The 3rd Decade Podcast
The 3rd Decade Podcast
Scarcity Mindset and Trauma Around Money
In this episode, Nikita & Katherine Chatmon (3rd Decade Volunteer Mentor), discuss how a scarcity mindset & trauma around money impact our financial beliefs, progress, and wellbeing. This discussion includes: how it shows up, root causes, and ways to heal/rewrite your money script.
Resources:
- "Money Story" worksheet download
- Financial Archetype Quiz
Welcome to the Third Decade Podcast, where we believe every young adult deserves the confidence to take control of their financial future. Whether you're just getting started or you're well on your way towards financial independence, we're here to give you the tools and guidance you need to build a life that aligns with your dreams. Let's turn financial uncertainty into opportunity. Together.
SPEAKER_02:Welcome to the Third Decade Podcast. I'm your host, Nikita Wolff, and today I am joined by one of Third Decade's beloved financial mentors, Katherine Chapman. Thanks for joining me today, Katherine. I'd love if you'd take a moment to introduce yourself.
SPEAKER_01:No, thank you for having me. So, yes, my name is Katherine. I am, well, Let me back up a little bit. So my day job is a wealth advisor for a financial firm based in Texas. And then I say my night job is that I do a lot of financial literacy outreach in the community. So my master's degree is in financial planning and wealth management. And so growing up, I really didn't know too much about money. And it wasn't until I started studying for my degree that I learned all these cool things about money, how you can build wealth, your financial behaviors. And so now this is kind of like a passion project for me. So during the day, I work with people who have wealth. During the evening, night times, weekends, just whenever my schedule allows, I work with the people who don't necessarily have the wealth, but giving them tools and resources to get them to that point.
SPEAKER_02:That is amazing. That must be super enriching to be able to, A, you know, journey that path in your own life and be get to work on both sides of that and and serve people who need it more than anyone.
SPEAKER_01:Definitely. So that's why I call it my passion project. You know, it's not for money, but it makes me happy.
SPEAKER_02:That's amazing. Thank you. Thank you for doing that. So today, our episode is going to be focused on the scarcity mindset and trauma around money. So I am really excited to dive into this. I know you have a lot of knowledge on the topic, and I know I'm going to be learning from you even during our discussion. So let's go ahead and just start off maybe by describing like, what is a scarcity mindset? What do we mean when we say that?
SPEAKER_01:So when we say a scarcity mindset, it's just belief that resources and whether that's money, even success, even happiness, it's just that it's limited in supply. And that if someone else has it, that means that you won't have it. So it's really just a voice in your head, I would say. And so it may tell you that, oh, you need to hold on to this because you may not get another chance. Or it'll tell you that, oh, I can't afford to rest. Like I have to to make money, money, money, money, money. So you're working like maybe two or three jobs at the time. If you take this money and invested, oh, it's going to fail and I won't have a safety net anymore. Like I'll lose everything. And so this mindset, it can show up in very different different ways, like every day, like you can worry about your bills, even if you have a steady income, over committing to your work, not applying for certain opportunities, because you're not sure it's for you that we get into that imposter syndrome. And then even holding on to toxic relationships, because you're, you know, fearful of being alone. And so at the root of this mindset is that it's not that you're being cautious is that you're just being controlled by fear.
SPEAKER_02:Wow. I wish that didn't hit a few relatable points, but great job explaining that. Maybe let's talk about how financial trauma impacts that and kind of how the two play together not nicely with one another.
SPEAKER_01:Yes. Okay. So at the root of that fear, it is trauma, honestly. And so the mindset, it didn't come from anywhere. There's things in your life that maybe made this like pop up or even just patterns over a lifetime that made this like just show up. So for example, like maybe you grew up watching your parents struggle to make ends meet and you maybe that fueled you to be a kid that didn't ask for anything because you know your parents couldn't afford it for you. And so now as you've grown up, maybe you're the person now that you have a good paying job and now you buy anything and everything that you want because you're satisfying that inner child that never got anything. Even so far as that maybe you face like discrimination or systematic barriers that made those opportunities fill out a reach for you. So we will see like those people that are just like they will be overqualified for a position, but they're under, like they're not working a position that they could be in. Cause you'll see a lot of people that have like master degrees and stuff, but they're not utilizing it. Like they're a manager at McDonald's and not downplaying like a manager at McDonald's. I'm saying that you're more qualified for something better than that. And so at the root of that, like I said, it's just trauma and it's just your brain pushing you to survive and not thrive. So when you're in survival mode, you're always looking for like oh what's going to happen next what's the next crisis what's the next threat and that just becomes your normal operation so even when you're safe even when you have abundance in your life you're just still stuck in that fear and so and it's not a flaw honestly like if animals had jobs they would probably honestly be the same way it's just a response to your natural environment and so have you as you have experienced trauma especially financial trauma it makes a makes sense when we look at it from a perspective.
