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"Guilt, of course, is feeling bad about one’s actions, but shame is feeling bad about oneself." (Greg Boyle)

When we have problems with money, we tend to feel that they are our own fault.

Recently, a group of behavioural economists published research that shows just how destructive this can be.

What they found is that having financial difficulties leads us to feel shame. And one of the effects of shame is that we don’t want our problems to be out in the open.

So, we avoid them, and that only makes things worse.

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

A cycle of hardship

They called this phenomenon the “shame spiral”.

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

There are two reasons that shame is so damaging. The first is that it comes from a sense that we have not just done something bad, but that we are bad. As far as our finances are concerned, this means that we may feel that we can’t ever manage money, or that we don’t even deserve to have it in the first place.

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

This can be even worse when it comes to money.

“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.

This makes it extremely difficult to tell anyone else that we are having problems.

So, how should we face it?

Step 1: Break the silence

To start dealing with the “shame spiral”, the first step is to stop suffering in silence. While it is difficult to take anyone into your trust, it’s critical to find someone sympathetic.

Getting your difficulties out in the open is the only way to start moving towards financial wellness.

Find a financial professional who can provide support and guidance.

Step 2: End the comparisons

We often base our feelings about our financial situation on what we think others are doing. It can be easy to imagine that other people are thriving when it comes to money, but the truth is that if you aren’t talking about your true financial situation, they probably aren’t either.

If you are having money troubles, you won’t be alone. You don’t know anyone else’s circumstances, so don’t measure yourself against them.

Step 3: Learn from your mistakes

To end the “shame spiral”, you need to show yourself some compassion. But that doesn’t mean that you shouldn’t have a good hard look at where you might have gone wrong.

You aren’t judging yourself by doing this. Rather, you are turning the hardship into a chance to learn.

Identify what behaviours have 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.”

If you have financial difficulties, speak to a professional.