What is financial trauma? How to deal with it?

Whenever you borrow money or are overburdened with expenses, it’s not just your bank balance that suffers. It also affects your mental health and emotional well-being. Financial hardships and losses can leave a long-lasting impact on the mind and cause trauma and stress.

What is financial trauma? How to deal with it?

Money is a tool to attain security, identity and meet basic needs. But its scarcity or absence leads to under-gratification or over-gratification of needs in the future. All these aspects affect the relationship between money and humans.

“Relationship people have with money and their pattern of spending tells a lot about their childhood and how much their needs were met at that time,” explains Dyutima Sharma, clinical psychologist and the co-founder of Orange Owl Percepts. In many cases, scarcity of money leads to anxiety and mental health issues that are termed financial trauma.

“There are two-three ways of financial trauma, one is when you have money and the other is when you lose money. The inability to meet self-set targets of earning money also causes anxiety and trauma. People who are unemployed or under-employed are its biggest victims,” says Bhopal-based psychologist Dr Kakoli Roy.

What is Financial Trauma?

Financial trauma is the emotional and psychological distress that can result from financial hardship or loss. It can be caused by a variety of factors, including job loss, bankruptcy, medical debt, or natural disasters. Financial trauma can significantly impact people’s lives, affecting their physical and mental health, relationships, and overall well-being.

Symptoms of Financial Trauma

The symptoms of financial trauma can vary from person to person, but they often include:

  • Anxiety: Feeling anxious about money, even when there is no immediate financial crisis.
  • Depression: Feeling hopeless, helpless, or worthless about your financial situation.
  • Anger: Feeling angry, resentful, or bitter about your financial situation.
  • Guilt: Feeling guilty about your spending habits or financial mistakes.
  • Shame: Feeling ashamed of your financial situation or your inability to manage your money.
  • Physical symptoms: Experiencing physical symptoms such as headaches, stomachaches, or sleep problems as a result of financial stress.

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Impact of financial trauma

One of the impacts of financial trauma is an inferiority complex. People face emotional hardships because they are unable to get a job or earn as per their expectations.

“ Everyone is earning well and I am not. When this comparison comes in, then the trauma starts. Trauma is an emotional thing, but because of these expectations, either because of comparison, or dependence, then there is trauma because of finances.”

A person’s financial dependency affects his personality as well as decisions related to finances, explains Dr Kakoli Roy. “Financial dependency limits a person’s ability to make money decisions on their own. If a lady who is not earning wants to go to a parlor or wants to buy something, then she is reluctant to ask or at least think of her husband or parents before making such decisions.

In extreme cases, financial trauma often leads to suicide. Cases of farmers’ suicide because of crop damage and loss is a result of financial trauma. Farmers reeling under debt and facing the loss of crops feel helpless. “Inability to take consultations because lack of money leaves their trauma untreated and often leads to depression and suicide,” says Dr Roy.

Shame and avoidance are another result of financial trauma. People who lose their hard-earned money in business and gambling, often end up being in guilt and not being able to talk about it. In such cases, people are inclined to alcoholism and drugs as well.

Trauma can also lead to low-self esteem and self-doubt. One such example was of a young boy who wanted to pursue his music career but could not because of the loss in his father’s business during the COVID pandemic. He ultimately gave up on his dreams to support his family. Slowly his financial hardships started affecting his relationship with friends and partner, recalls Dyutima Sharma.

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How to handle financial trauma?

Other than working hard to earn more money. The best way to deal with anxiety and emotional stress due to financial conditions is to talk about it, believes Dr Roy. “If you are not able to achieve what you thought in terms of money, try shifting your focus towards emotional achievement or something else,” she said.

Another way is to talk to friends and share feelings. No matter how bad you are feeling about yourself for your job, expenses, or anything, it is always a good idea to talk about it.

Instead of isolating yourself from the rest of the world, it is better to step out of home, meet new people, and experience new things.

No matter what people have thought about themselves earlier, the best way to perform well in the current situation is to adapt and mellow down expectations according to the situation. “Mellowing down expectations can’t happen in a single day, people need to step out, do adventure, and experiment with existent resources, to let this happen.

Resources for Financial Trauma

There are a number of resources available to help people who are struggling with financial trauma. These resources can provide information, support, and guidance.

  • The National Financial Educators Council: The National Financial Educators Council offers a variety of resources on financial literacy and financial trauma.
  • The Financial Therapy Association: The Financial Therapy Association is a professional organization that provides resources for financial therapists and individuals who are struggling with financial trauma.
  • The National Foundation for Credit Counseling: The National Foundation for Credit Counseling offers free and low-cost credit counseling services to help people who are struggling with debt.
  • The National Consumer Law Center: The National Consumer Law Center provides information and resources on consumer protection and financial education.


Financial trauma is a real and serious issue that can have a significant impact on people’s lives. If you are struggling with financial trauma, there are resources available to help you cope and begin to heal. With time, patience, and support, you can overcome financial trauma and regain control of your finances.


How much do we talk about financial trauma in India?

How much do we talk about financial trauma in India?

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