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April is financial literacy month and the month-long celebration often comes with appeals to low-income and marginalized communities that suggest the silver bullet to their financial woes is financial literacy–and it’s not. While it’s important to note that financial literacy is an important step toward sound financial decision making, it doesn’t account for those who are financially literate but impacted by behavioral issues stemming from institutional mistrust, historical exclusion, and financial traumas. The stigmas around mental health embedded within these communities also act as a deterrent, preventing its members from seeking the help they may need.

What Is Financial Trauma

While there is no set standard definition for financial trauma, financial trauma can be described as any instance observed or experienced that has a negative impact on the way someone views, interacts with, or believes about money. Most often associated with

  • Major losses in income or employment
  • Homelessness
  • Sustained financial stress due to poverty
  • Etc.

Financial trauma can also be triggered by inaccurate financial guidance or advice leading to the loss of savings, or the overleveraging of debt. This speaks specifically to the weaponizing of terms like “generational wealth” to push complex financial products and services to those without the knowledge or income to establish or maintain them. This plays on the ambitions of some to escape or put as much distance between themselves and poverty as possible.

Financial trauma and variations of the term like “money trauma” are increasing in popularity as the connection between how people think and feel about money, and what they actually do with money becomes more mainstream. While this is an important step in painting the complete picture of what overall financial wellness looks like, it often falls short of acknowledging the historical and present day impacts of racially motivated exclusion, exploitation, and abuse endured by Black people as part of a greater generational trauma. The reaction to said trauma can be enough to discourage participating in financial systems that have impacts on the way Black people think about

  • Retirement and estate planning
  • Investing
  • Home ownership
  • Responsible use of credit
  • Banking relationships
  • And more

The refusal to participate in these systems might seem like a lack of financial literacy on paper, but could very well be tied into the response to generational mistrust and observations passed down through family units. That is to say that the financially traumatic experience might have happened with a grandparent, but the resulting trauma response then became the norm and was passed down to the parent who then passed it down to the child.


Financial Therapy As A Solution

Finding mental health professionals with relatable experiences and education that acknowledge the lived experiences of Black people may be difficult as only 4% of therapists are Black, according to research done by Zippia on demographics and statistics for therapists in the United States. Adding in specialized training in navigating financial decision making, financial anxiety, or financial stress, shrinks that pool even further–leaving those issues unresolved or put on the back burner for a qualified professional to address later.

Acknowledging again however the historical lack of access and institutional mistrust Black people may have when pursuing financial advice or acknowledging a financial trigger to a greater mental health need, this leaves a very small opportunity to address these issues allowing them to continue festering and showing up in relationships, behaviors, and even in physical health.

Fortunately, work being done by organizations such as the Financial Therapy Association blend therapeutic and financial competencies to help people improve overall financial well-being while also curating a directory of qualified financial therapists. Financial therapy or financial counseling can help explore internalized beliefs and behaviors about money addressing

  • Scarcity
  • Decision making
  • Goal setting
  • Life events such as the birth of a child, marriage, divorce, etc
  • Hardship
  • And more

Examing these beliefs through the lens of a greater generational trauma allows Black people to inspect how systemic exclusion, abuse, and financial trauma likely impact financial decision making, even if viewed initially as a positive. For example, a high-income earning Black professional who experienced poverty might aggressively save as a response to financial trauma manifesting as scarcity. According to traditional views on financial literacy, this may be a positive behavior. However, viewed through a trauma informed lens this individual may be hoarding money despite having a high income and sufficient savings.

Financial therapy alone doesn’t stand in place of traditional therapy where qualified therapists may diagnose or prescribe medication, but acts as a supplement to cover gaps in financial training or specialization. It’s important to note that some qualified mental health professionals do have financial training or specialization in financial therapy, while financial therapists are not required to have the requisite credentials to diagnose or prescribe medications.

If you are having a mental health emergency, you should contact a qualified mental health professional.


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