SPEAKER_02:Yeah. It's interesting too, to see how it really kind of goes one way or the other. I know I have friends who have grown up with financial trauma and it's like, they either grow up to be super, super frugal and scared of losing money or completely reckless with the money that they do have and kind of trying to satisfy that inner child that never got anything they wanted. It's kind of interesting to see how it's like almost polar opposite responses a lot of the time.
SPEAKER_01:And I'm glad you said that because that takes us into the next key point when we talk about our financial trauma and our money types. So as you... Yeah. So... You know, certain parts of your brain can be overactive, underactive. I'm not going to bore the people with that. But just to summarize, like financial trauma, it just changes how your brain works. And so when you experience long-term financial stress, like poverty, debt, housing insecurity, or just being responsible for other people's survival, it just keeps your brain in a high alert. So it may not be that a person's bad with money. It's just that your brain has just been prioritized to, like, we're gonna prioritize immediate safety over future planning. And so when we're trying to like break and get to the root of that trauma, one thing I like to look at is ask people like, what is your money type? So we have a few of these. So the first one is the saver, or I like to call them the hoarder. They're always stashing money. And if they spend money, that creates a lot of guilt or anxiety. And so for this trauma route, this person, they probably grew up with a lack of where they felt like saving felt like survival. They're always thinking like, oh, I have to, I can't spend anything for myself. I can't buy new clothes because it's like, what if the car breaks down? you know. Next personality type is that we have the spender. This is Mr. Hotshot, Miss Big Money. Like, They see it, they buy it. And this brought in probably the one who had deprivation in childhood and spending now feels like, oh, I have power. I have self-worth now. Maybe it was the kid that was like, oh, we only got clothes from thrift store, but now I'm going to go to Saks and I'm going to buy all the clothes that I want. Next, we have the avoider. This is the person who doesn't want to talk about money, budgeting, or Any type of checking accounts, they're probably just like swipe, swipe, swipe, swipe. If it goes through, I'm good. You know, just logging into the bank app is just going to cause them so much trauma. And so for this person, probably growing up, they will probably money was like shame or conflict in the household. And next we have the enabler. This is the person that will give money to their friends and family at their own expense. So they probably were growing up, they learned that love had to be earned or you rescued others to feel valued. So you'll see people that are like, oh, I have to give like, you know,$500 a month to like my family member because it's like, oh, when I was growing up, like they gave us money. You know, it's like even if that person is not like utilizing the funds for like housing and stuff like they would still like they're enabling them by like, oh, I'm giving you this money every month. So it does encourage them to do better. And lastly, we have the overachiever. So. they're obsessed with earning more. It will never be enough for them. And so their trauma route is probably like performance, productivity. Think about the A plus student, same thing, but just for money. So
SPEAKER_02:do we find sometimes that people will, hit on multiple of those money types or maybe fluctuate throughout life?
SPEAKER_01:Yes, they will fluctuate throughout life. There's been people that have been hoarders and they have had to try to rework their brains and now they've unfortunately went to the spenders category. And so it's about finding that perfect balance. But sometimes people will be a blend of these. It may not just be like, this time, that time, and then just throughout their life journey, like changing, they may be a little bit of a blend. Like you may see like an overachiever who's also like a hoarder. Like it's like, oh, I have to just keep earning money, earn, earn, earn, but they're not like investing it. The money's not growing. They're just like hoarding it up under their mattress or something.
SPEAKER_02:Right.
UNKNOWN:Yeah.
