Historically, Black people have had a different relationship with money, as many of us have experienced financial hardship, insecurity, and anxiety about building wealth. In an October 2022 survey, seven in 10 black adults (69%) said their finances were in fair or poor condition, while just three in 10 (31%) said their finances were in excellent or good condition, showing that most black Americans still experience economic insecurity.
The ramifications of COVID-19 have also heightened Black Americans’ anxiety and relationship with money, and more importantly, how they spend their hard-earned cash. In a recent Pew Research study, the majority of black adults said their household finances meet basic needs, with little money left over for non-essentials outside of paying bills. According to the study, less than half of black adults say they have an emergency fund. Some took multiple jobs to survive – increasing anxiety, stress and depression from overwork.
But what about the population of black Americans who not only survive each month but can also enjoy the fruits of their labor without worrying about their bank accounts? There are still longstanding differences in economic experiences among black Americans today. While the October 2021 Pew Research survey shared that nearly two in 10 lowest-income black adults (18%) lack the money to meet basic needs, another four in 10 (43%) describe their household finances as just to meet your basic needs. However, higher-income black adults have an entirely different perspective: only 4% of middle-income and 1% high-income black adults say they don’t have enough to meet basic needs.
The study highlighted that more black Americans are coming to a place of financial security. Middle- and upper-income black adults say their household finances cover basic needs with some left over for extras. Nearly three-quarters (76%) of middle-income black adults say so, as do 93% of high-income black adults. While few black adult households have a lot of money left over for extras (14 percent), nearly half (47 percent) of black adults with higher incomes feel the same way.
Although more black Americans are financially secure, many are suffering from past experiences of economic hardship. To understand the lasting effects of financial trauma, we must first define it. Ashley McGirt-Adair, LICSW and trauma expert, defines financial trauma as an emotional response to financially induced stress, usually following a time in someone’s life when their attitudes and beliefs about money were negatively shaped. This caused long-term reactions similar to PTSD in that emotional and physiological symptoms occur, affecting typical day-to-day activities.
She also notes that financial trauma can also be inherited and passed down in the form of intergenerational trauma through shared DNA. “Financial trauma signs and symptoms can correlate with PTSD or personality disorder and are linked to chronic stress associated with financial health,” she says.
How does past financial insecurity lead to anxiety?
According to McGirt, individuals with a history of poor financial health may have difficulty concentrating and hypervigilance, which manifests itself through agitation when the subject of finances comes up, leading to anxiety. “This could be caused by intergenerational trauma based on how the parents exposed them to opening bill collector mail, answering phones, and/or responding to any requests for money, including avoidance behaviors, startled responses, somatic symptoms, and obsessive-compulsive disorders,” she it says.
Fanike-Kiara Young, LCSW, a licensed specialist in financial transformational trauma, believes that financial insecurity is caused by some type of trauma that directly affects a person’s financial comfort. “Examples might include debt that can’t be paid, job loss, inability to get a job, and trouble managing accounts. These situations can lead to prolonged stress, depression and anxiety. If a person experiences financial insecurity at one point, spending money, not having large amounts, and paying bills can lead to stress,” says Young.
Can financial trauma negatively affect our spending habits and aspirations?
Sadly yes. McGirt believes that individuals who have moved out of poverty or experienced poverty later in life may fear overspending due to lack of finances in the past. Anxiety can lead to overspending, underspending, and wealth accumulation. Those who have or have had a lot of debt from student loans, credit cards, and other forms of debt may experience spending anxiety and may be traumatized by accumulating more debt and taking on financial assets. Those with abundant wealth can also experience financial trauma in the form of being responsible for family members and friends who lack financial resources. This can affect how they spend their money, financial aspirations and desire to accumulate wealth when they feel burdened with providing their wealth to others.
So how can we resolve financial trauma?
It’s a long process and not a one-size-fits-all solution. Young suggests analyzing your habits and relationship with money to make an assessment first. She believes everyone should be aware of four common signs of financial trauma related to how we relate to money.
Spending too much: When you don’t use a budget and spend more than you can afford.
Insufficient spending: Holding on to your money so tightly that you forget to buy things you need, like investments for the future or for your professional development.
Avoidance: Not discussing your finances, looking at bills or facing your financial situation.
the lack of limits: Occurs when you don’t say no or limit how much you give to others. Often Black people take on a sense of responsibility for family and friends, especially if they are lucky enough to “make it”.
While financial trauma can be extremely debilitating and affect you emotionally and physically, there are ways to treat and combat it. McGirt suggests working with a trained and trauma-informed professional who can help with rewriting your money story by working on your financial triggers, decreasing shame, managing stress, and adopting practices based on mindfulness on an emotional level, as well as seeking a professional. financial advisor who can help with planning and possible debt consolidation.
Other steps a person can take to begin overcoming their financial trauma, according to Dr. Young, include the following:
1. Be honest about your beliefs about money. Do you believe that money is hard to come by? Do you think your earning potential could be improved? Everything you think is true! Write down your beliefs about money. The first step to getting over something is to face it and be honest.
2. Identify the source of each thought after your beliefs are written down. Was it from a father? Was it from a partner? Was it from a television show? Was it from something you read or watched? Knowing the source of your beliefs is essential, as this is key to changing them.
3. Now that you’ve identified the source of your message, consider whether that person reflects your anticipated results and financial goals. Do they have the same values as you? Do they live the life you want to live? Should you shape your financial outlook around this person? Keep the messages that line up, but discard the ones that don’t. Finish them off today.
4. Rewrite your money narrative. Take time to think about the new agreements and beliefs you want to have around money. Write them down and say them every day. Focus on changing your perspective.