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Financial Flashpoints: Money and Trauma

Put yourself in these peoples' shoes. 

Your parents saved diligently their whole life, but then the great recession came and your parents decided to sell their investments after they went down because they were sick of it falling week after week. Once out of the market, the market rebounded and your parents missed out on all the gains. 

You and your family scraped by to put food on the table and keep the lights on. Then a bill collector caught up with your parents and your family fell behind on rent, eventually evicted with no place to go. 

Your mother was never involved with the family finances and never noticed your father moving money out of their joint accounts into accounts that he owned by himself. After moving all the money, he divorced your mother to start a new life and you and your money were left with nothing.

financial flashpoints and behavior

Financial Flashpoints and Trauma

Financial flashpoints are effectively the money version of trauma. They are very intense emotional experiences that we have with respect to money. Because these experience cause a great deal of emotional and cognitive pain our brains do whatever they can to ease that pain and reduce the chance of feeling that pain in the future. They write and update our money scripts and therefore have the ability to change the course of our money behaviors. 

Big, Small, Bad, & Good

It's very easy to think about financial flashpoints as being very big, negative events. Certainly these quality. If you have ever experienced bankruptcy, a costly divorce, foreclosure, homelessness, or even financial losses, those events have mostly definitely had an impact on you and shaped your financial beliefs. 

But financial flashpoints don't have to be very large dramatic events. It could be something as small as an embarrassing moment; for example if you were made fun of at school for wearing hand-me-down clothing. It could be a hurtful comment that someone made to you once that really stuck with you, like someone calling you cheap or rich. 

Guess what - financial flashpoints don't even even need to be negative events. An example could be a situation where you were in dire straights and a family member stepped in to save the day. That is a positive event, but it has the ability to shape your financial views in a way that you never worry about money because you think things will work themselves out in the end. 

Financial flashpoints can be big, small, negative, or even positive events. What makes it a significant event is if it caused intense emotional distress. 

Fight, Flight, Freeze

When our bodies experience intense situations we tend to go into fight, flight, or freeze mode. Fight mode is what it sounds like; it is when we get aggressive and we think we can power our way out of a situation. This doesn't necessarily mean physical aggression; it can be verbal or emotional aggression, as well. Flight mode is when we run away, either because we don't think we can fight our way out or if running is the easier, faster method. Again, this doesn't always mean actually running away; it can mean changing the topic in a conversation or otherwise disassociating from an activity. 

Fight and flight are the two mechanisms most people know about, but there is a third option, freeze. This is the "I don't know what to do so I'll just play dead" response. It's the freeze response that tends to lead to severe trauma and financial flashpoints. 

It's important to understand that our responses to severe emotional events happen at the subconscious level; that is, we don't even know there're happening and we can't explain why we did it. These responses are about survival; surviving the moment. They are not about right and wrong. 

Money Script Development

Our brains don't like discomfort, especially very intense emotional discomfort. So it does what it knows how to do; it write (or rewrites) money scripts in a way that it thinks will ease the pain. It's interesting to note that two people who have the same experience can write two different sets of money scripts. Some will write scripts that repeat the behavior they noticed, since that's what they know and what they know is easy. Some will have the same experience and write scripts that do a complete 180 from the behavior they noticed because they're "never going to get themselves in that situation again." 

So financial flashpoints help create our money scripts, and money scripts drive our money behaviors. 

I have a question for you: What financial flashpoints have you experienced? How have they influenced your money behaviors?

Read Next:


Brad Klontz, Ted Klontz: Mind Over Money

Brad Klontz, Rick Kahler, Ted Klontz: Facilitating Financial Health

Brad Klontz, Sonya Britt, Kristy Archulata (eds.): Financial Therapy


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© 2018 Money Health Solutions, LLC



About the Author

Derek Hagen, CFA, CFP, FBS, CFT-I, CIPM is a speaker, writer, and coach specializing in financial psychology, meaning and valued living, resilience, and mindfulness.


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