SPEAKER_02:This is so interesting because thinking about as you're telling each one, I'm like, oh, this person. Yeah. Oh, that's me. Oh, wait, but no, maybe that one's me. There's amazing. I haven't thought of just how many different money types there could be, but a hundred percent. I can, I can literally think of a close friend of mine for each of those. I think it affects all of us in, in some way, if we've grown up with financial trauma.
SPEAKER_01:Yes, definitely. And then, The crazy thing is that, you know, most of our financial habits are established by the time that we are five years old. So you're missing all of like those key growth years. And then it's kind of like locked in. And you probably won't like, you know, this probably will not show up as a conflict for most children until they reach like adulthood when they're no longer with their parents and stuff. And then it's like, oh, first job, stepping out, apartment, college, all those things. Yeah, it's a
SPEAKER_02:lot of responsibility to stumble into all at once. I think just becoming an adult that, yeah, it is a shock to the system. Definitely. I know that one of the things too is witnessing the struggle in your caregivers, even if it doesn't necessarily impact you. I think that sometimes like you grow up with a money script a little bit based on how your parents maybe dealt with stress around money or didn't deal with stress around money. Do you see that to be the case too?
SPEAKER_01:Yes, definitely. And there is, and if anyone uses TikTok, there was a couple that reminds me of this. So one of them grew up like, We'll say like lower, lower class family. Another one grew up in like a more privileged family. And so they were comparing things that they did based on how they grew up. And this wasn't just totally about money. So one thing the wife she was from, you know, she grew up in poverty. She would always save leftovers in the fridge, even if she didn't eat them. Cause you know, it's like, what about, we may not have food, but he's a person that's like, oh, I'm going to eat this meal, throw it away. I don't need the rest. Even so much as like cutting the lights off in the house. Like every time she left her room, she would cut the light off, but he would be like, hey, leave the lights on. We can pay the power bill. But just little things like that, it makes you think. And so if you put that in the perspective of money, you can see like, she's probably like, you know, the hoarder personality that we talked about earlier. She's probably thinking like, oh, we have to save while he may be the personality. That's like, we can just go to the store and buy it. It's okay.
SPEAKER_02:Right? Yeah, totally. So can we talk about how trauma affects the brain specifically, like almost on like a physical level and just the decision-making as it follows?
SPEAKER_01:Yes. So first thing is most money-making decisions are emotional. I would say even upwards of like 80%. And then like 20% would be like, we would say logical reasoning. And so how a lot of things in life are structured is to make you make those rash decisions. Like in the moment, it will be like, think about it in terms of a sale. It's like, Oh, today only, or it'd be like this weekend only. So a lot of things are pushing you and your brain to make those rash financial decisions. So your brain system, in a sense, like it becomes all, overreactive when you are experienced to certain like outside forces. And when you react emotionally, impulsively or fear, like when money is involved, it really, at the moment you may think like, oh, it's okay. But sometimes people will have like that reaction. moment of clarity, probably like 24 hours later. And they're just like, what did I just do? Like, I bought this new 50 inch TV that was on sale. Did I really need it? And so when it comes to this, a lot of people feel like a lot of shame and stuff. And I just want people to know that it's not a flaw. you know it's like you're not set up for success when it comes to like dealing with these things and so it takes a lot of work to rework your thinking system because you're going to have to tell yourself like wait and so this is why they've tried to initiate different things of like tell people like hey before you make a purchase have a 24-hour like think through like sleep on it and make sure it's actually something that you want also tell yourself is it really a want is it a want or need. Do you need a new TV, but do you just want a 50-inch TV? You know, slightly different. And just want to add in that you're not broken. Your brain is doing exactly what it was trained to do, like to protect you at the end of the day.
SPEAKER_02:Yeah, I think sometimes we forget that we really are animals and that our brain's job is to help us survive. And while this may have been beneficial to us a few thousand years ago, longer than that, like it's sometimes not as beneficial to us now. So, yeah, just to be kind to ourselves and recognize that, you It makes sense that our brain is doing that and we're intelligent enough human beings that we can help kind of rework that so it doesn't become maladaptive. Right. Maybe a couple more examples that I thought of was having trauma around the banking industry, for instance. I know there are some people who have lost money to a bank or have had something where they weren't able to access funds. So there are people who avoid using a bank because they feel like their money is safer under a mattress. We can see how that could potentially backfire on a person in the event of a theft or accidentally losing money. Literally mattress stuffing your cash is not safer than a bank account. But then also lots of panic during financial planning and investment decisions. How do you see this impact people's investment behavior? Because I know that's a big one. Even as somebody who I like to think of myself as pretty objective and almost removed from thinking about investing too often because I have just everything on autopilot plan set ahead of time. But how do you see this kind of creep up for people who are... trying to invest and still kind of struggling with that trauma around money?
