4 Psychological Reasons That Could Be Behind Your Money Problems

Getting to the emotional root of your money problems can be the key to making positive changes. Here's what your financial issues could really be about.

If you're frequently short on money, underemployed, or always crawling out of a deficit, it's probably just regular old money problems, right? Not necessarily. According to financial therapists, most money problems are rooted in self-esteem, trauma recovery, or scarcity mindset issues.

Getting to the emotional root of your money problems is key to getting the clarity you need to change. Perhaps it's not that you're not good with money, but your parents weren't, and you feel doomed to repeat those patterns. Or maybe you struggle with self-esteem, and spending money is how you compensate for that feeling of not being good enough.

Here's what some of your financial problems could really be about. Is it money, or is it...

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A fear of repeating the past

"Even if we can see the patterns in our behavior, understand where they came from, and understand that we may have never had anything else modeled for us," said Hanna J. Morrell, a holistic financial coach at Pacific Stoa Financial Wellness in Salem, Oregon, "without the appropriate skillset and mindset to seek out or create new strategies and tools for ourselves, we are destined to repeat the mistakes we've seen others around us make,"

The trick, according to Morrell, is to reorient your perspective and have the courage to look for ways to make different choices. If your parents or role models weren't good with money, think of the mistakes they made and do the opposite.

Did they believe every financial investment was their big break and go all-in, only to be disappointed? Did they spend carelessly or not prepare for emergencies? The way to not repeat their mistakes is to analyze their choices, and then make different ones.

To turn the tide of careless money habits, try this: be extra cautious of financial opportunities that sound too good to be true, prepare a budget and stick to it, or start an emergency fund...today! These are just a few concrete ways to consciously choose different financial strategies.

The key is to recognize what's happening and understand you're not doomed to repeat the money mistakes of those around you.

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A scarcity mindset

What if you always come from a place of not enough? There's never enough money to pay the bills, you're not smart enough to get a better job, you'll never get out of credit card debt. Sound familiar? "The scarcity mindset lies to us, telling us that we don't have enough," said Morrell. But she challenges her clients by asking, "Is this temporary, or am I going to live the rest of my life this way?"

"Our brains, in scarcity and crisis (even a little crisis), tell us we're always going to feel the way we feel right now," Morrell continued. "That this hardship will last forever. Asking yourself if it will be like this forever gently pushes back on that lie while helping to change perspective. And with a little perspective change, you can make better choices."

Kelley Kitley, LCSW, a therapist at Serendipitous Psychotherapy, LLC, in Chicago, believes the law of attraction is a self-fulfilling prophecy. "If we always (or usually) think we don't have enough, then we will attract that," she said. "But if we have an abundance mentality, maybe we'll attract abundance and allow it to flow."

Basic living is often taken for granted, so find appreciation in everything. Kitley recommends making a list of what you appreciate in your life; which could be as simple as the bed you sleep in, the coffee you drink every morning, or the ability to go for a walk. Switch your focus on "enough" and "abundance", and you may start attracting that into your life.

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Low self-esteem

What if getting heavily into debt or chronic overspending has nothing to do with buying shoes or tchotchkes, but is rooted in low self-esteem? If you don't feel good about yourself, you may turn to shopping to feel better or more worthy. Erin Skye Kelly, author of Get the Hell Out of Debt: The Proven 3-Phase Method that Will Radically Shift your Relationship To Money, says that most human behaviors can be divided into four key areas:

  1. Things that might not feel good but are good for us.
  2. Things that feel good and are good for us.
  3. Things that feel good but aren't good for us.
  4. Things that don't feel good and aren't good for us.

When you have self-esteem problems, according to Kelly, it's usually because you have too many habits that fall in categories 3 or 4—things that aren't good for you (overspending, getting into debt, not saving, or not budgeting). "The way to improve your self-esteem is to do more activities or build more habits that fall within categories 1 and 2," said Kelly.

For example: Saving money feels good and is good for us; paying off debt might not feel good, but is good; and keeping to a budget might feel hard, but is a great thing to do. Once you habitually engage in habits like these, your self-esteem builds and you engage less in financial habits that aren't good for you.

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Unprocessed trauma

Most people experience financial problems—job loss, inflation, difficulty saving money, and working against systemic issues—but the ways people handle the stress of those financial problems vary. According to Annie M. Varvaryan, PsyD, a clinical psychologist at Couch Conversations Psychotherapy and Counseling, Inc. in Montrose, California; when we add a layer of trauma (such as divorce, illness, or loss of a loved one), it can affect financial issues and how you deal with them.

For example: You might cope with trauma by spending more money—filling your closet or your home with unnecessary items; or you might take a hands-off approach, such as not opening or paying bills. "Overspending and impulsive financial decisions are coping mechanisms," said Varvaryan, distracting you from what's really going on. Buying things rewards your brain with a fleeting high, which helps to distract you from emotional pain. To determine if your financial missteps are due to unprocessed trauma, identify those behaviors and decide if you're using them to avoid thinking about trauma.

"Once a person has awareness of what is going on for them," continued Varvaryan, "they could then decide whether or not it is helpful to their healing process by asking: Am I truly healing by buying myself new things? What do I need to do to heal from this experience? How could I use spending money in a more structured way to reward myself without avoiding my feelings or past experiences?"

When you're ready to work on healing, start by engaging in other behaviors: spend more time in nature, connect to those you trust and love, write down thoughts in a journal for 15 minutes every day, listen to music, or consider a therapist. In therapy, people with traumatic pasts can learn how their trauma impacts them, discuss their thoughts and feelings about their trauma, and then find ways to manage those feelings instead of engaging in bad financial habits.

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