Debt shame is a heavy burden that affects many entrepreneurs, influencing business decisions, personal finances, and self-worth. This post explores the societal, historical, and personal origins of debt shame, as well as its impact on mental health and business growth. You’ll also discover practical strategies to reframe your mindset, confront financial fears, and use debt as a tool rather than a source of shame.
The Shame of Debt
Mental health and money trauma are deeply connected. Money is so closely connected to our identity that it can cause us to feel shame in many aspects, such as business revenues, income levels, size of savings, not measuring up to the spending of other business owners, what coach you can afford to work with, who does your headshots, where you work from (beach or home), etc.
These and other pressures can lead us into debt, both in our personal lives and our businesses.
Understanding and releasing debt shame starts with thinking critically. Financial institutions don’t hesitate to use manipulative marketing practices and predatory lending, yet few financial tools are as socially demonized as debt. Few emotions carry as heavy a burden as shame, and yet we are shamed over and over again for having debt.
As an entrepreneur, you might experience common entrepreneur debt, such as mounting debts, missed financial targets, or business setbacks. In your personal life, cash-flow pressures can lead to increasing credit card balances, overdue high-interest loans, and coping strategies such as moving a balance back and forth between credit cards.
All of these pressures can affect your mental well-being, relationships, and sense of self-worth, evoking an overall sense that there’s something wrong with you and bringing up feelings of shame.
In this article, we’ll explore the nature of debt shame, its impact on individual mental health and on society, and strategies for overcoming its grip.
The Origins Of Debt Shame: Society and Culture
Social Conditioning Around Debt
All you have to do is read the headlines to know consumers have a lot of debt. Most of us who come to entrepreneurship without the benefit of inherited wealth and/or business experience retain the consumer version of attitudes toward debt, which often view it as bad. But at the same time, we are being manipulated into debt by financial institutions and consumer society.
In the US and Canada, corporations and governments often rely on debt to finance their operations and initiatives. Debt can be used to fund various activities, such as infrastructure projects, research and development, expansion efforts, and day-to-day operations. It is widely accepted that businesses may face bankruptcy, and owners may need to start over. Bankruptcy laws in both countries provide mechanisms for businesses. This leads to the reorganization or liquidation of assets when faced with insurmountable debt burdens. Bankruptcy is considered a legal process that provides relief and a fresh start for businesses facing financial difficulties. (Significantly, though, personal bankruptcy is considered shameful.)
In general, the individuals at the helm of the organizations do not experience personal financial hardship in circumstances like these. Often, they go on to start new businesses. Failure is an integral part of the entrepreneurial journey. It’s an entrepreneurship truism that you have to start and fail at a number of businesses before you find one that works.
I’ve had several businesses over the years, including a boutique yoga studio, a Steadicam business, and a PR and media consultancy. All of them “failed,” in the sense that they didn’t generate sufficient revenue.
While my current business hasn’t failed, I’ve certainly had ideas within my business that failed. Overall, I’m a mental health therapist, so I’ve always had a private practice and generated an income for myself from it. But within that framework, I’ve niched in a variety of ways. Since each of these niches was different, they were essentially different practices. Some of them generated revenue. Some of them generated losses because the investment was far greater than the return. In one case, there was no revenue at all, even though I had invested a significant proportion of the revenue from the rest of the business to get it going.
Historical and Spiritual Roots
During the Emperor Charlemagne’s rule, in the Dark Ages, the Church banned the practice of charging interest for loans (called usury) using the Bible as its justification. This is where I locate the origin of debt shame.
One example of how this idea came into social prominence is the famous and oft-quoted line from Shakespeare’s Hamlet. Even Judge Judy quotes it: “Neither a borrower nor a lender be.” It’s such a well-known expression that it’s even attributed to the Bible.
But as the explorers and merchants (funded by monarchs) who were carrying out colonial projects needed more and more money to fund their expeditions—AKA businesses—the need for capital and thus for credit increased, and it became acceptable for royals and wealthy folks to borrow to fund their projects.
The consumer credit boom began with the arrival of cars on the market. They were too expensive for most people to buy with cash, but as we all know, the success of manufacturing depends on volume. One of the car companies solved this problem by loaning consumers the money they needed to buy a car, and company-based installment plans became available for many of the major purchases people were making between the 1930s and the 1950s.
In 1958, to support more and more consumer buying, the first credit card was launched. With the proliferation of cheaper consumer products, there needed to be a way for consumers to buy them. The economy depended upon it.
Much of the economy today depends on consumer debt. Because financial institutions rely on interest income from loans to generate profits, it would disrupt their business models if we suddenly all paid off our debt. If everyone paid off their debt, the value of debt securities would decline, leading to losses for investors. This could have ripple effects throughout the financial markets, affecting asset prices and investment returns. The decrease in consumer spending that results from debt payoff could lead to job losses and economic downturns.
It’s not a stretch to say that the current economy is built on debt, and yet, in a triumph of gaslighting, individuals are constantly berated in the press for the amount of debt they are carrying. Here are just a few examples:
- Canadians ignore warnings about debt
- A Grave Problem: Canadian household debt is surging
- Canada’s household debt is exceeding the GDP. How alarming is that?