SPEAKER_01:Okay. Yeah. Let's start with the banking portion. So a lot of people are either they're underbanked or they are unbanked. And that just means that either they have like the most basic like checking account, just to say that they have a debit card, that would be the underbanked. Sometimes People do not vet banks. And one option I've given people who are like wary of banks is that to try credit unions, because those are kind of a better alternative. Like you have to be like a member, you know, and stuff like the funds are insured. They're insured with most banks also, if they are like insured. you know, they're not like a shady bank. Right. Yeah. So like, even if the bank fails, like the government typically steps in, if they're FDIC insured and they will give people back their money, like pretty quickly, it's not going to take you like six months to get your money back. Like they step in pretty quickly. Like we saw that with the Silicon Valley banks and all of those that went. Yeah. Yes. But there's a lot of distrust around banks and that's why we offer, credit unions as one. try to get people to avoid using like cash app and things like that, because it's like, even though certain, certain ones of those like money apps, even though they are like insured and stuff, you, I have heard stories of like, um, for income tax, they've gotten a deposit into the account and they assumed it as fraud. And now they've taken your whole income tax. So, you know, certain things you have to be wary of with dealing with those cash apps. So, um, That's one thing. I
SPEAKER_02:have a friend whose Venmo got shut down and like, even if people would pay him, he could not access the funds anymore. And that's probably a similar situation. That's crazy.
SPEAKER_01:Yes. And it's a scary situation because it's like, well, who do you call at that point? It's like, yeah, you're going to be in for like a long fight.
SPEAKER_02:Yeah. Yeah. Yeah, and you could just avoid it by going with a more reputable, a bank that was, I should say, meant to be a bank from the beginning rather than a friend-to-friend payment system that capitalized on an opportunity to also become a bank.
SPEAKER_01:Yes, and that includes PayPal also. Just don't let your buddy sit there. And even if there's a thing called checks systems for people that have, they maybe overdrafted a bank account years ago and they shut it down, and they never paid it and stuff. There's a system that kind of like credit scores that lets other banks know like, hey, this person's like unbankable. I don't trust them. There's programs that still will give you like the most basic checking account and you can still like build up your basically your credit score with the banking industry and they'll give you a second chance. But yeah, putting money in your mattress or just leaving it in your house is not the best idea because it's like with inflation, that money Money is just eroding in value. So it's good to find. And there's a lot of like high yield savings accounts that you can put into. Like most banks are giving you like 0.01% on your money. That's literally nothing. You can go to Allie, which is a bank. They do great for mortgages and stuff. They'll give you like 3.8% right now on your money. Like that's pretty good.
SPEAKER_02:I just moved my emergency fund over there because I was having trouble with another bank that was just had terrible customer service. Their platforms wouldn't let me make transfers. I'm like, I'm done here. But I'd heard great things about Ally. And yeah, I'm going to put in another pitch for Ally because they let you make seamless transfers. They're from super user intuitive and user friendly. And yeah, they have a good interest payout. They allow you to do buckets within funds so you can like kind of set goals. And that's an awesome online only bank. And it is FDIC insured as well.
SPEAKER_01:With that hand in hand is that we move over to the investment portion. So the stock market is going to go up and down every day. And there's really no way to time the market. Time in the market is more important than timing the market. And I'm going to say that one more time. Time in the market is more important than timing the market. I think too many people, they're just like, oh, I need to wait for the stock market to drop. If you look at the history of the stock market, like since the beginning. It's like it has always dropped down, but it has always rebounded. Like even if you look more recently from like if we just start from like the tech bubble crash in the 2000s up until like when COVID hit, like the market has continued going up. And yeah, it's dropped like 20% with maybe some nerve wracking for people like when during COVID and stuff, but it rebounded. And even with, you know, uncertainty with the Trump administration right now and stuff, the stock market has still considered to perform well at certain points. It's responding to what is happening in the economy. If things are going favorably, the stock market reflects that favorably. So try to tell people to invest what your comfort level is. Too many people think like, oh, I have to do the individual stocks route. You don't have to. There's mutual funds, index funds that you can invest in. And those are just like a basket of stocks. Like think about a grocery store and you just have a bunch of things in your cart. that's basically what those funds are. And because you're equally diversified in these funds, yeah, the stock market may be down 15%, but your assets may only be down 8%. Right.
