Financial Impostor Syndrome: Do You Have it & is it Costing You Money?

Success is normally great, but sometimes it comes with feelings of guilt.

In other cases, someone works hard and achieves success, but then feels like they didn’t really earn it.

Imposter syndrome can arise in many contexts. There is a special kind as well – financial imposter syndrome – which affects many people who have improved their financial situation.

What is financial imposter syndrome?

Imposter syndrome describes a feeling of inadequacy that arises when you don’t think you’ve earned your place among your colleagues or current social circles.

It’s something that often comes when you’ve gotten your seat at the table, but feel like you don’t belong. Specifically, it’s the feeling that you’re a fraud and don’t deserve that seat.

Regular imposter syndrome is fairly well-understood. Its triggers are any event that brings attention to your success. This can include a new job, a promotion, an award, or more. Financial imposter syndrome isn’t a separate issue, but rather it’s the same phenomenon applied to finances.

Examples of financial imposter syndrome

When you don’t have much money, you develop habits that reflect that fact.

You’re resourceful and frugal, always asking whether you can justify each expense. These habits can stick; one example of financial imposter syndrome is being very frugal even after receiving a significant raise. In this way, it is almost the opposite of lifestyle inflation.

Let’s say that you lacked money for a long time and had to ask yourself questions like:

• Do I NEED to replace these worn-out shoes TODAY?
• Do I NEED an oil change now, even though there’s a strange smell and exhaust smoke?
• SHOULD I buy a car now, even though I’ve been taking the subway for years?

If you suddenly start making a higher income, how do your habits adjust?

There are a few problems that some people face in this situation. It can either go the way of lifestyle inflation or the way of imposter syndrome.

Some people make more money, then feel like they should live in a house, drive a car, and eat the kind of food that reflects that new income.

Others will maintain their old habits because living frugally is more familiar to them. The reality of the increased income may not be accepted so quickly.

In some cases, this can be healthy for the person who is suddenly making more money. But it can be problematic as well. In the end, the reason for any example of financial imposter syndrome is that knowing what you can afford is difficult and takes time and practice, and one that no one probably taught you how to do.

Is imposter syndrome due to low self-esteem?

Imposter syndrome can often be attributed, at least in part, to low self-esteem.

However, this is likely to be more connected to your past experiences and the expectations you’ve set as a result.

Another major contributor to financial imposter syndrome is uncertainty.

Past experiences can make individuals fear that they may suddenly not have the money they need. In these cases, self-esteem is less of an issue, and it may just take time and considerate budgeting to become accustomed to a higher income.

Do successful people suffer from imposter syndrome?

Yes.

In fact, the most successful people are often the most susceptible. There has long been debate about the Dunning-Kruger Effect, the tendency for the unskilled and ignorant to be more confident, while the skilled and knowledgeable often second-guess themselves.

As Darwin put it “Ignorance more frequently begets confidence than does knowledge”.

When it comes to finances, most people love to make more money, but second-guessing your current financial situation is normal.

It’s hard to imagine that the most successful people suffer from this (although we can’t say for sure). But all forms of imposter syndrome follow some kind of success.

Conclusions

The core of the problem of financial imposter syndrome is that habits are, by definition, hard to change. This is combined with the fact that managing money also takes practice, and sudden changes in income may be shocking at first.

There’s nothing wrong with holding onto frugal habits – it can actually be very helpful!

The answer to the challenge includes one or both of:

1. Mental health awareness
2. Budgeting

Budgeting is the answer to a wide range of financial challenges. But you must also be aware of your mental health and seek help if you need it. In the meantime, it can help to simply set a new budget that adjusts for your current income. 

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