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If you feel cash-strapped despite a seven- or eight-figure inheritance, you’re not alone. Katherine explains where the scarcity mindset comes from and the first step to feeling confident about what you spend.
Feel like no one is helping you understand how much you can actually spend? Reach out to Katherine to see how Sunnybranch can help you build a clear plan for your inheritance.
Transcript:
On today’s episode of Heir Necessities, we are diving into a question that I get asked all the time. It boils down to some version of, “Why do I still feel so poor even though I’ve inherited millions and I have an investment account that’s seven or eight figures?”
Before I dive into answering why you feel this way, I wanna take y’all on a little bit of a journey in my life. Because to be totally candid with y’all, this is something that I struggle with, too.
I have a total scarcity mindset, and some part is due to personality, and some part is due to the money stories that I learned as a kid. And I wanna tell you how this exact issue shows up in my life.
Hey, y’all. I’m Katherine Fox, and this is Heir Necessities.
I’m a certified financial planner, a financial advisor for inheritors, and an inheritor myself, so you can think of me as your old white man translator. On this show, I take the inheritance questions you can’t ask your friends and give you real jargon-free answers.
Why Do You Still Feel Poor Even Though You've Inherited Millions?
Let’s get into it. If you’ve been following the podcast, you know that last season we started a basement renovation.
We are almost done. We’re working through the last items on the punch list, but we are at the worst part in any renovation, which I know is coming because this is now the third major renovation I’ve done.
But it’s the point where you’ve run out of the cash that you had allocated for this renovation project, but you still have to pay your design build firm the rest of their invoices.
And you’re basically dealing with the consequences of all of the decisions you made six months ago when you said, “Yeah, we can definitely put that change order in. That’s something we wanna do,” whatever.
You went over budget, it’s fine. Now, we have the cash to pay for these overages, or I should say, we have the money, but we don’t have the free cash.
How Can Major Expenses Create Financial Anxiety for Wealthy Inheritors?
And this is an insane point of stress for me that is, let’s be clear, totally fabricated. So let’s say we still owe our design build firm $100,000.
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We don’t have $100,000 in cash. We have basically three places, four places really, that we could pull it from.
We could sell stock and pull it from the portfolio. We have a HELOC that we could pull it from.
We have a line of credit against my brokerage account that we could pull it from, or I could pull the cash from my business. So there are many ways that I could generate this cash, but every single one of them feels fraught.
And the reason that it feels fraught is because it feels like we are spending money that we don’t have, only because we have exceeded the amount of cash that we allocated to this project. And it feels like we are stressed and kind of strapped for money when the reality is that we have insane financial resources.
For whatever reason, I just don’t love the idea of pulling from those resources because I wanna be able to stand on our own two feet. I don’t wanna have to touch our brokerage accounts.
I don’t like selling stock to pay for personal expenses. It makes me feel like a failure.
I don’t love the idea of pulling from the HELOC or the line of credit because obviously then we’re paying interest, um, and we have very, very little debt, so I’m kind of loathe to take on more debt.
And I don’t wanna pull it from the business because the business, while it has the cash, also needs money to stand on its own two feet, and I don’t wanna feel like I’m using the business as my personal piggy bank. What we decided to do was pull money out of the HELOC.
Again, this is not a real problem. I have just described this whole journey I went on that has caused me, like, a pretty intense amount of stress and anxiety.
None of that stress or anxiety needed to exist. We have these four places where we can easily generate that much cash.
Paying back the HELOC is not gonna be a big deal. It’s not something that’s gonna stress us financially.
But still, literally, we went out to dinner last night, and I told my husband I wanted to go out to dinner, and then I was like, “Oh, but I don’t know if we should, if it’s, like, the right financial decision.”
And he just looked at me and was like, “Katherine,” like, basically, “Don’t be dumb. Dinner’s gonna cost $60.”
So I tell you this whole story because if any part of that resonated with you, I want you to understand that as someone who is worth millions or tens of millions of dollars, but still feels like you don’t have enough, you are, like, living in some sort of cash-strapped world, you are not alone.
Why Does a Scarcity Mindset Persist After Inheriting Wealth?
There are really clear reasons when you step back and look at it, and look at kind of the swath of inheritors as a whole, why you feel this way. First and foremost, I would say the reason that most of us feel this way is because we were raised with a scarcity mindset.
Even though our parents were wealthy, they raised us kind of in that quiet wealthy zone to live within our means, not spend more than we have, to make sure that above all, the money kept growing and growing and growing. It’s a very capitalist mindset, right?
