There are specific, defining moments in history, like the assassination of JFK or the falling of the World Trade Center towers on 9/11, that are so impactful that everyone can vividly recall exactly where they were and what they were doing when they first heard the news.

We have similar experiences in our financial lives—moments in time that make a huge impression on us. Brad Klontz, a financial psychology expert, refers to these as financial flashpoints.

What Exactly Are Financial Flashpoints?

Financial flashpoints are significant events that shape our attitudes and behaviors around money. They directly impact how we earn, save (or don’t save!), and spend money.

Examples of financial flashpoints include:

• Experiencing poverty as a child
• Parents divorcing over money
• Losing a job
• Inheriting money
• Experiencing a financial crisis (such as during the 2008 recession)
• Losing a significant amount of money due to bad investments
• Receiving a large windfall
• Bankruptcy or foreclosure
• Medical emergency
• Witnessing the financial struggles of a close friend or family member

These events are part of our individual money stories. Just like all of life, there are highs and lows that cause us to grow and evolve as individuals.

One of my own financial flashpoints is the 2008 housing crisis, where I saw our first home (purchased in 2006 at the height of the market) fall to less than 1/2 of its value. Since then, I’ve never had the same views as previous generations about home ownership being the ultimate American dream. I’ve had lots of ups and downs on my financial journey, but this is one of the most impactful.

The Effects of Financial Flashpoints

The way we view money—directly influenced by our own unique past experiences—is similar to an operating system in a computer. Past experiences have “programmed” us to subconsciously filter many of our decisions to avoid pain, especially the pain we’ve already negatively experienced.

We then respond to money emotionally rather than logically, which often doesn’t lead us to make the best financial choices.

For example, if you were heavily invested in stocks during the 2008 recession and moved everything to cash near the bottom, you might be extremely hesitant to invest again for fear of losing all of your money. On the other hand, if you receive an unexpected windfall, you might spend impulsively, as if you’re afraid the money will disappear if you don’t use it right away.

Something incredibly interesting is how people oftentimes respond to the same (or very similar) financial flashpoint in completely different ways. 

For example, two siblings who grew up in an environment of extreme financial instability caused by excessive consumer debt might have opposite behaviors. One might follow those learned behaviors, while the other might be extremely debt-adverse and save excessively to avoid going through that experience again.

Identifying Your Financial Flashpoints

So, how do you uncover your own financial flashpoints? The best way is to reflect on some of your money memories. A few questions to ask yourself include:

• What is your earliest money memory? Why did this have such an impact on you?
• Did you feel like your financial status matched those of your peers growing up? Did you feel like you had substantially more or less than them, and how did that make you feel?
• What are your most significant financial wins and losses?

Just thinking about these and remembering these times is valuable in giving yourself more grace and understanding, regardless of where you’re currently at financially.

Improving Your Financial Life

Recognition is just the first step in improving your financial life. The next and most important step is to address how these money beliefs impact you negatively on a daily basis.

For each of the experiences you identified, identify the emotion that comes from that experience and how you have made less-than-ideal financial decisions because of those emotions.

For example, if it’s extremely difficult for you to spend money on things, even when you can afford it and it will improve your life, it’s probably fear driving that decision. It’s common to experience fear around money, especially if you’ve experienced times of not having enough. At the same time, fear can keep us from living our lives to the fullest and can deeply affect our relationships with others.

Often, the best solution is to get out of your comfort zone and challenge yourself. If spending money is difficult for you, set aside an amount of money each month that has to be spent on something fun. Thos who find investing to be scary can start with just a small amount of money. If your issue is overspending, start writing down the emotions you felt for each and every purchase.

After all, the goal of money is to improve your life. If it’s not creating more peace of mind for you, there’s room for improvement.

Final Note

Understanding your financial flashpoints is a powerful initial step toward gaining confidence and control over your financial life. When you recognize the emotions tied to your money decisions, you are empowered to make more mindful decisions that align better with your goals and values.

After all, the purpose of money isn’t just to avoid the negative but to help you build a life of purpose and fulfillment.