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Overcoming spending guilt

Key takeaways

  • Emotions about money can be deep seated, often forming at a very early age.
  • Stress testing your financial plan and getting a second opinion from a financial professional can help mitigate fears of exhausting your nest egg.
  • If you are confident in the security of your own financial plan, how much you spend for the rest of your life is up to you—including how much you spend on yourself.

"If you don't fly first class, your kids will."

That's the quote displayed in the California home office of Fidelity Financial Consultant and Vice President Tiffany Myers.

"For many affluent people, spending money on themselves or treating themselves to a first class vacation is not something that comes naturally—even when they know they can certainly afford it," says Myers.

In many cases, spending guilt is holding them back.

No doubt there are dozens of societal, psychological, and spiritual factors that impact how we think about savings and investing. If you're financially secure and your financial plan has been stress tested, it makes sense to take a step back and reconsider what's holding you back from feeling good enough to spend more money on yourself – on things that you value and things that matter to you.

The good news: This is something that financial advisors often can help people like you do. Using behavioral economics as a backdrop, let's take a look at some of the factors that influence how affluent Americans make personal spending decisions, especially as they grow in age and wealth.

Early childhood memories may be shaping current spending patterns and attitudes

Our money emotions can be deep seated, often at a very early age. According to Melissa Knoll, PhD, Vice President of Behavioral Economics at Fidelity, there is evidence that people's financial socialization—or the way parents teach (or don't teach) their kids about finances as they're growing and developing—can have an important impact on financial well-being and financial outcomes in adulthood.

According to Knoll, "Parents don't have to explicitly teach their kids about finances in order for children to pick up on their parents' attitudes toward and relationship with money. Kids are like sponges, and observing how their parents talk about—or don't talk about—finances can have an impact on money attitudes and behaviors across the lifespan. There are nuggets of wisdom passed down from parents to children about how we should think about money. And just like other tendencies we learn from our parents, whether passively or actively, our feelings and beliefs about money can stick with us."

Why? Take for example a set of parents who have lived through the Great Depression and have passed on that scarcity mindset to their children. Once you've learned to rely on spending as little as possible just to get by, it's hard to shake the mindset—especially if your mental model about finance is shaped during critical developmental periods in childhood. This mentality often is attributed to the behavioral finance concept of "loss aversion."

"People often are driven by the pain of losing money—something those who lived through the Great Depression may remember quite vividly—so drawing down their hard-earned money to finance their lifestyle might be too difficult for people who experienced such hard financial times. And, this mentality can be passed on to the next generation," says Knoll.

Reshaping the way we think about spending guilt

According to Jodi Coochise, PhD, psychologist and consulting partner, Fidelity Center for Family Engagement, guilt responses are tied to our mental models around spending. "We all have core beliefs around money," she says. "If our thinking or behavior diverge from those mental models, we may experience feelings of guilt."

Beliefs that might be at odds with spending money on yourself could include:

  • "You should only spend money on ‘important' things"
  • "Money is a way to show and demonstrate love and support"
  • "You earn money to take care of your family"
  • "Money is power"

Coochise explains that the issue isn't having feelings of guilt, it's how we interpret the feelings. "Often, when we feel guilty, we assume we have done something wrong. That's not really the purpose of guilt. It is mainly an indicator that there is a difference between what we believe and what we are thinking or doing."

She suggests that in an effort to expand our options, we can shift to thinking of guilt as a prompt for reflection. "When you feel guilty, pause and explore your beliefs related to spending. This can help you be more intentional about your spending while alleviating the discomfort you are experiencing."

Why some affluent investors feel "obligated" to provide a better life for their heirs

In the US, we have cultural messaging that each generation is "supposed to do better than their parents." If you are a parent of means, and you align with this cultural value, you will feel it is your "duty" as a "good parent" to set your children up for that better life. This "obligation" is associated with "being a good parent" or "being a caring, supportive parent." These money beliefs and messages are, at their core, emotional, especially if you have adult children who are not supporting themselves financially.

