid and real as any other type of trauma. A professional therapist or counselor would be best trained to guide you through your healing process. Reach out to learn more about how trauma therapy can help you feel in control again.

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Green Heart Therapy provides in-person psychotherapy for adults, teens, and children in Los Angeles and online therapy across California.