Yahoo Finance With most Canadians avoiding their finances, here's how to break the cycle of financial shame
Have your feelings around money impacted your relationships or caused you to put off important financial tasks? If so, you may be among the more than one-third (36 per cent) of Canadians who are stuck in a cycle of financial shame, according to a recent study from Coast Capital.
But it doesn't have to be that way. Here’s what it means to be dealing with financial shame, and how experts suggest breaking free.
When financial shame becomes part of your identity
Chantel Chapman, a financial trauma researcher and educator, describes financial shame as a “really big feeling” associated with money that becomes part of someone’s identity. Whereas someone experiencing “financial guilt” may feel bad about their credit card debt, Chapman suggests they could still remain confident in other areas like investing.
That’s not the case with financial shame.
“Financial shame would be like, ‘I’ve got credit card debt, I am bad with money. It’s like my identity,’” Chapman said in an interview with Yahoo Finance Canada.
As the CEO and co-founder of a financial literacy program called The Trauma of Money, Chapman has found that financial shame can feel like the “threat of abandonment.”
“It feels like everyone’s going to shun me, like I’m going to be kicked out of the group,” she said.
In addition to debt, financial shame is often associated with how much someone earns, and whether or not they own a home, according to Chapman. But she says there are many reasons why the feeling may arise, and it could differ based on gender and generational experiences.
The impacts of financial shame
Financial shame often becomes a cycle, Chapman explains, because it comes with two common behaviours that lead to worse financial outcomes. The first is avoidance.
“They’ll avoid having conversations around money, they’ll avoid filing their taxes, they’ll avoid looking at bills,” she said.
This aligns with the Coast Capital study, which revealed that 63 per cent of Canadians take some sort of measure to avoid dealing with their finances. Those measures include postponing financial goals, avoiding discussing finances with family and friends, and avoiding situations that involve purchasing decisions.
The other common behaviour, Chapman says, is a compulsion like hoarding or overspending.
“And they’re choosing that type of behaviour because they’re looking for a way to soothe or distract from the pain of financial shame,” she said.
The effects of financial shame can extend far beyond one’s finances. More than half of Canadians reported that financial shame is impacting their relationships, as well as their mental and emotional well-being, according to the Coast Capital study. The study, conducted by Angus Reid Forum between Nov. 1 and Nov. 4, was based on a survey of 1,512 Canadian adults.
Steps to break the cycle of financial shame
Chapman says the first step to move past financial shame is to identify and name it. Don’t just say you’re bad with money. Instead, articulate what’s actually happening and isolate the shame into a specific situation.
“So, it would be like, ‘I notice a part of me is feeling shame about wanting to increase my rates, but I’m afraid to do that just in case I lose customers,’” Chapman said.
“That can help reduce the impact.”
Next, Chapman says it’s important to “depersonalize” the shame. She notes that shame can come from different sources, whether it’s generational, societal, or systemic. So, ask yourself: “Whose shame is this?’
“When we know where it comes from, we can easily depersonalize it.”
Finally, Chapman says it’s time to take action, starting by having a conversation with a trusted friend, family member or financial professional.
“Just notice what happens to the nervous system and the power of the shame once you open up and talk about it in a safe space,” she said.
By following these steps, Chapman says you’ll have more agency to choose a different path and break free from the behaviours that fuel the cycle of shame.
Don't associate your wealth with your worth
For many Canadians, choosing a different path comes down to “analysis and budgeting,” says Xin Lou, a wealth planner at Coast Capital Investment Management.
Start by tracking your spending, perhaps on a weekly or monthly basis, to get a complete understanding of your situation. Then, determine what your priorities are and how much money you want to allocate to each of them.
But most importantly, Lou tries to remind clients that “it’s not about the money.”
“The money is a means to an end,” Lou said in an interview with Yahoo Finance Canada. “So, let’s take a step back and talk about how your life has been and what you want it to look like in five, 10, 15, 20 years. And let’s talk about how money helps get us there.”
Farhan Devji is a freelance journalist and published author based in Vancouver. You can follow him on Twitter @farhandevji.
