How can we overcome the fear of spending?

When individuals are reluctant to spend, anxiety or a history of financial trauma may be at the core of the issue. Getty

Humans aren’t great at balance. We tend to think, feel, talk and act in extremes, often to our detriment.

When we are too indulgent or too restrictive, we create a world of discomfort for ourselves and those who care about us. This is also true in our money lives.

For example, when most people think about problem spending, they think about those who overspend. Yet, it can be equally problematic for someone when they underspend or are scared to spend the money they have.

So, why do some of us struggle to spend money even when there’s more than enough? To answer this question, we must look under the surface.

People struggle to spend money for many different reasons. They may include financial anxiety or a history of financial trauma, transitioning from accumulation to decumulation into a new phase of life, or through identity and emotional connection to assets.

Let’s look at these three areas individually, starting with anxiety and financial trauma.

When people are reluctant to spend, anxiety or a history of financial trauma may be at the core of the issue.

If someone struggles with anxious thought patterns, they may spend a lot of time preparing for the worst thing they can imagine. While it’s healthy to plan, financially anxious people can carry preparation for unforeseen events to the extreme.

With financial trauma, the brain of someone who has experienced scarcity, deprivation or loss may struggle to recognise that they are living in a new context with different resources.

Thriftiness that was previously necessary and adaptive is no longer needed. Still, the mind can’t register that old threats don’t exist. They are unable to see that they have outgrown what was once adaptive. Long-standing habits get in the way.

When people transition to a new phase of life, they often need to recalibrate various aspects of their money life.

One of the most significant shifts occurs when people enter retirement. Many people spend decades focusing on saving for retirement.

So, when a person then flips from accumulation to decumulation, it can be jarring. Life’s uncertainty makes it scary for someone to start spending what they’ve spent a lifetime working for.

Finally, the origins of people’s money can significantly affect the feelings they have about spending it.

For instance, people may feel uncomfortable about spending money they receive from a life insurance policy.

Or if someone has received an asset as a gift from a person who has passed away, they may struggle to part with it because, in their mind, it’s a connection to someone important. They may think “this is all I have left of them”.

And so, given that there are many factors impacting our willingness to spend, how can we overcome this?

When the fear of spending is having a detrimental effect on the quality of your life, there are steps that you can take.

Here are five strategies to use if you are struggling to use the resources currently available to you:

1. Acknowledge and normalise, validate the struggle

Current choices emerge from previous life experiences, so be compassionate with yourself when engaging in a behaviour that is instinctually about survival.

2. Do the maths with an adviser you trust

After validating the emotional side of the struggle to spend, it may be beneficial to speak to a trusted adviser who can help you review data and the facts of a situation. You might discover that some fears are unfounded in their present financial reality.

3. Define your abundant life

Explore if a lifestyle upgrade might bring you increased joy. Paint a vivid picture of new possibilities and be specific.

4. Give yourself permission to pursue an abundant life

To do this, you may need to address issues that have made spending a challenge. That may include guilt, fear, core beliefs about wealth, or struggles with self-esteem.

5. Practise living an abundant life

After identifying ways of spending that lead to new kinds of comfort or enjoyment, it’s time to practise. For instance, set aside a specific amount of money you can reasonably afford to spend. Next, commit to using it. It may be uncomfortable at first, but like other behaviours in life that were hard at first, changing spending habits will grow easier over time.

By walking through these steps, you can feel freer and more confident to use your resources in a manner that is both responsible and enjoyable.

Spending money may feel uncomfortable or counterintuitive to you, but remember, it’s part of a healthy financial life.

Taking steps to achieve a balance allows you to responsibly prepare for tomorrow while allowing yourself to savour and enjoy today.

Sam Instone is co-chief executive of wealth management company AES