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If money is tight, that’s nothing to be ashamed of

New research is illuminating the psychology that can perpetuate financial trouble.

A Salvation Army relief worker tends to a line at a soup kitchen during the Great Depression.Associated Press

Money is not only a source of stress and worry for many Americans but also a chronic source of shame. Three out of four Americans report being anxious about their financial situation, but since our society is built upon the myth that anyone can make it if they try, hardship is commonly thought to signal personal deficiency.

Being ashamed of financial difficulties is especially pernicious because psychologists have long known that feelings of shame make people withdraw and hide from their problems. Shame can turn its victims into metaphorical ostriches. While hiding one’s head in the sand may be helpful in some situations, it is disastrous in the context of financial difficulties — as we avoid our financial circumstances, they only get worse. In other words, shame is a critical ingredient in the poverty trap, the self-reinforcing cycle whereby the experience of living in poverty makes it difficult to escape. The consequence is that feelings of shame are likely causing people to drown in compound debt and an onslaught of fees.


We can see this in the widespread reluctance to file for bankruptcy, with far fewer people filing than economists would recommend. Before Senator Elizabeth Warren entered politics, she conducted research on the “bankruptcy stigma,” the idea that anticipated shame deters many who would financially benefit from declaring bankruptcy. People facing financial difficulties are also more likely to avoid opening bills, in order to minimize exposure to information that could make them feel even more shame.

Our recent research demonstrates how financial difficulties and shame reinforce each other. Looking at data on the same group of more than 2,000 people who were surveyed over five consecutive years, we find that feelings of shame predicted future financial hardship just as financial hardship predicted future feelings of shame.


To understand why this is the case, we also conducted several experiments that show that people ashamed of their financial situation are less likely to do what they can to improve it. For example, in one study, we asked participants to watch a video and take the perspective of “Dave” — who, unbeknownst to participants, was a paid actor. Dave discussed either his feelings of financial shame or some neutral details about his day. Participants who watched and put themselves in the shoes of Dave discussing his financial shame indicated that they’d be less likely to open an email containing information about a past-due payment.

While this study asked subjects to consider a hypothetical situation, avoiding such an email in real life could easily make one’s financial hardships much worse, given the cascading fees and interest. From a rational economic perspective, failing to open past-due bills may seem foolish. But it makes sense from a psychological perspective.

This has important implications for policies and institutions that can help people stuck in a poverty trap. We have three recommendations.

First, let’s separate the financial situation from the person. A person is not a failure because of their financial circumstances; their worth and value are independent of their bank account balance. Just as our culture has shifted toward using language that is more inclusive in the context of mental health, it should do the same in the context of financial health. Rather than thinking of those with financial hardships as “poor” or “struggling,” we should recognize that financial difficulties are commonly situational — the results of, say, high unemployment rates, illness, or discrimination. This could improve how institutions and organizations respond to people experiencing financial challenges. For example, banks shouldn’t impose high fees on people with overdrawn bank accounts, because this only serves to reinforce shame and subsequent financial hardship.


Second, as shame typically results from the judgments or anticipated judgments of others, reducing the public nature of financial difficulties could give people more space to access financial help, such as debt services and advice. In many places, bankruptcies are a matter of public record. While public information about bankruptcies has value — creditors deserve to know whether someone has a history of not repaying their debts — we question how widely accessible this information ought to be. Bankruptcies last on credit reports for 10 years, and potential employers are able to access this information when running a credit check. Tightening the access to bankruptcy information could give people better cover to seek help.

Third, we need to feel more comfortable talking to each other about money. The fact that there exists a 12-step program, Debtors Anonymous, tells us that there are people who are eager to talk to others who are having similar difficulties in a judgment-free space. In our research, people were more reluctant to seek help from others if they felt more ashamed about their finances — even when the people they could talk to might be useful sources of guidance and emotional support.


We need to view people in poverty as they really are: People who generally have ended up in a tough financial spot due to a series of challenging circumstances and who are trying their best to navigate a challenging landscape. People face tough times for a variety of reasons: the loss of a job, a medical emergency, or other unexpected events. Redesigning institutions and policies to reduce shame and address people in financial hardship with compassion can help break the poverty trap.

Joe Gladstone is assistant professor of marketing at the University of Colorado. Jon Jachimowicz is assistant professor in the organizational behavior unit at Harvard Business School. Adam Eric Greenberg is assistant professor of marketing at Bocconi University in Italy. Adam Galinsky is professor of leadership and ethics at Columbia Business School.