Hitting bottom financially is bad enough. In addition to money problems, the fear, guilt or shame associated with financial distress can make pulling yourself up by your bootstraps seem impossible.
But there's hope for an emotional recovery, too, experts say, one that can walk hand-in-hand with a financial comeback.
A financial crisis is emotionally traumatic because it threatens our survival and our sense of belonging, says Brian H. Farr, a licensed professional counselor in Portland, Ore., who specializes in financial therapy. Financial therapists help clients understand the emotional issues connected to money management problems. "We can get knocked out of our peer group if we don't have the cash flow," says Farr.
The recent recession was particularly traumatic for Americans, with more than half experiencing some type of work-related hardship and 32% saying they lacked confidence in their ability to retire, according to the Pew Research Center. Others are simply jaded, having watched family and friends grapple with credit card struggles, according to Patricia Sahm, managing director at Auriemma Consulting Group.
But the good news is you can regain control over your emotions -- and your money -- by taking the following steps offered up by experts.
1. Confront the shame. Guilt and shame are common feelings when people make major financial flubs such as accumulating massive credit card debt, says Katie Ross, education and development manager for American Consumer Credit Counseling (ACCC). "People feel that they've been a failure," says Ross, who co-wrote the book, "Financial Peace of Mind," to help people pick up the pieces.
While many go to great lengths to keep others from learning about their precarious financial situation, the process of telling someone can be very liberating, says Rick Kahler, president and founder of the Rapid City, South Dakota-based Kahler Financial Group, a financial planning company. "Just admitting a financial failure to someone is usually enough to begin letting go of the shame," Kahler says. Talking to a financial therapist, a financial planner trained in dealing with financial therapy or a good friend could prove helpful.
2. Focus on behavior. Some who have endured difficult financial situations vilify financial tools and swear off using them ever again. For example, a person who ran up credit card debt might decide he will never use a credit card again. But the credit card is not the bad guy; rather it's the use of the card that got you into trouble, says Farr. In fact, used wisely, a credit card can save you money through rewards, purchase protection and other bonuses. The better solution is to modify your behavior so financial products are no longer a curse, but a blessing.
3. Take responsibility. It's important to look closely at the factors that caused the trouble, says Marie McNabb, a financial therapist based in Seattle. "Bad luck or other people's actions may have played a role, but in most cases, there were moments when one could have changed the course of events," she says. "Maybe we trusted when we knew better or gave in to social pressure or the desire for things we couldn't afford, or took unreasonable risks or shortcuts."
Once you own up to any role you may have played in creating your money blunders, you empower yourself to create a better future. After all, if your choices had the power to wreck your finances, they also have the power to improve them.
4. Create new habits. It's not enough to simply say you're going to change your money behaviors. "Humans are creatures of habit so new habits must be formed, which will pay off financially and emotionally," says Kathleen Gurney, CEO of Financial Psychology Corp. and author of "Your Money Personality: What it is and How You Can Profit From It." Implementing rules such as saving 10% of your income or paying credit card bills in full each month takes emotion out of the equation and creates a safety net that will make you feel less anxious if financial difficulties arise again, she says.
5. Take small steps. Just as a person who has recently been in a traumatic traffic accident may be overly cautious at intersections, a person who has undergone financial trauma can become overly cautious with his or her money, says Farr. For example, a loss of money in your 401(k) might tempt you to hoard cash when you may have plenty of time to recoup those earnings in the stock market. While you're not likely to get over new money fears over night, you can take small steps to restore your confidence. First, you might invest a small amount. Then, you might slowly raise the percentage. Over time, you'll regain trust in your ability to create a sound financial future.
Applying past lessons is key to rebounding from a financially traumatic event, says ACCC's Ross. "Once you accept your mistakes, there are tools to help you make better decisions moving forward."