Abstract:
Financial hardship is an established source of shame. This research explores whether shame is also a driver and exacerbator of financial hardship. Six experimental, archival, and correlational studies (N = 9,110)—including data from customer bank account histories and several longitudinal surveys that allow for participant fixed effects and identical twin comparisons—provide evidence for a vicious cycle between shame and financial hardship: Shame induces financial withdrawal, which increases the probability of counterproductive financial decisions that only deepen one’s financial hardship. Consistent with this model, shame was a stronger driver of financial hardship than the related emotion of guilt because shame increases withdrawal behaviors more than guilt. We also found that a theoretically motivated intervention—affirming acts of kindness—can break this cycle by reducing the link between financial shame and financial disengagement. This research suggests that shame helps set a poverty trap by creating a self-reinforcing cycle of financial hardship.
Commentary:
This article, which I discovered while reading Adam Galinksky’s recent and excellent book about the science of leadership, Inspire, points towards an important difference between shame and guilt (which might also be more neutrally called “responsibility”) as emotional responses to the financial hardship that leads (or doesn’t lead) to bankruptcy. While it is natural for people to feel bad about financial struggles, it’s important to know (and help clients understand) the difference between shame and guilt.
Shame can make them feel like they’re a bad person—leading to counterproductive behavior like avoiding bills, ignoring help, or giving up. Guilt, on the other hand, means while someone regrets decisions that contributed to the financial distress, they still believe that by taking responsibility they can move forward and improve their circumstances.
Shame keeps you stuck; responsibility moves you forward. Our job as consumer bankruptcy attorneys is to help clients move past shame and take smart steps toward a better financial future.
