What Is a Toxic Money Mindset—and How Do You Get Rid of It?

Have you wanted to quit your job with every fiber of your being, yet volunteered to work overtime? Have you waited years for a legal settlement, and then felt like the payout didn't compensate for your lost time and suffering? Have you ever fought so hard for alimony or child support that finally receiving it felt like a slap in the face?

If so, you know what it is to receive income and resent every single penny or, in other words, toxic money. According to Margaret M. Lynch, author of Tapping Into Wealth, and Gull Khan of The Money Mindset Podcast, toxic money comes from a source you despise and, no matter how much you get, you never feel good about it. The first step to addressing a toxic money mindset is to determine if you have toxic money habits or toxic money.

Do you have toxic money habits?

Toxic money habits are more about bad financial behavior rather than your literal money. Toxic habits come in many forms, but the most common are: lying about how much money you have, shopping away your feelings via retail therapy, and relying on credit cards rather than cash in hand.

In short, a toxic money habit is any patterned behavior that is ruinous to your finances. For some, that means overspending, but for others it could mean under-earning. According to Underearners Anonymous, "Under-earning is many things, not all of which are about money. While the most visible consequence is the inability to provide for one's needs, including future needs, under-earning is also about the inability to fully acknowledge and express our capabilities and competencies. It is about underachieving, or under-being, no matter how much money we make." Toxic money habits can be remedied by recognizing the pattern and forming newer, better habits.

Or do you have toxic money?

Toxic money is income you begrudge, often from a source you once loved or appreciated. It's the result of a negative shift in your feelings—while everything else about the relationship has ended, the financial tie persists. We mentioned alimony and child support, but it could be something like a loan your estranged parents gave you to send your kid to the private school of their dreams.

Lynch explains that toxic money is usually associated with a prolonged battle that forces you to "play small, to live by somebody else's rules, to stay wounded or sick or broken—just not stand fully in your power." Whether it's a cash settlement or a regular paycheck, toxic money comes into your life through a painful process that makes you feel like a victim. It can be particularly damaging when it makes it less lucrative elsewhere (like child support that bumps you into a higher tax bracket) or it's allocated to a toxic purpose (like alimony you have to hand over to pay that parental loan).

Once you realize you have toxic money, you have a decision to make: Keep it, give it back, or donate it. There is no right answer, and every choice has a consequence. Khan says that toxic money makes you feel stuck, but it's your emotions that "dictate how much money you can have... the more negative you feel about the place you're getting money from, the [more] toxic the money gets."

If you can survive without the money, it's best to consider walking away. The resentment from accepting it can bring self-deprecating feelings like guilt or shame. If you need the money, the first step to finding freedom is to acknowledge your financial dependence. The next step is to manage your mindset, form a better relationship with your finances, and find new income sources. Here's how.