my two cents

How Can I Stop Feeling So Guilty About My Spending?

Email your money conundrums, from the technical to the psychological, to

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Dear Charlotte,

I just graduated from college and have a decent job with above-average pay, but I’m terrified about managing my money. I have a tendency to overspend, followed by a period of guilt-induced frugality, then splurging again. I am an only child and have been able to hit up my parents for money whenever needed, so I have terrible habits and no idea how to save or invest. I tried keeping track of my spending using an app but quickly gave up. Please help me figure out how to make consistent spending habits (instead of the random binges I have right now) and reduce the guilt associated with spending. I want to go to grad school, so I’m hoping to save up at least a bit in the next two or three years.

Welcome to adulthood! I want to tell you that this money stuff will get simpler with time, but that would be a lie — chances are, it’ll only get more complicated as your career advances and life gets bigger. However, you can make that growth process much easier on yourself starting right now. Your fear of botching your finances — and subsequent guilt when you do — is perpetuating itself. Your problem isn’t just that you need better habits. You need to prove to yourself that you’re capable of making them.

By always bailing you out, your parents set a precedent where you never had to solve a financial problem. You don’t mention this in your letter, but I’d bet they also didn’t talk much about money around the house, or at least not in front of you. If you were able to “hit them up” for cash whenever you ran short, it’s probably because they wanted to give you a childhood where you never worried about being provided for. This came from a good place, I’m sure. But the result is that you’ve never had to dig yourself out of a financial pickle, and now you’re anxious that you’ll never learn how.

The best way to conquer this anxiety is to pinpoint exactly what you think you can’t do, break it down into very small steps, and then repeat those steps until they become a part of who you are (more on those steps in a minute). Science backs this up, too: Multiple studies have shown that people are more likely to keep a new habit if they identify with that future, better version of themselves. If you think of yourself as the kind of person who’s responsible with money, then you’re far more likely to become her.

As for the guilt you feel? Think of it as your strongest weapon. Once you’re running on your own steam, your nagging self-reproach will lift, and that’s a fantastic feeling that you’ll want to hold onto. When I finally learned how to live within my means and save money (which didn’t really start to happen until I was 30, so you’re way ahead of me already), I realized that I never wanted my finances to make me feel trapped or stupid again. Self-sufficiency is its own incentive.

Here’s how to start: You need to figure out how much money you can spend in the first place, so draw up a budget. The internet is swimming with worksheets and tools to help you do this, but they’re all just variations on the same concept — just pick whichever appeals to you most (or doesn’t make you want a nap). Then, look at your take-home pay. That’s the dollar amount on your paycheck after taxes and benefits, and the basis for your planning from here on out. (Speaking of benefits: If your employer offers a 401(k) plan, I’d recommend funneling at least 10 percent of your salary into it, especially if your contributions are matched — it’s one of the most effective ways to invest for the long term, and even more so when you’re young.)

Now, subtract your nonnegotiable expenses — rent, transportation, utility bills, loan payments if you have them, groceries, etc. These are also known as “fixed” expenses, because they’re consistent and necessary. If you’re not sure about the numbers, look through your credit or debit card transactions for the past two or three months to get a general idea. And if you’re off, don’t worry — part of learning to budget is not freaking out when you miscalculate. You can adjust moving forward. Ideally, the sum of these expenses should be around half of your take-home pay.

The next step is to figure out how much you want to save, and for what. Most experts recommend setting aside 20 percent of your income for long-term goals and any debt payments (remember, your 401(k) contributions count as part of this — so if you’re putting 10 percent of your paycheck toward that, then you have another 10 percent to work with).

You mentioned grad school. Do you have an idea of how much you’ll want to save for it? Pari Hashemi, a Philadelphia-based financial adviser, suggests choosing a realistic amount that you can build up steadily — say, by squirreling away 5 percent of your take-home pay every month. “Set up automatic transfers into a separate account so that you don’t even see that money,” she says. To keep your paws off that savings, make it inconvenient to access; you could even try putting it into an online savings account that’s separate from your normal bank and doesn’t offer ATM access (many of these are free, easy to open, and offer high interest rates). At the same time, you want to build up a cushion for yourself, also known as an “Oh, shit” fund, which is exactly what it sounds like. So, that’s three different buckets of savings — one for school, one for emergencies, and your 401(k) — but once you automate your contributions to each, you don’t have to think about them, and there’s nothing to mess up.

Finally, the fun part. If you’re putting 50-ish percent of your take-home pay toward your needs and 20-ish percent toward savings, then you’ve got 30-ish percent left over to play with. This is what pays for clothes, drinks, vacations, dinners out, pony rides, Korean beauty products, a fancy vibrator, or whatever else you please. Enjoy it! You’re an adult! You get to do what you want. However, this is also the category where most people — including you, it sounds like — tend to get tripped up. That’s understandable; it’s hard to stay in line when you’re face-to-face with something pretty or soft or shiny that you really want, especially if you’ve never had to regulate yourself before. To set your own limits, divide this part of your budget into weekly chunks, or maybe even daily ones. The best way to make a new habit (or break a bad one) is to break it into the smallest, most digestible bites imaginable.

To stick to this “allowance,” Hashemi advised that you ditch your cards for a while and go cash-only. (Some people call this strategy the “envelope system” — every week, you take out the allotted amount of cash and divvy it up into envelopes for each day.) Obviously, this isn’t realistic for the long haul, but it’s a good way to wrap your head around the physical exchange of money for things you want — and it physically prevents you from overspending. It also teaches you to “save up” on a micro level: You can roll over any unspent cash into the next day’s envelope, so if you know you’re going out to dinner on Thursday, you’ll want to spend less earlier in the week to accommodate. (Obviously, there will be situations where cash is unreasonable; in those cases, just remove the equivalent amount of bills from your weekly stockpile.) It’ll take a few months to get used to this, but that’s how long it takes to form a new habit — remember, you’ve got to prove to yourself that you can do this.

Once you’ve succeeded, you can transition back into using cards, but the cash method is always useful tool to fall back on. I know people who reinstate it whenever they need to save up for something; sometimes I’ll do it for a few days or a week when I feel like I’m getting too loose with money.

Meanwhile, consider enlisting help from the original source: your parents. Talk to them about what you’re trying to do, and ask them about their own financial histories. See if they can offer support of the non-financial variety. And if you do find yourself in a position of needing to “hit them up,” make it official. “Borrowing money from parents is a common occurrence in most middle and upper middle-class families,” says Georgia Lee Hussey, a certified financial planner and founder of Modernist Financial. “As you move toward greater independence, you may want to consider structuring these transfers as loans with a repayment schedule and maybe even a small interest rate.”

Inevitably, you’re going to have lapses in judgment and regret spending money on something dumb. Everyone does. But the best way to avoid (and recover from) these slip-ups is to be aware of why they happen. “Many of us struggle with developing a healthy relationship with money,” says Hussey. “I would work on increasing your awareness of what might trigger overspending.” For instance, I used to get the urge to shop on Fridays — I felt like I deserved a reward for getting through the workweek, and would buy random things that I later regretted. Once I realized what was happening, I started making dinner plans for Friday nights instead, to give myself an alternative activity to look forward to — one that I don’t feel guilty about.

How Can I Spend Smarter and Stop Feeling Guilty?