Financial Denial is a problematic money behavior that covers a lot of area. To help make it understandable, let’s start by defining “denial.” One definition is “the action of declaring something to be untrue” (implying that the something is in fact true). Another defines it as “a failure to acknowledge an unacceptable truth or emotion, or to admit it into consciousness; used as a defense mechanism.” When I am in denial, I simply do not want to admit something is true because the pain of having it be true is overwhelming or unacceptable.
Financial denial, then, is denying or avoiding painful truths around our relationship with money. And, of course, as with other money behaviors, it is more about emotions than about money. Usually, behind the resistance to accepting a financial reality is fear. There is a threat that if this is true, it is going to be overwhelming. No wonder that, in a survey of 1000 adults, 36% admitted they avoided thinking about their financial difficulties.
Yet the consequences of financial denial can be significant. A person in financial denial is more likely to also have problems with compulsive buying, gambling, hoarding, workaholism, financial dependency, or financial enabling. The denial is helping us cope with these self-destructive behaviors. We avoid looking at financial reality because it’s so painful to consider that the reality could be true. There could be all sorts of difficult emotions associated with the behaviors, including a huge amount of shame. If (whatever the behavior or problem may be) is true, then that means I am a failure, I am bad, I am wrong, I am defective, etc.
Underlying all of that pain is an inner part of us that has been wounded and has been exiled in an attempt to keep us safe from that emotional pain. We try to avoid triggering the pain by saying the problem does not exist. We make up our own internal story of how the world is operating and numb out to what reality is.
Financial denial can be an issue even for people who appear to be financially successful. One example we cited in Facilitating Financial Health was a woman who owned a thriving business, earned $200,000 a year, and had savings of over $500,000. Yet she had a difficult relationship with money. She had never been taught how to manage money, just that she was supposed to have it. And one of her family money secrets was that her mom, who used to manage her business, embezzled $400,000 from her. She worked really hard, but she never looked at the books and never learned the financial side of the business. That denial and avoidance gave her mom an opening to manipulate and steal from her. And if you can’t trust your own mother, who can you trust? There was deep pain behind this woman’s financial denial.
Another common factor in financial denial is an underlying belief that money is bad. This might include money scripts like these: “Money is not spiritual,” “Virtuous people shouldn’t care about money,” or “If I’m good, the universe will provide.”
Financial denial is a way to avoid the pain that is carried by a traumatized part of us. Yet in order to heal and to change our behavior, it is essential to visit that part. In denial, we try to exclude that part and make it wrong or bad. Recovery requires us to accept reality, to experience the pain, and to really connect with that part of us and give it legitimacy for what it is feeling. Then we can change course and create a better financial and emotional outcome.
Check out The Financial Therapy Podcast by Rick Kahler concerning this topic.