- An alarming trend: credit card debt climbed to a record high
- Americans are drowning in credit card debt
My Story of Money and Self-Worth
My fears from past debt as a consumer and the shame I had about it made debt stressful for me as a business owner.
The moral weight of the edicts from my parents and childhood that you should never buy what you can’t pay for, and you should never borrow, and by extension, if you do, you’re a morally bad person, weighed heavily on me.
The biggest effect this had on me was to stunt my business growth. In the end, it was a major factor that led to the closure of my group practice, although I can only see that in retrospect.
At a certain point in its growth, my group practice got to the point that it needed a financial bridge so it could take the leap from one revenue bracket to the next. For growth, the business needed bigger commercial space. I needed to do less direct client service to earn my own salary and instead have the business pay me, so I could concentrate on running the business. The business needed professional support, such as a marketing team, an office, and/or a clinical manager.
But I was ashamed of the lack of cash flow in the business. I also carried shame and fear about debt, not only related to my childhood experiences that taught me to think I was bad with money, but also to the weight of the moralizing around debt with which I had grown up (and let’s face it, this moralizing also permeates society, as the headlines above show).
Instead of exploring how debt could be the lever that propelled this business to the next level, I tried to do it all myself. I made do with the less-than-ideal commercial space, I DIYed all our marketing, and I managed the team and the office. I even hired an assistant, but was limited in how I could benefit from her support because of the very small amount of cash the business had available to pay her.
Inevitably, the stress of carrying this weight showed up in ways of which I am not proud. I yelled at my beloved. I also tackled some interpersonal challenges with the team in confrontational ways that damaged relationships.
Fortunately, my therapist pointed out to me that the level of stress I was experiencing wasn’t within the normal range that business owners should expect. This is a problem many of us business owners have. We normalize stress to the point that we don’t see when it’s excessive and harmful.
Within two months, I had taken stress leave from the business and then exited it. Leaving the group practice really was the right choice for me at that time, given what I knew and was experiencing then.
But today, seeing how both my fear and shame related to debt and my belief that debt was to be avoided at all costs prevented me from even considering what often is a very important lever for business growth, I feel sad.
These days, I’m looking at adding a tiny home to our farm property. This would be a vacation rental, serving as a revenue generator that would pay itself off and provide additional income as part of my financial retirement plan. In the future, it will be my home after my beloved dies and my daughter and her husband move into the main house.
The tiny home is an essential part of my future financial safety and well-being. But I don’t have the cash up front to pay for it. I’m confronting my fears about debt again. It’s a slow process to see what the parts of me that are afraid need in order for me to be able to move forward with this project. But at least I’m engaging with the idea and open to figuring out ways I can use debt as a lever to secure my future, rather than letting my beliefs and fears declare that debt is out of the question.
Financial trauma, including the intense stresses and judgments related to past or current debt, can have an enduring impact on your thinking and behavior, amplifying the shame, fear, and anxiety associated with debt.
Why We Accumulate Debt
Debt can accumulate for many reasons, often beyond personal control:
- Insufficient Cash Flow: Lack of cash on which to “live”—either to ensure short-term survival of your business or your own survival in terms of food and shelter—in an era where the cost of living outstrips what we can earn means you turn to debt (credit cards and lines of credit) to cover the gap.
- Social Expectations: Social pressure to demonstrate “wealth,” meaning you have money and can show that by buying things like fancy cars, exotic beach vacations, an executive mastermind, and fancy headshots, also means you turn to debt.
- Manipulative Marketing: And lest you scoff at social pressure as a legitimate cause of debt, I invite you again to watch the first hour of The Century of Self to understand how powerfully marketing manipulates our fears of not belonging. Evolutionary psychologists argue that social bonds, cooperation, and community were essential for early human survival. That same biological imperative persists today in the search for belonging.
Dealing With Debt And Shame
Financial educator Dana Miranda says, “Debt shaming is one of the pillars of budget culture. It’s a way to keep most of us from accessing resources that are readily available to others, and it’s a way to encourage restriction as ‘responsible’ money management.”
Debt is morally neutral, but it has been made to be immoral. The more shame we feel, the less able we are to access our wisdom, and the more likely we are to engage in more spending, which indebts us more.
Alternatively, shame about money can lead you to ignore and not address your debt.
Did you know that debt that can’t be collected or isn’t being paid off is sold by the initial holder (the bank) to another business for pennies on the dollar? Then the second company makes money from this by collecting from you more than they paid for it. The bank is willing to accept less to sell your debt, but won’t accept less from you directly.
All of these benefit the holders of your debt, who make money from it.
How To Stop Feeling Ashamed About Debt
Rewire Your Mindset
The first step in recovering from shame and rewiring your mindset about debt is to gently begin to address the emotion of shame itself.
It’s important to distinguish between shame and guilt. Both have a different body feeling, and intuitively, you’ll probably know the difference, even though you may not be able to articulate it.