SPEAKER_02:Because it's unlikely that the industry that is suffering is the only industry reflected in your portfolio if you have mutual funds.
SPEAKER_01:Right. And there's also assets that perform really well when the economy is doing well. And then on the flip side, when the economy is doing bad, there's other assets that perform well. So that's why I tell people like you have to be diversified when we get into this investment talk.
SPEAKER_02:Yeah, we are all for index funds, mutual funds, and not trying to stock pick because yes, it is. Yeah.
SPEAKER_01:So there are people that are really good, like you can follow and pick stocks, but that's, you know, it's time consuming. And the last thing you want to end up with is that there were some horror stories with Fidelity, people who are following these, you know, Instagram, TikTok, stock pickers, and they didn't know about wash sale rules. And so they were ending up with like$800,000 gains taxable on their tax returns. And like, what do I do about that? I'm like, you owe it. There's nothing you can do about it. You can set up a payment plan, but there has to be some knowledge there first before we just jump into stocks.
SPEAKER_02:Yeah.
UNKNOWN:Yeah.
SPEAKER_02:Yeah, no kidding. I think Robinhood and companies like it have made it feel so approachable that it's getting people who know literally nothing to come in and put real life money and stuff at stake. So yeah, it's sort of a downside to making it overly accessible you want to like you want it to be accessible of course but not um gamified because then i think you're maybe drawing in the wrong personality types into financial planning for their futures yes so i would love to maybe move into our discussion around you know if we if our listeners resonate with some of these money types um maybe have some background of financial trauma, but they are ready to move forward and forge a better path that is better for their well being what can people do to help kind of rewrite their money script and just, you know, move forward into healthier habits?
SPEAKER_01:Well, the first thing I would want them to do is to, there is a survey on Abaticus Wealth Partners, and it will ask you to answer the questions and it'll tell you like what your money type is. And it'll give you a good start point of like, what are some things you can look for in your behaviors and, you know, track those behaviors. Another thing I would like them to do is that for a month, just keep every receipt. that they spend money on. I don't care if you went through the drive-thru on your lunch break to McDonald's. Keep a little paper bag in your car and just chunk a receipt in there every time you spend something. Then at the end of the month, I want you to look at every receipt and categorize it. Is it food? Is it clothing? Or is it a necessity? Your housing is a necessity. Electricity bill. Internet can be an accessibility necessity now because You know, most people like work from home or just, you know, streaming services like those aren't necessities. But if you are using your Internet for streaming services, put them over there in the leisure category and then just look like where you are spending money. And that usually is like the first kick for someone to be like, oh, something needs to change, because a lot of people like they'll say like, oh, I want to change my money habits. And I'm like, OK, where's your money going? And then it's just like a flat line. Yeah, it's like we can't change anything if we don't know where the money is going, because it's a possibility that maybe you do have better spending habits than you thought. And we have an income problem. And that we can fix. Like, we can, like, possibly, like, you could go back to school. Like, there's 18-month programs or a certificate you can get. Or are there open positions at your job that you can possibly move into? Like, fixing an income problem, I would say, is easier than us tackling, like, the financial, the, like, behaviors, the thoughts, the habits. Because that takes time. It's nothing that we can just say in a month's time, like, oh, you know, like, this Bibbidi-bobbidi-boop, you're healed. Go out there and get them, tiger. It doesn't work like that. It's going to be a lifelong process of like where and you'll probably forget. And then it's like, oh, wow, I bought something that I didn't really need and stuff. And you may, you know, feel a sense of shame about that. Be like, oh, I messed up. But just start right back over again. The important part is that, you know, it takes like 21 days to form a habit, right? It's going to take much longer to break that.
