Your Trauma, Your Money and How to Make Better Financial Decisions / by Paco de Leon

I am very much not a psychologist, psychiatrist or a doctor of any kind. This is 100% not medical advice, just stuff that I've been learning lately that I'd like to share. If you feel like you need help processing your trauma, please reach out to a licensed professional.

Why do people spend money when they donโ€™t have it to spend? You donโ€™t need to be great at math to know when youโ€™re overspending. Often times, in a weird way, you can feel the unease of bad financial decisions in your body or your gut, yet we do it anyway. Why do humans beings willingly participate in behaviors that they know are harmful to them? The internet has everything weโ€™ve ever needed to know about how economics, finances and how money works in the world, yet we still engage in behaviors that are harmful to our financial well being. As if capitalism isnโ€™t oppressive enough, so many of us still find ways to harm ourselves. After years of thinking about these questions and trying to understand this dichotomy, Iโ€™ve recently started to dig into the role of trauma in our lives. Being able to look at finances through the lens of trauma is another way to try to understand who we are and why we do what we do.

The Window of Tolerance

Daniel J. Siegel, MD is a contemporary psychiatrist and writer who specializes in interpersonal neurobiology. He is credited with creating the concept of the window of tolerance.

The window of tolerance is used to understand and describe normal brain/body reactions, especially following adversity or trauma. The concept states that we each have an optimal zone of arousal, called a window of tolerance. When a person is within the window of tolerance, they can regulate their nervous system in order to deal with the natural ups and downs of being a human being on earth. In the window of tolerance, one can reflect, think rationally and calmly make decisions without withdrawing or feeling overwhelmed.

When we're in our window of tolerance, we can approach day-to-day life most effectively. We're able to handle emotions without losing control and we can make clear-headed decisions with rational thought. And even if we were to experience anxiety, pain, hurt or anger that can bring us close to the edges of the window of tolerance, we're generally able to use tools and strategies that can keep us in the window of tolerance.


What happens when you move outside the window of tolerance?

When a person experiences a stressor, trigger, or circumstance that pushes them outside of the window of tolerance, they go into survival mode and the prefrontal cortex, the part of the brain that is involved in impulse control, decision-making, and regulating emotions, shuts down. This means any financial decision you make outside of the window isnโ€™t really a decision, itโ€™s an action youโ€™re because youโ€™re trying to survive. When you look at the people who take out pay day loans at criminal interest rates, you begin to understand why anyone would do such a thing.

Trauma and adversity disrupt our nervous system and we can experience hyper- or hypo-arousal.

Hyper-arousal is the fight-or-flight adrenaline response that happens when you are pushed above the window of tolerance. When you're in this state, you might feel an increased heart rate, digestive issues, panic, anxiety, racing thoughts or hyper-vigilance with your surroundings. You may feel really intense panic, anger or anxiety. You may feel really overwhelmed and out of control.

Hypo-arousal happens when you're pushed below the window and your level of arousal dips. This zone is characterized by a shutdown or freeze response. One may experience paralysis, numbness, emptiness, lack of motivation, exhaustion and disconnected from emotions.

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How trauma impacts the window of tolerance

Trauma makes us feel like the world is unsafe and unpredictable. To understand this, all you have to do is think about how COVID-19 has impacted you or someone you know - the great majority of us are experiencing a traumatic event.

When we experience a traumatic event, which 70% of adults in the U.S. have, our window of tolerance shrinks. When we have a smaller window of tolerance, our emotions will fluctuate between hypo- and hyper-arousal more frequently. In this state, even seemingly innocuous events can have us spiraling with anxiety or feeling quickly overwhelmed.

With a smaller window of tolerance and excessive disruptions to your nervous system, some people may find themselves outside of their window of tolerance for long periods of time. Clinical levels of depression and anxiety or unhealthy coping behaviors can develop, like overspending and going into debt or taking big financial risks to counteract feeling numb.

It's impossible to completely insulate ourselves from adversity and trauma; our world is constantly changing and a lot of it is outside of our control. One of the things we can do to navigate life, financial and otherwise, is to develop our self-awareness to know when we are reaching the edges of our own window of tolerance. And to learn about the tools we can use to effectively shift our emotional state and regulate our nervous system.

Regulating your nervous system to stay within the window of tolerance

By staying within your window of tolerance, you increase the likelihood that your financial decisions will be made as a result of examining your emotions and making a rational decision despite any triggers, stressors and circumstances. This is especially important because trauma in one area of our lives may show up in our financial lives. Someone with trauma related to authority may struggle with being able to communicate and interface with a banker, an accountant or a financial planner. Someone who feels shame and guilt about their student loan debt and trauma surrounding abandonment might struggle to communicate their situtation to their partner or loved ones. If instability and uncertainty are both triggering for someone, they might avoid investing and forgo the ability to build wealth. Someone who grew up in a household with a lot of conflicts might have used looking at clothes online as a way to self soothe. And after years of experiencing more trauma and a smaller window of tolerance, this person might find themselves using online shopping as a coping mechanism.

Working with a licensed professional is one way to work through trauma and if you think that option is right for you, it's definitely something you should explore. Throughout life, you'll continue to experience moments where you feel triggered. There are lots of ways to regulate your nervous system so that when you feel pressed up against the edge of your window of tolerance, you can self soothe. Breathwork is a really amazing tool because you can do it anywhere, anytime. Some other ways to self-regulate include strenuous exercise, hard work, physical activity, listening to music, a weighted blanket, cold water or a warm bath, smelling something like essential oils or a flower, dancing, humming or singing, socializing, laughing, massage, and stretching.