Guilt is about behavior. “I did something bad.” It’s considered a pro-social emotion because its purpose is understood as leading us to address and repair the harm we have caused.
Shame is an emotion that comes from a value judgment about your worth. “I am bad.” It may or may not be related to a behaviour for which you or others are judging you. Because it leads to internal collapse and self-hatred, shame is not prosocial but toxic.
Renowned psychoanalyst Carl Jung said, “Shame is a soul-eating emotion.” I have certainly experienced that aspect of shame and know its debilitating effects.
Brené Brown defines shame as “the intensely painful feeling or experience of believing that we are flawed and therefore unworthy of love and belonging.” This is why you might find it difficult to address feelings of shame. If you’re thinking you’re bad and unworthy, it’s hard to take the risk that someone might think otherwise.
Create Space
Brené Brown also says, “Shame hates it when we reach out and tell our story. It hates having words wrapped around it—it can’t survive being shared. Shame loves secrecy.” This has certainly been my experience, both in my personal and business life, as well as with clients in financial therapy.
So many of my clients have revealed what they consider to be very shameful aspects of themselves. As a result of the work I do, my life experience, and my training, I have the perspective to know that the thing they are ashamed of is 1) common and normal, and/or 2) their best attempt to cope with the circumstances with the resources they had available at the time.
It helps to care for shame when you can have some breathing space between yourself and the experience of shame.
Using the magic formula for creating space between you and what’s bothering you (in this case, shame) outlines steps you can use to do this.
Get Curious
Once you’ve created a sense of some space between you and the part of you that’s feeling ashamed, and you have a sense of yourself AND the shame as distinct from one another, you can use a version of the classic trauma of money inquiry: “Whose debt shame is this?”
This is where it can be helpful to be curious about the information I shared above about the conditions that lead to debt. It can help to read this with a compassionate eye, considering how you may have been affected by these conditions.
Break the Cycle
You can also look at the developmental, generational, intergenerational, relational, societal, or systemic conditions that may have played a role in your thinking about debt (and the emotions that come when you have these thoughts) and/or in the debt you do or don’t have.
Here are the specific steps you can use to begin breaking the cycle of shame and increasing discernment around money and debt. These steps are adapted from the Trauma of Money program:
- Name the Shame: Shame thrives in silence. It isolates and can feel like the threat of abandonment. To alleviate the burden of financial shame, we need to feel connection, acceptance, and belonging. Naming the shame and meeting yourself (and others) with acceptance and compassion can create a pathway for action, instead of isolation and avoidance.
- Talk About the Shame: Find an accepting space to have a conversation about financial shame. This may mean speaking with a trusted friend or family member or a financial professional who acknowledges the impacts of financial shame and can provide us with the resources we need to unlock financial opportunities. This list of Trauma of Money alumni is a great place to start looking for help.
- Depersonalize the Shame: Whose shame is this? (See above for more details on how to do this.)
- Reinterpret the Shame: We often have the impulse to push away shame and judge it as harmful. But you can reconsider it in the light of self-compassion, seeing how it may have served you at one time as a way of staying safe.
- Take Discerned Action: Shame makes us want to hide, and debt shame can make you want to avoid your financial situation. This impulse to avoid and hide makes any of the help available inaccessible to you, when what you need is financial literacy, support, and pathways to action.
Take Action
Sadly, while intending to protect you, avoidant behaviours result in far worse financial outcomes than if the situation is faced directly. This is how the saying, “Taking no action is still action,” bears out. Not addressing your financial situation doesn’t resolve it; it allows it to fester and get worse.
This is why a key step in breaking the debt-related shame cycle is action.
Choosing a new course of action, such as speaking to a shame-free or trauma-informed financial professional, starting the planning you may have been putting off, or setting a financial boundary, can help minimize the burden of debt shame.
Advocate For Yourself and Others
Healing isn’t only individual; it has to be communal as well.
Once you are on the path to heal your debt shame, you can begin to advocate for yourself if you discern that your debt is harmful to your mental health or your future vision.
You can use the tools available, such as a consumer proposal and bankruptcy, to alleviate your debt. Or you may find, after looking at the actual numbers, that you can create a plan that works to alleviate the weight of your debt, either on your own or with support. The Canadian Debtors’ Association may be a resource to explore.
In this journey of self-advocacy, you may encounter professionals who do not have a shame-free approach, and that’s when you can go back to the first few steps in healing shame and lather, rinse, and repeat, so to speak.
Healing shame is key to addressing mental health and debt. It’s an ongoing process because shame comes up often in a capitalist, supremacist, exploitative, and dehumanizing world.
For communal advocacy, one option in the US is a debtors’ union: “When debtors unite, we can turn our individual financial burdens into a source of collective power to push for political and economic transformation.” – The Debt Collective.
Anti-poverty work is another way you can engage in community advocacy to address the social, political, and economic conditions that lead to individual debt.
As I’ve outlined above, political and economic policies and conditions are what lead to debt, not individual moral failure.
If you’ve found this information helpful and would like more support on your journey to heal debt and financial shame, book a free call with me to explore working together.