SPEAKER_02:Yeah. Yeah, no, that's absolutely true. I also think sometimes it can be really eye-opening for people to see where they actually spend their money. One of the things that our participants do in our program during the education piece before they move into mentorship is putting together their financial profile and filling out an expenses sheet based on their historical spending of the last year. And I have had friends that are texting me while they're working on it going, how in the world did I spend this much money on eating out this last year? And I think that and groceries to me personally are the easiest spot to kind of bleed money. It's like the hole in the boat that you don't think about because it's$11 here, you know,$13 here. And then you're like, oh, I spent$300 and also accidentally wasted food at home because I also overbought at the grocery store. And yeah, I think it's excellent advice to hold onto your receipts and actually just track what you're doing with your money. So you can kind of have a clearer picture of if there is a problem.
SPEAKER_01:Yeah, definitely. And then also I would encourage people to like not do this by yourself, like get like a community or an accountability buddy, someone who you can trust. You know, someone who's not going to shame you, whether that's like your spouse, your best friend, a sibling, just look, even your mom. Someone who's going to hold you accountable that this is something that you want to do, because if it's you yourself holding yourself accountable, it's not going to work because you've gotten into this situation by yourself. now so how are you yourself going to get yourself out of the situation and then also for the people who are like who like to write and journal and stuff you can put like put like your internal dialogue on things like let's just say you made like a big purchase what was going on in your head when you made that big purchase like what was that voice in your head telling you like it's okay because you're going to get paid friday anyway or it's like um like i lost five pounds it's okay for me to treat myself. Without you knowing what's the trigger, you're not going to be able to realize and stop yourself from doing it next time.
SPEAKER_02:Yeah, that's a really good point as well. Definitely. I know a lot of the time, our own beliefs about ourselves and about money can impact how these things show up in our life. What can people do to help reframe their beliefs?
SPEAKER_01:Hmm. Good question. Well, the first thing I would say is that what, find what you want to believe in and then work towards it. Because like earlier when we talked about the little voices in the head and I said that, oh, if I invest in myself and fail, like I'm going to lose everything. So let's reframe that and say, if I don't invest in myself and it's like what is the end result you may have to work till you die you know you may only depend on social security like who knows if social security is going to be around 15 years from now you know so what is your game plan and honestly like when we work with people we map out their financial goals we map out like what does like what do you want in life and this is why we call it personal finance because it's personal for you. Like what I want may not be what you want. You know, some people, they may be like, oh, I want to fully retire. I want to get on a boat and I want to travel the world while the next person is just like, I just want to be comfortable.
SPEAKER_02:Yeah. Yeah, definitely. That's true. So are there any other things you want to touch on before we kind of wrap up this episode?
SPEAKER_01:I think that's it, but I just want to remind people that, again, what I said earlier is that you're not bad with money. It's just your brain. It's prioritizing immediate safety over your future planning, and there's ways to combat that. But you have to be at the point yourself where you're ready to address and fix that. And if you aren't ready... I wouldn't encourage you to start the process because you'll just get burned out and tired because you're not at the point mentally where you want to change. But when you hit that point, I say full on running. Don't stop.
SPEAKER_02:Yeah. Well, as we're closing out, I do want to have a moment just to invite our listeners to reflect on a couple of questions. So I want you to think about what your earliest memory around money is. And you can pause the episode if that helps. And I also want you to think about what belief about money do you want to challenge this week? Maybe just as a starting point as you start to dig through some of this yourself. But Thank you so much, Catherine, for joining and for discussing such an important topic, and I think a relatable topic to so many people. I'm excited to publish this for our listeners, and we will make sure to link the resource that Catherine mentioned, as well as a couple additional resources in the show notes. And if you have a friend that might relate, please share this episode with them as well. Thank you again and thanks for listening everyone.
SPEAKER_00:Thank you for joining us on the Third Decade Podcast. Remember, building your financial future isn't just about dollars and cents. It's about empowering yourself to live the life you want. If today's episode gave you new insights or inspired you to take action, we'd love for you to share it with someone who could benefit. Together, we can turn financial uncertainty into opportunity. Until next time, let's continue to embrace the journey ahead and take control of your financial future.