Financial Trauma Preventing from Living Best Life

Whether you’re going to bed before midnight, eating broccoli, or managing your finances, doing the “right thing” can sometimes feel like a herculean effort.

Similar to an irregular sleep schedule or an aversion to green food, delaying reasonable financial decisions has consequences. Avoiding creating a budget, paying your bills automatically, or learning how to invest can make your financial life more stressful.

But knowing that something is good for you is not always enough to make you do it. Many people have complicated feelings about money, and for good reason. Getting to the bottom of these feelings can be the most effective way to deal with avoidance tendencies.

Discover your financial beliefs

To get to the bottom of your financial fears, it may be helpful to find out about your “money scripts”, a term that is a registered trademark of the Institute of Financial Psychology. Money scripts are what financial therapists call the unconscious beliefs we have about money. Often these beliefs are rooted in our childhood and shape our financial life until adulthood.

Rick Kahler, a licensed financial therapist and founder of the Kahler Financial Group in Rapid City, South Dakota, had a client who was having trouble saving even though he was a highly paid professional. Through several interviews, Kahler learned that the client’s parents had filed for bankruptcy as a child and had lost their own savings in the process.

“All she knew was that all the money she had worked hard to save was gone. The lesson she learned from this was: “don’t save any money, because that will disappear,” Kahler says.

Georgia Lee Hussey, a licensed financial planner and founder of Modernist Financial, an asset management firm owned by B Corp in Portland, Oregon, says that sometimes it can do more harm than good to take a logical step, such as investing only a small amount, before digging out your deepest emotions.

“The small step of getting closer to logical action is actually a reinforcement of the mega story,” says Hussey.

Tools you can use

While finding your money scripts may seem daunting, there are many tools that can help you get started. You can take the Klontz Money Script Inventory-Revised( KMSI-R), a short free quiz that allows you to identify your dominant money scripts and give practical advice. THE kmsi-R assessment is offered by Your Mental Wealth Advisors, a financial advisory firm based in Burlingame, California that focuses on overall financial health. Hussey’s company offers a similar thinking experience that you can download for free and that can help you facilitate a conversation about your money history.

And if you are able to do this, it may be worth working with a financial therapist in conjunction with these tools.

“Working with a financial therapist can really help,” says Kahler. “But if a person does not want to do this, he may want to use journaling or mindfulness meditation, which is specifically tailored to money scripts. But in general, people can make very good progress by really focusing on their personal circumstances, and a financial therapist can help them.”

Be okay with small steps

After working thoroughly on your money history and how your long-standing beliefs came about, you may feel ready to take small steps towards a better financial future.

Some small steps you may want to consider could include transferring your money to a high-interest savings account instead of a standard savings account. If you have a 401(k) with an employer match, you may also consider contributing enough to get that match.

But be prepared for these old stories to come back, because even an account type like a 401(k) can become an emotional stumbling block.

“One of my favorites from the Great Recession is, ‘I’m not going to invest in a 401(k) because my uncle lost all his money in his 401(k),'” Hussey says. “It wasn’t the 401(k) that was the problem. It was your uncle who freaked out in the middle of the night and sold everything in his 401(k) at the end of the market. That was actually what was wrong. It was the person who made an emotional decision. The 401(k) itself is just a tax package. He has no personality. It doesn’t do things to anyone. Let’s find out what this story is about.”

Hussey encourages people to thoroughly investigate the origin of the stories they have heard about investing.

“I think these kinds of questions like ‘What am I saying to myself? Where does this come from? Who said that? Where did I hear that? How do you think they heard that?’That’s how we start unpacking these investment and savings stories,” says Hussey.