For many of us, the past few years has slightly – and in many cases, dramatically – changed our personal financial outlook. Many families have dipped into their emergency savings account to cover for the gloomy economic climate, or even slipped into growing debt. No matter your situation, financial loss can often be a very serious emotional trauma – a heart issue that calls for appropriate healing and restoration. In this article, I address the psychology behind financial loss, and then touch on some ways to cope better from such trauma.
Recently, NPR published a radio segment as well as an article about the American housing market and why its recovery is so slow to come around. NPR interviewed Eric Johnson, a professor at Columbia’s business school, who took a look at the psychology behind financial loss by providing an example through the experiment of a coin toss. He has claimed that on a psychological level, our brain responds much more strongly to financial loss than it does to financial gain. When flipping a coin, and offering a $15 win for heads but a $10 loss for tails, most people would not take the bet. Just imagine if you were going to play that 1,000 times. You’ll end up with a pretty nice chunk of cash. You’d win, on average, $1,000!”
So, why would people refuse such a fantastic bargain? When taken to the street, people are strongly resistant to the idea of losing the $10, even if they are high risk takers in other areas of their life. It’s a very real fear.
While we can’t change the way our brains respond to fears, we can use that knowledge to learn how to best cope with the pains of financial loss and recovery. Based on our understanding of our psychological fear of financial loss, the first recommendation that I have for you is to build upon that awareness. As we move forward through the slow but sure economic recovery, be consciously aware of your fears so that when you feel overwhelming aversion to risk, you will understand why. By identifying with your emotions, you can begin to release some of your hurts and pains. Admit those feelings to someone you trust, a counselor, or even just your journal. By acknowledging your painful emotions, they will be free to be let go from within your heart.
Financial trauma is a very real issue to be wrestled with and overcome. If you or someone that you know is wounded by financial loss, encourage them to gain a better understanding of those hurts, and take time to face them in order to begin the releasing and recovering processes. It’s not easy, but your heart will be glad for the brave work you’ve done to move past the loss towards greater abundance, peace and love.
My challenge to you: Just for today …choose to feel abundant.