Your Bank Balance Might Be Low, But Is Your Self-Esteem Lower?

Struggling with overspending, impulse buying or poor money habits? Don’t beat yourself up over it — you actually need to give your self-esteem a boost. A new R29 survey of 1,000 people found that 43% of women who feel bad about their financial situation end up also feeling bad about themselves. But it's a cycle that runs both ways — those who feel bad about themselves are more likely to end up spending more. 

People often fall into the trap of spending to “fill the gap”. This is how Lily Ellis, 20, from Oxford puts it when she reflects on her spending habits. “I noticed how my self-esteem affects my money a few years ago when I started earning. With the new disposable income I had, I was regularly buying lots of things that I didn't necessarily need, like clothes to keep up with trends, makeup, beauty procedures, meals out, accessories and gifts.” Of the women Refinery29 spoke to for this article, spending on makeup and clothing for a boost was a recurring theme. More recently, Ellis has been watching videos on TikTok about “overconsumption” and it’s made her realise that she needs “to find better coping mechanisms”. She typically spends £50 at a time every few days, and thinks she’s spent up to £15,000 in total on these kinds of purchases since she started working (she lives with her parents and doesn’t pay rent). “I am clearly using shopping as a serotonin boost,” she adds. “At the time of buying it does lift my mood, but only for a short amount of time.” 

Small purchases may not feel like much in the moment but they add up. Ellis wants to change the habitual pattern she’s caught in, especially when she looks at her bank statements and sees piles of clothes she hasn’t worn (which she ends up donating or reselling). “It makes me feel regretful and disheartened. If it wasn't for my little-and-often purchases, I could have bought a new car by now.” It all just ends up as clutter, she says, which worsens her self-esteem...and the cycle of spending repeats itself. 

The link between mental health and spending money is long recognised by experts. The charity Mind notes that people can “overspend to feel better” — but those who actually experience this might not recognise the link, or the extent to which low self-esteem can influence how often and what we buy. A study in the Journal of Consumer Research found that people with low self-esteem are more likely to buy “inferior” products than people with high self-esteem, as it subconsciously confirms how they see themselves. That might mean impulse-buying a knick-knack that only creates clutter, or choosing low-quality shoes that will need to be replaced sooner than a higher quality pair. Researchers called this “self-verifying consumption”, meaning that what we buy confirms how we feel about who we are. There’s also the phenomenon of “emotional spending”, in which a person spends at the height of an emotion without really thinking it through. According to a study conducted by Qualtrics on behalf of Credit Karma, 58% of American Gen Z and 52% of American millennials say they are emotional spenders. 

Our finances aren’t simply transactions — they reveal something about who we are. Clinical psychologist Dr Daniel Glazer tells Refinery29 there is a “self-perpetuating cycle between low self-worth, frivolous spending, remorse and depleted self-esteem”. He says it’s common and “deeply ingrained” for many. “The initial rush soon wears off, triggering self-judgement which further diminishes self-esteem, restarting the urge to spend for that fleeting reprieve,” Glazer explains. “When we feel deficient in self-worth, retail therapy and status purchases can provide a fleeting dopamine hit that temporarily salves our insecurities and longing to feel valued. These ‘little mood boosters’ validate us in the moment, even if that relief proves unsustainably short-lived. The fear of missing out and desire for social belonging can also heavily drive overspending for those with self-esteem issues.”

There are ways to challenge those habits, though it’s not easy. Nora Thomas-Dib, 27, is from the US and currently living in Barcelona. Coming from a low-income background, spending always invoked a sense of shame, perpetuating the cycle that saw her “seeking validation through spending”. It’s via therapy and then travelling that she’s confronted her relationship with money and her self-esteem. “I saved money for two years and made purchasing decisions based on my goal of travelling Europe,” Thomas-Dib says. “My confidence increased because I watched what I was saving grow and saw the possibility of this lifestyle become more achievable.” She now feels less anxious and shameful when she does choose to buy things, especially as while travelling she’s often confronted with surprise costs. “I’ve learned how to balance habits because if I don’t, I can easily end up back in my home city.”

Now, we shouldn’t assume that feeling good about ourselves automatically means we make better money decisions. Peter Staffell, behavioural scientist at Santander UK, warns “while evidence suggests high self-esteem can lead to better financial planning, over-optimism and excessive confidence can also result in taking too many risks and financial failure”. It can even increase our chances of being scammed, Staffell adds. Conversely, people with low self-esteem can fall victim to “impulsive behaviour” and the “ostrich effect”, which is when a person buries their head in the sand, ignoring their finances. The result? We feel worse about ourselves once the reality of our actions sets in. “Worrying about money can lower self-esteem even more,” Staffell adds. “Plus, our self-control tends to wear down as the day goes on.”  

It’s not just about losing money — people lacking self-esteem also miss out on gaining money. Staffell says these people “are less likely to take risks with investments, missing out on potential gains” because they lack the confidence to take these risks and might struggle to forward-plan. Prioritising short-term highs over long-term rewards is common, as well as being “less likely to scrutinise the quality, value or consequences of our spending”.

None of this is to say that treats, splurging or pick-me-ups are bad. Everyone deserves to indulge in these kinds of buys sometimes, but it’s about recognising why we’re doing it. One takeaway or new lipstick on a bad day isn’t a problem; regularly using or relying on purchases to improve how we feel is. Staffell says that when “spending helps us get closer to what we want in life or supports a personal goal, it can have a more lasting positive impact”. It’s time to take stock, think about the quick-fix products in your cart and ask yourself: How am I really feeling?