Let me tell you why this matters in your personal finances.
When something traumatic happens to you it can be very easy to revisit that experience in your mind as you comb over details and what if scenarios. The problem with this is that your brain doesn’t distinguish between it actually happening and you reliving it in your mind.
So as you remember that trauma you re-experience it chemically by way of emotions. Those chemicals tell us to fight or flight. It constantly puts you in a survival state… are we thinking the most rationally in that state? Absolutely not.
We might develop a habit in that state that says this is a means to an end. I’m sad/hurt/angry/scared and I need to cope so I’ll splurge (retail therapy). Now you made yourself feel good by coping… but you never addressed the trauma so now when you feel trauma you what?
Let’s take it bigger. Your trauma is tied into your economic status. You NEED to make decisions to survive. You buy ramen because it's affordable, you stash $$ because you never know what can happen. You are afraid to lose what you have because it’s all you’ve got. You are stuck.
The problem is, our bodies weren’t designed to withstand long term stress. Poverty is more than a lack of money, it’s a wretched state of being. Poverty is a traumatic experience that impacts how we view, believe, use, and grow money.
Having anxiety, fear, or guilt as a result of long term financial trauma is normal but staying there is an addiction. Especially if you know better.
Why can’t you budget, or save, or invest? Because you’re addicted to trauma.
Even as your financial situation changes the effect of that trauma can be lasting because you’ve learned how to operate in that trauma. Now you feel anxious you have money instead of bc you don’t. You feel guilty spending or investing because “it can go to better things”, etc.
Now you just make more money but repeat similar patterns and behaviors because you haven’t moved away from your trauma.
Financial literacy doesn’t fix this.
Financial empowerment does.
This is why I say money management is mindset management.