Yes, you can spend money, but you can’t spend too much because then the money will not grow. And why do we need the money to grow when we already have tens of millions of dollars?
No one can really answer that question, but they know that it is important. And if you grew up in that scarcity mindset, when you inherit millions of dollars, that mindset doesn’t just go away, and you’re trying to justify the fact that you are rich with this money story that you learned growing up, which really told you, “Don’t spend too much.
Don’t live beyond your means. Make sure that the money keeps growing.”
How Do You Know How Much of Your Inheritance You Can Safely Spend?
But what you don’t have in this story, what so many inheritors don’t have, even if they’re working with financial advisors, is a sense of how much you can actually spend. And that is the biggest factor that I see for inheritors who have this scarcity mindset, is that they don’t have someone in their corner who’s helping them understand how the spending decisions that you make now will affect the amount of money that you have in the future.
And so what it means is on a day-to-day basis, you’re just spending money. You’re living your day-to-day life, you’re paying your mortgage, you’re probably going on nice vacations.
I would bet that you aren’t overspending. But because you have no frame of reference for how much you should be spending, how much it’s safe to spend, how much other people like you spend in, like, a similar asset or net worth portfolio, it feels like you’re hurtling down this track towards some totally unknown future where you might have even more money than you have now, or you might run out of money.
And you don’t know how to get the information you need to feel like you can get off the track, and instead just kind of walk on a path with a destination that you know and understand.
Why Doesn't Financial Advice Always Ease Money Anxiety?
If what I just said resonates with you, I want you to understand that it is not your fault that you feel that way. It is the fault of the people around you, the people who you have hired to give you financial advice and financial guidance, that they are not providing the information that you need to understand where your spending decisions are taking you.
It’s a really hard thing for inheritors because most financial advisors and investment advisors are not providing this level of support. They don’t understand how stressed you feel about the amount of money that you’re spending.
They just keep saying, “It’ll be fine, it’ll be fine, it’ll be fine.” But meanwhile, you have no confidence in them saying that it’s fine because you have no understanding of what’s going on.
And all they do is they look at what you’re spending, they look at your assets, and they’re like, “Well, they don’t need to worry about it.” And they don’t take the time to educate you and bring you into the conversation of why that is.
How Can You Talk to Your Parents About Their Estate Plan?
Quick break. If you’re heading home for the holidays this year and there’s a conversation you know you need to have with your parents about what happens when they die, but you’ve been putting it off, I made something just for you.
It’s a free guide called How to Talk to Your Parents About Their End-of-Life and Estate Plan. You’ll learn how to start these conversations without them getting super weird, what to do when your family shuts you down, and the exact questions you need to ask, from your parents’ medical wishes to where their will actually lives and when they updated it.
Grab it free at the link in the show notes. Okay, back to the episode.
How Can Inheritors Feel More Confident About Spending Money?
If all of this is hitting with you, the question you’re probably asking now is, “Okay, so what do I do about it? Given that I have this scarcity mindset, I feel like I’m spending too much.
I totally resonated with this idea of hurtling off into this uncertain spending future. How do I stop it?
How do I feel confident in where my money is going, what my money is doing, the spending decisions I’m making, and how they affect my financial future?”
And the answer for that is that you need to start by defining what you want your financial future to look like. That is the missing piece in these spending discussions.
Because money doesn’t exist in a vacuum for your current spending only. Money is there, and your wealth is there to support your vision for the future.
And without having a really clear vision for what that future is, and knowing that you have the team around you who supports that vision and is gonna make sure that if you start spending in a way that means you may be deviating from that vision, they’ll help you get back on track, it’s really hard to feel safe and confident and assured in what you’re spending now if you’ve inherited millions or tens of millions of dollars and you wanna feel in control of your spending and really have a sense of how what you’re spending now affects the amount of wealth that you are gonna have in the future, and also your goals for the future, your goals for your family, your goals for your wealth, and your goal for the impact that you wanna have with the money that you’ve been given, I would love to chat.
These are the kinds of questions that most investment advisors are not gonna talk to you about, but they are the first part and the grounding work of everything I do with my clients at Sunnybranch.
Let’s take the next step together
Understanding how to protect, invest, grow, and/or give away a multi-million dollar inheritance isn’t easy. Inheritors can encounter a wide variety of different situations requiring knowledge and finesse to manage. If you need more help, reach out to Katherine Fox, CFP® and CAP®, financial planner for inheritors, to learn how Sunnybranch can help you evaluate your financial situation and build a plan for your financial future.
