Are you guilty of any of these financial misdemeanors?
- You leave shopping bags in your car so you can sneak them into the house when your spouse is asleep
- You lie about your bank balance because you’re embarrassed you’re doing so well
- You buy expensive gifts for your kids to make up for not spending time with them
If you said yes to one or more, chances are guilt plays a role in your relationship with money. While a little financial guilt can help us stick to a budget, it becomes unhealthy when it affects our ability to make rational decisions about making, saving or spending money. Here are some common ways guilt interferes with our financial health:
1. An embarrassment of riches
Too much money is a problem most of us would love to have. But when you don’t believe you deserve to be rich, wealth can stir up feelings of guilt and unworthiness. People often deal with these feelings by overspending or giving money away to friends and family. This phenomenon has even spawned a new category of experts – wealth therapists – who help people cope with financial success.
2. Spending money you don’t have
Buying on credit, outspending your budget or buying stilettos with your retirement fund can cause a form of buyer’s remorse that is fueled by guilt. If you make a promise to cut down on frivolous purchases and then rack up $500 at an online boutique a week later, you can feel like a failure. The guilty feelings are intensified if you’re sharing finances with another. A recent survey revealed that two-thirds of adults in relationships combine finances with their partner, and of those, 42% admit they’re committing financial infidelity1 by lying about purchases.
3. Sudden wealth syndrome
Winning the lottery or coming into an unanticipated inheritance can be a dream come true but the initial euphoria can be followed by feelings of guilt. When you’re suddenly richer than your friends, family and coworkers, the dynamic of everything from eating out to family vacations can shift. If you have always had a strong work ethic, the guilt can be further compounded by the fact that you did nothing to earn your newfound wealth.
4. Deep-pocket parenting
The arrival of a first child often kick-starts decades of parental guilt. You can feel guilty about not spending enough quality time with your kids or sending them to daycare while you go to work and often, parents resolve these feelings by overspending on their children. It’s natural to want to give your children the best advantages and opportunities, especially if your own childhood was difficult. But when you go into debt to buy your kids the latest electronic gadget or borrow from retirement funds to send them to private school, you’re letting your emotions affect your spending.
5. Guilt induced frugality
Some of us have lots of money but we feel guilty about spending it. Excessive frugality is usually tied to a fear that you might lose everything. If you grew up in poverty and didn’t have enough to eat, the fear of hunger and homelessness can still be entrenched in your relationship with money decades later. Likewise, if you’re financially thriving in the middle of a recession, you might feel the need to hoard your cash in case you lose your job and slide into poverty.
Why are guilt and money so often intertwined? Years of practice! According to Bradley Klontz, author of Mind Over Money and founder of The Financial Psychology Institute, each of us has a “money script” that describes our core beliefs about money. Klontz says our money script is “typically unconscious, developed in childhood, passed down from generation to generation within families and cultures, contextually bound, and often only partial truths”. And because financial literacy hasn’t historically been part of our school curriculum, many of us were never exposed to any other approaches to finance than what we learned from our parents.
So, what’s a guilt-ridden person to do? The first step is to work to separate money from guilt and other emotions, such as fear, entitlement and anxiety, that can sabotage your financial health. Each time you buy something, ask yourself why you need or want it. If the answer has anything to do with making you feel better about yourself, the purchase is likely tied to one emotion or another. Even the use of seemingly harmless terms like “retail therapy” suggests a relationship with money that is more emotional than transactional. To get started, you might try some online resources such as The Money Type Assessment, a 10-minute survey that can provide personalized insight into your relationship with money.
Traditional financial management tools can also help neutralize emotional spending. Making and sticking to a budget, saving up for luxuries and preparing a long-term plan for retirement are tangible ways to combat emotions because they are based on numbers. Make a promise to be financially honest with yourself and your partner so you’ll think twice about spending the rent money on champagne. If you’ve realized that your shopping addiction is linked to a lack of confidence, consider non-financial ways to boost your self esteem. And, if you’re one of the lucky ones who has too much money, consider charity or an endowment.
1 January 2016 Harris Poll from the National Endowment for Financial Education.