The systematic drop in spending when people retire is what economists call the "retirement consumption puzzle". This is partly out of necessity because people's incomes generally drop by 1/3 at retirement, and partly because people spend less on work-related expenses and save money by cooking lunch at home instead of eating out, for instance.

Common examples of questions discussed by affluent couples

Travel and transportation

  • Can we afford $17,000 to take a once-in-a-lifetime trip?
  • Can we afford to fly first class to Europe?
  • Can we afford to take all of the extended family on a cruise?
  • What if we spend $50,000 on travel the first 10 years of retirement and then slightly decrease it?
  • Can we spend $50,000 on a new car every 6 to 8 years?
  • Can we afford to give our car to our favorite granddaughter and buy a nice one?

Real estate
  • Can we afford to buy the lot of land that's next to our beach house? (in hopes of keeping the family bonds alive…)
  • Can we come up with the money to design and build our dream house, even though we are now both retired?
  • Can we meet the expense of a vacation home? If so, how should we structure the financing?
  • How much house can we afford if we want to upgrade?
  • What if we want to put $50K/$100K/$500K into our current home?

Family and charitable giving
  • Should we have a "family conversation" to focus on increasing our family giving?
  • For our RMDs next year, can we afford to do qualified charitable distributions (QCD)?
  • Can we afford to give our kids/grandkids the max annual gifts?
  • Can we help our kids or grandkids with a down payment on their house? Wedding expenses? Grad school?
  • How should we set aside money for our grandkids' education?

Tip: Read Viewpoints on How to give financial gifts to loved ones

Getting professional help to make tough family and money decisions

Sometimes, people seek help to bring clarity to complex decisions, especially when it comes to money and family.

"Working with clients, I've observed savings and spending habits over the years—where they splurge, where they scrimp, where they've made mistakes," says Myers. "I enjoy helping people figure out tough money decisions like what their 'sleep at night' number is—the amount that they decide to keep in cash as an emergency savings, coupled with how much risk they feel comfortable taking on at a particular life stage."

"Of course, when you add in factors like family and emotions, money choices can be perplexing at times, but through honest dialogue and robust financial modeling, we can help people make decisions that are right for their families as well as for their portfolios," adds Myers.

Smart spending strategies

"Sometimes, people feel more open to spending down assets when they believe they are employing tax savvy strategies for RMDs, charitable giving, and distributing other assets," says Myers.

"For example, I often help clients with partial Roth conversions. Working with their tax advisor, they can see how much of a conversion will ‘fill the marginal tax bracket' and convert IRA assets into a tax-free growth bucket in a Roth IRA. This might reduce RMDs and can help build a bucket of assets, free of income tax, to pass to the next generation. It's a long-term look at tax-efficiency."

Another smart spending strategy may be to help people reframe their thinking about money in retirement. There's some indication from the world of behavioral economics that reframing retirement savings in terms of an income stream rather than a lump sum can help increase willingness to spend.

This is one reason why annuities (a guaranteed income source) might increase willingness to spend by reducing concerns about exhausting one's assets in addition to actual longevity risk.


You may have become highly successful at saving and investing over the years because of your ability to delay gratification and hold out for larger future rewards. Congrats. However, "turning off" this aspect of your personality may not come easily. "The attitudes and behaviors you picked up from your parents while you were growing up—which may have served you well throughout life—can also hold you back from enjoying yourself in your retirement years," says Knoll.

There are a variety of options for well-to-do retirees to consider as they plan out their legacy—whether it's a family business, family values, donor advised fund, or assets that will be passed onto future generations via trusts. Take time to have a quality family money meeting with an eye to bringing clarity to how you plan to use your wealth to support the dreams and values of your family and loved ones.

Tip: Read Viewpoints on Mapping your money to your family and wishes

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