Financial paralysis is a state of persistent anxiety about money. This anxiety overwhelms those suffering from financial paralysis. Even, arguably more so, when their financial situation looks bleak, and action is critical. When they do get the courage to try facing their finances, they feel a combination of confusion, shame, hopelessness, powerlessness, frustration, and indecisiveness. This mixture of complicated feelings makes them “freeze up”, rendering them unable to take actions to better their situation.
From the outside, financial paralysis might look like:
- Avoiding opening or paying bills
- Not checking bank accounts
- Procrastinating on making a budget
- Putting off investing
- Evading talking about money
These actions, or inactions, have consequences. Some of which can be serious, all of which lead to the situation worsening over time. These consequences range from late fees and lost savings to damaged credit and unmanageable debt. In really bad situations, it can even affect relationships.
Fortunately, as difficult as financial paralysis is, there is a way through to a financially healthy life. Bravely taking small steps at a time will lead to a healthier way of managing money both habitually and emotionally.
What causes financial paralysis?
While there is a lot of nuance to financial paralysis, the cause can be broken down into two overarching sources: a sudden external shock and underlying behavioural patterns.
Sudden external shock
It’s common for someone to experience financial paralysis when faced with something traumatic, like a job loss or their home burning down. These situations instantly create a long to-do list of urgent tasks. The stress of the situation can leave even the most competent people stuck, not knowing where to begin.
Underlying behavioural patterns
When faced with something that frightens us, we humans have four main automatic survival responses: fight, flight, fawn, and freeze. These responses can happen even if it’s a perceived threat and not an imminent threat. In modern day, we need money for necessities like food and shelter. Facing financial hardship puts these things at risk, and so our survival response gets triggered.
Avoiding taking action to improve the financial situation can be seen as a form of both freeze and flight response. A flight response might look like continuing to charge things to a credit card even though there’s not enough money to cover the cost. A freeze response might look like trying to open a credit card bill, but not being able to.
It’s important to know that for some, it doesn’t take financial hardship to trigger one of these survival responses. For them, even thinking about money is enough. There are a myriad of reasons for this. It’s different for each person.
Getting past financial paralysis
No matter what happened to cause the financial paralysis, the way through is the same. The key to “unfreezing” is keeping things simple. Take one small step at a time. It’s best when each step feels comfortable, but with the mildest of stretches.
How much of a stretch to go for is an important consideration. Similar to stretching the body, in time the stretches between steps may become wider and looser. Even then, staying within a comfort level stretch is still important. Reaching beyond that leads to a greater likelihood of getting triggered back into a survival response. Some helpful tips to do this are:
- Break down larger goals into small, bite-sized steps.
- Live in a mindset that progress, no matter how small, is better than none.
- Don’t take on everything at once. Choose one goal to focus on at a time.
- Seek out support from a friend or professional when you need it
- Find ways to celebrate the small wins.
Example of breaking down a goal
A goal of paying off debt may be broken down into as small as steps as opening the unpaid bills one day, adding them up the next, and then making a list of debt solutions the following day.
Tips for staying on track
Survival response can be tricky to get out of because they tend to have a very strong magnetic pull to them. Here are three things to help you get out of (and stay out of) financial paralysis.
Starting point
Often, the survival response keeps looping around because we simply don’t know where to start. To help with that, here are a few great starting financial goal recommendations.
- Create a budget
- Pay off debt
- Find a reliable financial expert
- Do a no-spend challenge
- Build an emergency fund
To narrow it down to just one recommendation, the best place to start is creating a budget, followed up very closely by building an emergency fund.
Know your why
There’s always a reason behind why someone chooses a goal. This isn’t just any surface why. It’s the core why. For example, many people may have a goal of saving $10,000, but each person will have a different reason for choosing that goal. One person might want financial freedom. For another, it might be to go to university or to support an ill family member. Knowing this core reason and reminding yourself of it often will help motivate you to keep going.
Seek out support
Reach out for support getting through any particularly tricky parts, so you don’t stay stuck in one spot too long. Support can come in many forms:
- Budgeting, or other financial apps
- Trusted friends
- Financial experts
- Government resources
Reliable financial literacy sources and tools like blogs, calculators, podcasts and videos
Wrap up
Financial paralysis’s grip can be strong, but rest assured, there is a way to get it to release its hold. Taking one step at a time affirms and confirms to yourself what direction you want to go. Building confidence and courage at each milestone along the way. In time, you’ll be rewarded for your efforts with greater financial health and overall well-being.
