Financial PTSD: Break the spending cycle and regain control

Financial post-traumatic stress disorder (PTSD) is a condition that can afflict people who have experienced traumatic financial events. 

We consider the causes of financial PTSD, along with the signs and symptoms, and we share tips for breaking the cycle.

Tip: If you have unmanageable debt and don’t know where to start, you can consider debt counselling.

What causes financial PTSD?

Financial PTSD can manifest as a result of trauma; whether experienced, or witnessed.

“Growing up in poverty or witnessing a caregiver losing their source of income can have long-lasting traumatic effects on children,” explains Claire Klassen, consumer financial education specialist at Momentum Metropolitan Holdings.

In adulthood, external factors such as stock market crashes, loss of savings, and business failure, can also result in financial PTSD, says Joanne Miller, financial wellness expert at InvestmentWise.

Signs and symptoms

“Overreactions to budgeting discussions or an obsessive desire to save money can be indicators of financial trauma,” notes Klassen. “The fear of not having enough money can lead to risk aversion, resulting in individuals living minimalistic lifestyles. Alternatively, people can overspend and fall into excessive debt.”

Miller adds that typical indicators of compromised mental health often also appear; such as insomnia, apathy, depression, and strained work and interpersonal relationships. Physical symptoms, including headaches, weight gain, and fatigue can also emerge, she says.

Cheryl Benadie, in her book The Wholeness Revolution, shares her experience with financial PTSD as a result of childhood trauma. As an adult, she began buying expensive items with credit cards and store accounts. This led to a significant spiral of debt, which at one point amounted to R1 million.

Breaking the cycle of emotional spending

Benadie’s turning point came when she realised that her behaviour was hurting not only herself, but also her partner. She was inspired to take action by finance mentor Dave Ramsey, and after four years of hard work, she paid off her debt and has since remained debt-free.

Benadie, Klassen and Miller suggest taking the following steps to regain control of your finances.

Seek out support and guidance

• Connect with others who share similar experiences. Support groups can work well for this purpose.
• See a therapist or counsellor to work through your trauma
• Consult a financial adviser for professional planning and guidance

Be proactive

When you clearly understand your financial circumstances, take proactive steps towards improving them. For example:

• Create a budget
• List your debts from smallest to largest, and pay them off accordingly

“Paying off the smallest debts first provides momentum to tackle larger ones,” says Benadie.

Educate yourself and learn from your mistakes

• Find resources and products to help manage your finances
• Learn about the consequences of purchasing decisions
• Research how to prevent impulsive and emotional financial choices

Increase your work value and cash flow

• Consider upgrading your employment skill set
• Explore ways of creating a second stream of income

Manage your stress

• Practice self-care
• Find joy in small, seemingly insignificant moments
• Prioritise physical exercise
• Establish lasting support systems

If you or someone you know needs help addressing trauma or depression related to financial PTSD, the South African Depression and Anxiety Group can assist. Their helpline is available 24 hours a day; phone 0800 456 789.

Having money available in an emergency will give you peace of mind. Open a savings account to save for emergencies today.