From Rags to Riches - How Coming into Money Can Cause You to Overspend

The Impact of Wealth on Our Habits

Sudden wealth has the potential to bring immense joy, but it can also unleash a wave of anxiety, indecision, and fear among those unprepared to handle it. In fact, up to 70% of people who acquire sudden wealth end up losing it all due to their inability to navigate the practical, financial, and emotional hurdles that come with it.

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Spending Habits

When we grow up without a lot of money and start earning more, we feel rich! This may cause someone to spend more than they can. But, it’s essential to remember that just because we have more money now does not mean we can afford everything we want. Being mindful of our spending habits may be even more important when you have money than when you don’t, because you actually have money to do something with. Remember, even millionaires can be in debt - it’s about living within your means.

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Saving Habits

If you grew up poor, you may have developed a scarcity mindset. What is a scarcity mindset? It’s a feeling that you never have enough and the money is always running out. But didn’t we just say that people coming into money might feel rich? We did, but what is not factored in is how people who have a financial status change think about saving and investing. Even though they feel they now have money to spend, savings and investing may still feel difficult. Many people in this situation are afraid to use emergency savings funds and would rather dip back into the credit card. The purpose of saving is to build a financial cushion so you don’t always have to rely on your income. It may be helpful to automate savings and set aside a specific amount each month.

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Giving Habits

When we come into money, we feel like we can start sponsoring or helping out our friends and family (and they might feel like you’re the person they can come to for money). While this is a noble thought, it is crucial to ensure we are giving in a way that aligns with our values and does not put us in a precarious financial situation. So next time you think to yourself, “drinks on me” or “yea you can borrow $50), make sure to double check if you can actually afford it.

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How to Navigate a Change in Financial Status

Educate Yourself

Take the time to learn about personal finance and investing. The more you know, the better equipped you will be to make informed decisions about your money. Lucky for you, the Debbie app has an awesome money psych course than can walk you through the ins and outs of growing your money 😉

Surround Yourself with Positive Influences

Surround yourself with people who have a healthy relationship with money. This can help you develop healthy financial habits and avoid falling into old patterns. Coming into money when growing up poor can have a significant impact on our habits, but that doesn’t mean you can’t learn new ones to help your growth !

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