Three steps to breaking the money shame spiral

Posted by TEBI on February 12, 2022

Three steps to breaking the money shame spiral





There is a reason that many people who have many problems don’t do anything to fix them. It comes down to our human emotions.

Recent research by behavioural economist Joe Gladstone from the University of Colorado Boulder and colleagues from the Harvard Business School, Bocconi Univ…ney-shame-spiral/ersity and Colombia Business School, has revealed just how destructive this can be.

According to their findings, having financial difficulties leads to feelings of shame. This is because we tend to feel that money problems are our own fault.

And since one of the effects of shame is that we don’t want our perceived shortcomings to be seen, this makes us avoid our problems. And that only makes them worse.

“Shame induces financial withdrawal, which increases the probability of counterproductive financial decisions that only deepen one’s financial hardship,” the authors of the study wrote.


A cycle of hardship

The name the researchers gave to this phenomenon is the “shame spiral”.

“Shame helps set a poverty trap by creating a self-reinforcing cycle of financial hardship,” they wrote.

Shame is a particularly pernicious emotion, for two reasons. The first is that it comes from a sense that we have not just done something bad, but that we are bad. In the case of our finances, this may be a feeling that we are simply unable to manage money, or that we don’t deserve to have money.

Secondly, as the American Psychological Association defines it, shame “is typically characterised by withdrawal from social intercourse”. This is because of a “strong fear of one’s deeds being publicly exposed to judgment or ridicule”.

In other words, when we feel shame about something, we don’t want anyone else to know about it.


Secrecy and silence

When it comes to money, this shame is made worse because just the topic itself is often taboo.

“Money isn’t polite to talk about in most societies, so there is built-in secrecy and silence,” says the author of The Financial Anxiety Solution, Lindsay Bryan-Podvin.

Acknowledging to anyone else that we are in any kind of financial distress is therefore extremely difficult.

In addition, it’s easy to feel that there is something wrong with us if we have difficulty with money because of the kind of messages we are getting all the time. There is no shortage of articles written about how most people spend too much, haven’t saved enough, won’t be able to retire comfortably and can never stick to a budget.

“There is money judgment coming at us from all directions: personally, professionally, religiously, and culturally,’ Bryan-Podvin says.


Step 1: Break the silence

The first step to ending the “shame spiral” is, however, to stop suffering in silence. It is incredibly hard to take anyone into your trust about money problems, but finding an understanding ear is critical.

Shame grows deeper from isolation. Getting your difficulties out in the open is the only way to start moving towards financial wellness.

These days there are a growing number of professionals who can provide support and guidance in these situations. Whether it’s a financial adviser, a financial coach, a financial counsellor or a financial therapist, there are people who understand the predicament and will be sympathetic to your challenges.


Step 2: End the comparisons

Our perceptions about our financial situation are often based on how we think other people are doing. It’s easy to assume other people have it all together, and are thriving financially, but the reality is that if you aren’t talking about your true financial situation, they probably aren’t either.

According to the latest Financial Capability Survey, 39% of adults in the UK don’t feel comfortable managing money. Nearly nine million adults are in serious debt.

If you are having money troubles, you are therefore far from alone. So accept that you don’t need to measure yourself against anyone else, particularly when you don’t really know their circumstances.


Step 3: Learn from your mistakes

Ending the shame spiral requires you to stop being so hard on yourself and showing yourself compassion. But that doesn’t mean that you shouldn’t really scrutinise where you might have gone wrong.

This is not about making judgements. It is about turning the hardship into a learning opportunity.

Identify the things that cost you the most, acknowledge them, and make a conscious decision about how you will do things differently in the future.

As Bryan-Podvin says: “Practicing financial empathy and compassion means being nice to yourself for the mistake. Many clients I work with believe that empathy and compassion are about letting yourself off the hook for making mistakes. That couldn’t be further from the truth. Acknowledging a mistake, owning up to it, and not beating yourself up is one of the most emotionally mature ways to cope with mistakes.”


One of South Africa’s most respected financial journalists, PATRICK CAIRNS is a trusted commentator on the world of investments and the quirks of behavioural finance. Over more than a decade he has built a reputation for keeping the industry honest, and putting the interests of investors first.
Here are some more articles by Patrick Cairns:

Three reasons not to wait to talk to your kids about money

Do men and women invest differently?

So you think you’re a rational investor?



Investors are far more likely to achieve their goals if they use a financial adviser. But really good advisers with an evidence-based investment philosophy are sadly in the minority.

If you would like us to put you in touch with one in your area, just click here and send us your email address, and we’ll see if we can help.


© The Evidence-Based Investor MMXXII

How can tebi help you?