Financial shame spirals: How shame intensifies financial hardship

• Published in: Organizational behavior and human decision processes Vol. 167; pp. 42 - 56
• Main Authors: Gladstone, Joe J., Jachimowicz, Jon M., Greenberg, Adam Eric, Galinsky, Adam D.
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.11.2021
• Subjects: Emotions; Financial decision-making; Financial hardship; Guilt; Shame; Financial hardship; Guilt; Shame; Financial decision-making; Emotions
• ISSN: 0749-5978; 1095-9920
• DOI: 10.1016/j.obhdp.2021.06.002

•We propose that shame can be a driver and exacerbator of financial hardship.•Shame leads individuals to withdraw and disengage from their financial situation.•Six experimental, archival, and longitudinal studies offer empirical support.•Shame is more strongly associated with financial hardship than guilt. 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.