There are many factors in life that could affect your personal finances. This can range from your  family background, cultural factors, media or even unprecedented global events, such as a  deadly pandemic. However, one factor which affects personal finance is one that is often  overlooked. This commonly unrecognized factor which affects around 70 percent of Americans  is trauma.  

What is trauma?  

A person experiences trauma when an extremely terrible event is too much for a person to  cope, prompting an emotional response. Trauma causes lasting feelings of helplessness and  fear, which can lead to certain maladaptive behaviors. An individual may be traumatized after a  one-time event such as a natural disaster, car crash or an assault. However, trauma can occur  from continuous negative experiences, such as neglect or abuse.  

Post-traumatic stress disorder  

If the trauma is particularly damaging a person could develop a long-term condition known as  post-traumatic stress disorder (PTSD). This condition can include symptoms such as  flashbacks, acute anxiety and nightmares. People with PTSD may also find themselves  chronically depressed.  

Long-term effects of trauma  

There are many long-term negative effects experienced by traumatized individuals. This may  include all of these aforementioned symptoms of PTSD, obesity, increased substance abuse  and difficulty in forming healthy relationships with others. Trauma has also been known to  increase likelihood of having an unstable work history, compulsive spending and overall  difficulty in managing finances.  

How trauma affects the brain  

Much of the long-term effects of trauma stem from how trauma impacts the brain. Sustained  stress conditions can alter the development of the brain which can be particularly relevant if the  traumatic experiences occur during childhood. Being stressed means that stress hormones are  constantly being produced in the body and in the brain which can weaken the immune system  and cause inflammation. This can lead to chronic illness and disease. 

Since the stress hormones keep the brain in a constant survival mode, the higher order  

problem-solving and thinking capabilities become diminished overtime, particularly when trauma  occurs during childhood. This has been shown to be detrimental to learning and ability to make  decisions. It has also been shown to be the cause of attention and concentration issues.  

Damage to the brain has been linked to maladaptive behaviors such as taking excessive risks  as well as substance abuse.  

Effects of trauma on personal finance  

It is quite obvious how the long-term symptoms of trauma can have an effect on one’s personal  finances. Traumatic damage to the brain alters behaviors in a way that is not conducive to  budgeting, saving and making smart financial decisions. Of course, the inability to maintain  steady employment, impulsive spending and inability to maintain healthy relationships will inhibit  one’s ability to earn income, making for an unstable financial situation.  

Get help  

Fortunately, there are numerous options available for helping you deal with trauma and its  

negative effects on your emotional life as well as your finances. Therapy and some psychotropic  medications have been shown to be effective in helping alleviate trauma symptoms. As far as  the financial aspects, you may want to consider consulting with a professional financial advisor  to help with budgeting and other financial planning needs.  

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Rademacher Financial, Inc. and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.