Historically, Black people have had a nuanced relationship with money, as many of us experience financial hardship, insecurity, and anxiety around wealth building. In an October 2022 survey, seven in 10 Black adults (69%) revealed their finances were in only fair or poor shape, while just three in 10 (31%) said their finances were in excellent or good condition, showcasing that most Black Americans are still experiencing 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, most Black adults said their household finances meet basic needs with little money left to indulge in nonessential items outside of paying the bills. According to the study, fewer than half of Black adults say they have an emergency fund. Some have picked up multiple jobs to make ends meet – furthering anxiety, stress, and depression from being overworked.
But what about the population of Black Americans who are not only making ends meet every month but who can enjoy the fruits of their labor without worrying about their bank accounts? There are still long-standing differences in economic experiences among Black Americans today. While Pew Research’s October 2021 survey shared that about two in 10 Black adults with lower incomes (18%) don’t have money to meet basic needs, another four in 10 (43%) describe their household finances as just meeting their basic needs. However, Black adults with higher incomes have a starkly different perspective: Only 4% of Black adults with middle incomes and 1% with upper incomes say they don’t have enough to meet basic needs.
The study highlighted that more Black Americans are arriving at a place of financial security. Black adults with middle and upper incomes say their household finances cover basic needs with some left over for extras. Roughly three-quarters (76%) of Black adults with middle incomes say this, as do 93% of Black adults with upper incomes. Even though few Black adult households have a lot of money left over for extras (14%), nearly half (47%) of Black adults with upper incomes have this same sentiment.
Although more Black Americans have financial security, many are suffering from previous experiences of economic hardship. To understand financial trauma’s lingering effects, we must define it first. Ashley McGirt-Adair, LICSW, and trauma expert, defines financial trauma as an emotional response from financially-induced stress, typically following a moment in someone’s life where their attitudes and beliefs about money were shaped in a negative way. This caused long-term reactions similar to PTSD in the sense that emotional and physiological symptoms occur, impacting 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. “Signs and symptoms of financial trauma may correlate with PTSD or personality disorder and are linked to the chronic stress associated with financial health,” she says.
How does previous financial insecurity lead to anxiety?
According to McGirt, individuals with a history of poor financial health may have difficulty concentrating and be hypervigilant, as it shows up through agitation when the topic of finances comes up, leading to anxiety. “This can be caused by intergenerational trauma based on how one’s parents exposed them to opening up mail from bill collectors, answering the phones, and or responding to any financial requests, including avoidant behaviors, startled responses, somatic symptoms, and obsessive-compulsive disorders,” she says.
Fanike-Kiara Young, LCSW, a licensed financial transformational trauma specialist, believes that financial insecurity is caused by some form of trauma that directly impacts a person’s financial comfort. “Examples can include having debts that cannot be paid, losing a job, being unable to get a job, and having trouble managing bills. 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,” Young says.
Can financial trauma negatively impact our spending habits and aspirations?
Unfortunately, yes. McGirt believes individuals who have come from poverty or experienced poverty later in life may have fear around spending in excess due to a lack of finances in the past. Anxiety can lead to overspending, underspending, and hoarding wealth. Those who have or had a lot of debt from student loans, credit cards, and other forms of debt may experience anxiety around spending and can be traumatized when accruing more debt and taking on financial assets. Those with abundant wealth may also experience financial trauma in the form of being responsible for family and friends who lack financial resources. This can impact how they spend their money, financial aspirations, and desire to accrue wealth when they feel burdened to supply their wealth to others.
So how can we solve financial trauma?
It’s a long process and not a one-size-fits-all solution. Young suggests analyzing your habits and relationship towards money to make an assessment first. She believes everyone should be aware of four common signs of financial trauma connected to how we relate to money.
Overspending: When you do not utilize a budget and spend more than you can afford.
Underspending: Holding onto your money so tightly that you neglect to purchase things you need, such as investments in your future or for your professional development.
Avoidance: Not discussing your finances, looking at bills or facing your financial situation.
A lack of boundaries: Occurs when you do not 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 fortunate to “make it.”
Although financial trauma can be extremely debilitating and impact you emotionally and physically, there are ways to address and combat it. McGirt suggests working with a trained, trauma-informed professional who can assist with rewriting your money story, working through your financial triggers, decreasing shame, managing stress, and adopting mindfulness-based practices on an emotional level, as well as seeking out a professional financial advisor who can assist with planning and potential debt consolidation.
Other steps that a person can take to begin overcoming their financial trauma, according to Dr. Young, include the following:
1. Be honest about your beliefs around money. Do you believe cash is hard to come by? Do you feel your earning potential could be improved? Whatever you think is true! Write down your beliefs about money. The first step to overcoming something is facing it and being honest.
2. Identify where each thought originated once your beliefs are written down. Was it from a parent? 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 instrumental in changing them.
3. Now that you have identified the source of your messaging, consider if this person reflects your anticipated financial outcomes and goals. Do they have the same values as you? Do they live the life that you want to live? Should you shape your financial perspectives based on this person? Keep the messages that align but discard the ones that do not. Break up with them today.
4. Rewrite the narrative of your relationship with money. 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 shifting your perspective.