4 psychological reasons that could be behind your money problems

Author: Jennifer Nelson

Source: Real Simple

Getting to the emotional root of your money problems can be the key to making major positive changes. Here's what some of your financial issues could really be about.

If you're frequently short on money, underemployed, or always crawling out of a deficit, it's probably just regular old money problems, right? Not necessarily. According to financial therapists, many of these problems aren't really money problems at all; rather, they're self-esteem problems, trauma recovery problems, or scarcity mindset problems.

Getting to the emotional root of your money problems can be the key to getting the clarity you need to make major changes. Perhaps it's not that you're "not good with money," but rather that your parents weren't, and you feel doomed to repeat those patterns. Or if you're always broke, it could be because you struggle with self-esteem, and spending money on things is how you compensate for that feeling of not being "good enough."

Here's what some of your financial problems could really be about. Is it money, or is it...

A fear of repeating the past

"Even if we can see the patterns in our behaviour, understand where they came from, and understand that we may have never had anything else modeled for us, without the appropriate skillset and mindset to seek out or create new strategies and tools for ourselves, we are destined to repeat the 'mistakes' we've seen others around us make," says Hanna J. Morrell, a holistic financial coach at Pacific Stoa Financial Wellness in Salem, Oregon.

But the trick, Morrell says, is to reorient your perspective and have the courage to start or carry on looking for other ways to make different choices. If your parents or caregivers weren't good with money, think of how they messed up, and do the opposite.

Did they believe every financial investment was their big break and go all-in only to be disappointed time and again? Did they spend carelessly or not prepare for emergencies? The way to not repeat their mistakes is to analyze what the mistakes were in your mind and try to make different choices.

Maybe you can be extra critical of financial opportunities that sound too good to be true. Prepare a budget and stick to it to prevent careless money habits, or start that emergency fund today. These are the concrete ways you can consciously choose to make different financial choices for yourself.

The key to halting the habit of following in others' footsteps is to recognize what's happening and understand that you're not doomed to repeat the same money mistakes.

A scarcity mindset

What if you always come from a place of "not enough"? There's never enough money to pay the bills, you're not smart enough to get a better job, you'll never get out of credit card debt. Sound familiar? "The scarcity mindset lies to us, telling us that we don't have enough," says Morrell. But she tells her clients to challenge it by asking, "Is this temporary, or am I going to live the rest of my life this way?"

"Our brains in scarcity and crisis (even a little crisis) tell us we're always going to feel the way we feel right now," Morrell continues. "That this hardship will last forever. Asking yourself if it will be like this forever, gently, pushes back on that lie while helping to change perspective. And with a little perspective change, you can make better choices."

Kelley Kitley, LCSW, a therapist at Serendipitous Psychotherapy, LLC, is a huge believer in the law of attraction being a self-fulfilling prophecy. "If we always or usually think we don't have enough, then we will attract that," she says. "But if we have an abundance mentality, maybe we'll attract abundance and allow it to flow."

Kitley says to make a list of what you appreciate in your life. This could be as simple as the bed you sleep in, the coffee you drink every morning, the ability to go for a walk. Basic living is sometimes taken for granted. If we switch to a focus of "enough" and "abundance," we will start attracting that into our lives and find appreciation in everything.

Low self-esteem

What if getting yourself into a lot of debt or chronic overspending has nothing to do with your love of shoes and tchotchkes but with low self-esteem? If you don't feel good about yourself, you may buy stuff to feel better or feel more worthy. Erin Skye Kelly, author of Get the Hell Out of Debt: The Proven 3-Phase Method that Will Radically Shift your Relationship To Money, says that most human behaviours can be divided into four key areas:  

  1. Things that might not feel good but are good for us.
  2. Things that feel good and are good for us.
  3. Things that feel good but aren't good for us.
  4. Things that don't feel good and aren't good for us. 

When you have self-esteem problems, she says, it's usually because you have too many habits that fall within numbers 3 and 4—in essence, the stuff that isn't good for you (overspending, getting into debt, not saving, not budgeting). "The way to improve your self-esteem is to do more activities or build more habits that fall within categories 1 and 2," says Kelly.

Saving money feels good and is good for us. Paying off debt might not feel good but is good. Keeping to a budget may feel hard but is a great thing to do. Once you're firmly engaging in habits like these, they begin to build up your self-esteem so that you engage less and less in the financial habits that aren't good for you.

Unprocessed trauma

There are financial problems that most people experience, such as job loss, inflation, difficulty saving money, and working against systemic issues. Then there's how people handle the stress that comes from those financial problems. Annie M. Varvaryan, PsyD, a clinical psychologist at Couch Conversations Psychotherapy and Counseling, Inc. in Montrose, Calif., says that when we add a layer of trauma, such as the loss of a loved one, a divorce, or illness, it complicates these financial issues and how they show up in your life.

You could be coping with the trauma by spending more money—filling up your closet or your home with unnecessary items. Or you could be coping by taking a hands-off approach, such as not opening or paying bills. "Overspending and impulsive financial decisions are coping mechanisms," says Varvaryan. They're a distraction from what's really going on. Buying things gives the brain a reward and a fleeting "high" to help avoid any pain you're going through. The best way to figure out if your financial missteps are a result of unprocessed trauma is to identify the behaviours and figure out if you're engaging in those things as a distraction to prevent thinking about the trauma.

"Once a person has awareness of what is going on for them, they could then decide whether or not it is helpful to their healing process by asking: Am I truly healing by buying myself new things? What do I need to do to heal from this experience? How could I use spending money in a more structured way to reward myself without avoiding my feelings or past experiences?" continues Varvaryan.

When you're ready to work on healing, you could start to engage in other behaviours, including spending more time in nature, connecting to those you trust and love, writing down thoughts in a journal for 15 minutes every day, listening to music, or seeking out a therapist. In therapy, people with traumatic pasts can learn about how their trauma impacts them, discuss their thoughts and feelings about their trauma, and find ways of managing those feelings rather than engaging in bad financial habits.


This article was written by Jennifer Nelson from Real Simple and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.