"An abnormal reaction to an abnormal situation is normal behavior."
After much debate, Frank has decided to buy a new car. He goes upstairs into his closet. There's a safe in the back where he keeps all of his cash. He has hundreds of thousands of dollars in his closet. He doesn't put his money in the bank, much less the stock market. Investing is for suckers. He watched his dad lose all of their money in the Great Depression when the banks literally closed. That was stressful for his family, and he remembers from then on that he would never put money in the bank and only pay cash for his purchases. He has not made any interest on his money, and in fact, his money is worth less than it used to be because of inflation. Not only does Frank not fully understand this, but he wouldn't care if he did. Banks are not to be trusted.
Waking up from a nap, Mike checks his trading app and see that his positions are up $5,000 over the course of a couple of hours. Over the past week, he's made $40,000 trading options. The next day, Mike dabbles in the options markets more, this time losing not only his $40,000 profit, but also three-quarters of his initial investment. He doesn't even care. Money is not important to him, and he would rather lose all of his money trying to take down hedge fund managers than wait for hedge fund managers to take advantage of him in the future. Mike's dad lost his company in the Great Recession and never recovered. They lost their home, and his dad turned into an alcoholic. He remembers the stress that came from watching hedge fund managers and other bankers receive government bailouts while the little guys lost their homes. He would rather risk any money that he would ever accumulate just to try to spite hedge fund managers.
Mike's friend Tim has been hearing about all of his friends making money trading options. He's jealous. He's heard of so many people turn $5,000 into $100,000, and if it's that easy, he might as well do it. He tries, but he doesn't understand trading, much less what options are and how they work. As a result, he lost his stimulus money and some of the student loan money that was supposed to pay for his education.
Frank, Mike, and Tim have all have their beliefs about money shaped by highly intense experiences that they have either experienced themselves or watched others experience. They have experienced intense financial flashpoints.
Financial Flashpoints: Financial Trauma
Financial flashpoints are highly intense emotional experiences that shape or change how we think about money. You can think of financial flashpoints as being the money equivalent of trauma. The analogy is not perfect, but it's a good starting point. True financial trauma would count as a financial flashpoint, but financial flashpoints aren't necessarily trauma. For example, a financial flashpoint could be a good event that happened to you. Financial flashpoints don't even need to be a significant event. They can be big or small, positive or negative.
If something happened that was outside of your original views about money, and this event changed how you think about money, that would be a financial flashpoint.
The more intense the financial flashpoint, the bigger impact it will have on your Money Scripts. For example, if you put your foot in your mouth and were slightly embarrassed in front of a couple of people because of something you did with your money, that may not change your Money Scripts at all. On the other hand, if you are embarrassed in front of your entire company or entire school because of something you did or didn't do with your money, it could dramatically impact how you view money going forward.
Financial Flashpoints: Fight, Flight, Freeze
We don't particularly enjoy being in stressful situations. When the stress gets high enough, our brains try to get us out of that situation anyway it knows how by going into a stress response. You may have heard of this being called fight-or-flight, but there is a third option, freeze.
If we go into a fight response, we're likely to get aggressive. Sometimes we'll get into a physical altercation, but more often, this takes the form of yelling, screaming, or even being sarcastic and dismissive.
When we go to a flight response, we run away. That could literally mean we leave the situation, but it could also mean mentally checking out of the situation. We could change the subject or otherwise avoid the stress.
Fight and flight responses remove us from stressful situations that our brains perceive as threats. These could turn into financial flashpoints, but generally, these events won't because we were doing something about the situation - taking an active role.
The freeze response is when we effectively play dead. We freeze. We literally don't know what to do, so we shut down. This is when we can't believe that it's happening to us, so we wait for it to pass. This is when we let a bad event happened to us because we don't have any other choice. When we go into a freeze response, we tend to end up with a financial flashpoint.
All of this happens outside of conscious awareness. We don't know that it's happening at the time. Throughout your life, you've been learning which of these responses works best to get you out of stressful situations. If becoming aggressive has helped you in the past, you're more likely be aggressive in the future. If leaving the situation has been effective in the past, you're more likely to leave stressful situations. It's usually when things come out of the blue that we enter the freeze response and then experience a financial flashpoint.
Financial Flashpoints: Responses
When these highly emotional financial flashpoints happen to us, they rock our view of our financial world. These tend to be uncomfortable situations that our brains don't want us to go through again. There are two ways that we tend to respond to financial flashpoints. One is hyperarousal, and the other is dissociation.
Hyperarousal is when we pay far too much attention to what we perceive as the source of the financial flashpoint. We are obsessed with it. We feel like the event is haunting us constantly. We tend to overreact when something similar may happen, or we perceive it might happen.
Dissociation is when we pay no attention to the source of the financial flashpoint. We ignore the source of whatever may have caused it. We altogether avoid situations that we subconsciously think might lead to that pain again.
Financial Flashpoints: Money Script Impact
With financial flashpoints, essentially, our minds were caught off guard and are left to try to make sense of what just happened to us. To make sense of what happened, we create rules, or Money Scripts. These rules tend to have a "never," "always," or "only" component to them. If this is a new situation for us, this will be a brand new Money Script. If the financial flashpoint violated an old money strip, this flashpoint would rewrite the old Money Script.
Understand Your Financial Flashpoints
Once you begin to understand the role that money has played in your life in the past, you can understand why you believe the things you do today about money. Think back about significant events around money that happened to you. How have they impacted what you do or don't do with your money today? Explore your money history, and you're likely to get a glimpse of why you behave the way you do.
Once you understand some of the financial flashpoints you have and their impact on your Money Scripts, you can start to challenge those beliefs and live with more peace of mind.
You only have one life. Live intentionally.
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Related Money Health® Reading
References and Influences
Barrett, Lisa Feldman: How Emotions Are Made
Klontz, Brad, Rick Kahler, and Ted Klontz: Facilitating Financial Health
Klontz, Brad, Rick Kahler, and Ted Klontz: The Financial Wisdom of Ebenezer Scrooge
Lawson, Derek, Bradley T. Klontz, and Sonya L. Britt: "Money Scripts," in Financial Therapy
Manson, Mark: The Subtle Art of Not Giving a F*ck
Miller, William R., and Stephen Rollnick: Motivational Interviewing
Wikipedia: Schema (psychology)
Note: Above is a list of references that I intentionally looked at while writing this post. It is not meant to be a definitive list of everything that influenced by thinking and writing. It's very likely that I left something out. If you notice something that you think I left out, please let me know; I will be happy to update the list.
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