Shame and Financial Identity
I recently reconnected with at least a dozen brilliant friends who recently lost their jobs in tech. Something about them seemed different, their light was a teeny bit dimmer. They knew their value, and that they were caught up in efficiency exercises slicing across the tech industry, but they couldn’t protect themselves entirely from the overpowering influence of shame.
Shame is a powerful emotion that can have a profound impact on your financial identity. If you recall from my last blog, your financial identity comprises your goals, values, risk, behaviors, and other basic information about you. Whether you realize it or not, shame can drive you to make choices that may not align with your financial values, and it can prevent you from approaching risk thoughtfully to achieve your life goals.
In this blog post, I’ll explore the relationship between shame and financial goals, values, risk, and behaviors, and discuss how you can overcome shame to achieve financial wellness.
What is shame?
According to Brene Brown, “Shame is the intensely painful feeling or experience of believing that we are flawed and therefore unworthy of love, belonging, and connection.” It is a complex emotion linked to inadequacy that can be triggered by a wide range of events or circumstances, from social rejection to personal failure. It can also be triggered by something as cursory as job loss or FOMO, the fear of missing out.
Shame can be particularly challenging to deal with because it is often accompanied by feelings of isolation, and it can be difficult to talk about openly. However, it is important to recognize that shame is a normal human emotion that everyone experiences at some point in their lives. Knowing if you’re experiencing shame and what is causing it is the first step toward addressing it.
The relationship between shame and financial goals
Shame has a significant impact on your financial goals. When you feel ashamed about your financial situation, you may be less likely to talk about your finances, set goals, seek help, or make the changes necessary to achieve them.
For example, if you feel ashamed about your current level of debt or savings, you may be hesitant to analyze your behaviors, taking more of an ostrich approach - burying your head in the sand. A 2021 paper in the Journal of Organisational Behaviour and Human Decision Processes explains how financial shame can lead people to avoidant behaviors. This creates a vicious cycle, termed the “Financial Shame Spiral,” that may increase financial hardship.
In some cases, shame can even prevent you from setting any financial goals at all. You may feel so overwhelmed or inadequate that you simply give up on the idea of financial wellness altogether (please don’t do this).
The relationship between shame and financial values
Financial values are the principles that guide your financial decisions and behaviors. They are shaped by your upbringing, your culture, your education, and your personal experiences.
Shame can impact your financial values by causing you to prioritize the wrong things. For example, if you feel ashamed about your financial situation, you may be more focused on keeping up appearances than on building long-term financial security. You may find yourself pouring money into things that don’t reflect you or your needs.
A feeling of inadequacy may subject you to acting on advice given without the constraints of your own personal context, values, or beliefs.
May I suggest a pause on this point. Digest this one…
Please be extremely cautious about taking advice from individuals who don’t understand your personal context - your values, beliefs, attitudes about risk, priorities, dreams, challenges, access, etc. You know your values better than anyone. Take some time to reflect on those…and then you can find support to align your decisions and actions accordingly.
The relationship between shame and financial risk
Taking calculated risks is an important part of achieving financial success. However, when you feel ashamed about your financial situation, you may be more hesitant…or more willing to take risks that could be unsuitable to your risk tolerance level.
Knowing your risk tolerance and preparing ahead of time for stressors that might cause you to question your financial decisions is the antidote to taking too little or too much risk when you’re “in shame.”
Talking about your attitudes related to financial risk clearly and often with your loved ones is uncomfortable. I get it! I have wanted to launch a business for years. I come from an entrepreneurial family, I understand the risk involved in independently launching a business from scratch. My partner comes from an opposite background. His parents worked government jobs and enjoyed security and stability for 30+ years before retiring.
Our attitudes about financial risk couldn’t be more different. I followed a secure path and worked in salaried jobs for the first 25 years of my career. The shame of NOT giving myself a chance finally led me to open up and communicate. I absolutely experience fear and uncertainty, but I’m no longer allowing shame and the inability to speak openly about risk to hold me back.
The relationship between shame and financial behaviors
Your financial behaviors are the actions that you take - your account transactions and balances that indicate how you manage your finances today.
Shame can impact your financial behaviors in a variety of ways. For example, you may be more likely to engage in impulsive spending or to avoid dealing with your finances altogether, as referenced in the research about the Financial Shame Spiral linked above.
Have you ever engaged in retail therapy? When triggered by shame, this may prove more self-destructive financially than beneficial. Consider a bit of self discovery to better understand how your behaviors are impacted by shame. All of us sometimes buy things we don't need (don't we?), but if you find yourself splurging after a shame trigger, putting your savings and goals at risk, then it's time to get some help.
Overcoming shame to achieve financial wellness
Overcoming shame is a critical step toward achieving financial wellness. It requires that you acknowledge your feelings of shame, understand where they come from, and take steps to address them.
Knowing yourself is the solution. Talk openly with trusted friends, family members, or a therapist. Talking about your shame can help put your feelings of financial shame into perspective and will help you develop a more realistic and positive view of your financial situation.
Know YOU so that you know what to do!
