Though it’s now been years since the start of the COVID-10 pandemic, its lingering effects have caused great financial anxiety for many people. Professionals in the mental health community and the financial services industry have explored the notion that financial trauma is quite possible.
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Financial trauma can be defined as the challenges people may experience when they are unable to process the fact, they may have suffered a significant and/or an abrupt financial loss. It is also caused when there are inadequate financial resources to pay for essentials necessary to survive from day to day. The anxiety and poor decision making can create further challenges if one does not create a strategic plan to manage both their emotions and financial positions.
Here are five strategies you can implement to combat financial trauma.
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Identify Your Emotional Relationship With Money
Identifying your financial patterns will help you gauge if you have adopted spending habits that need to be controlled. People who tend to splurge around payday consistently, while struggling at the end of a pay period, may trace their financial behavior back to childhood experiences that shaped how they see money.
Other clues include waiting until the last minute to purchase items that are necessary. Does the practice cost you more financially or does shopping for a discount benefit you over time? Do you shop for bargains and purchase items solely because you received a great deal? Have the purchases caused you financial hardship down the road? These basic inquiries can help someone determine if financial trauma is an issue.
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Create a New Financial Blueprint
If one experiences a financial loss or decrease in income, it may be necessary to revisit your discretionary and nondiscretionary expenses. Pull the last three to six months of bank statements to review your deposits and withdrawals.
Being conscious of where your money is going will help you tighten the financial reins until you can either adjust your new lifestyle or increase your income once again.
Review Your Company Benefits
Sometimes a financial loss can cause an individual to deplete all their life’s savings just to stay afloat. The best way to rebuild financial stability is to evaluate which company benefits meet your financial objectives.
If the company offers life, health and retirement benefits, one can begin to accumulate wealth and protect their family through payroll deductions. Some companies will also match retirement contributions up to a certain percentage and provide life insurance coverage based on the employee’s salary.
Establish Financial Boundaries
Acknowledge that you may have to curtail your financial expenditures. This may include recognizing the support you lend to family, friends and initiatives that have meaning to you has to change. Because financial trauma does consider emotional relationships with money and people find it difficult to deny family members in financial need, this can be difficult to implement, especially if its your parents or children.
At the same time, if you are struggling, you must steady your overall financial picture to ensure that you don’t experience more dire financial strain as you continue to advance in age. There will come a time when you must rely solely upon what you have accumulated over your lifetime and Social Security benefits because you can no longer work.
Accept Your Current Financial Position
A negative shifting of financial status can be difficult to process. Be careful not to further exacerbate your economic position. Many individuals will continue to spend money to maintain their standard of living, even if it requires using debt. The sooner you make the adjustment, the better positioned you will be to rebuild your financial future.
Financial anxiety is real. There are ways to combat difficult economic seasons of your life by using a pragmatic approach. The worst response is to ignore its reality and continue to operate financially as if you have not suffered a loss. Understanding how you relate to money and being willing to make adjustments will help you combat financial trauma.
Editor’s note: Dr. Nicole B. Simpson is a dedicated certified financial planner and the CEO and founder of Harvest Wealth Financial.
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This article originally appeared on GOBankingRates.com: I’m a Financial Planner: 5 Strategies You Can Implement To Combat Financial Trauma
