Change and control go hand in hand. Some changes fall easily into your scope of control, whereas others remain just outside it. You can’t control the weather no matter how much you wish that sunny January morning was actually sparkling snow. But there are other times when it doesn’t feel like you have control over a situation when you really do — and your personal financial health (and money mindset) is certainly one of them. People often fixate on the money aspects they can’t control, like the market or returns, instead of focusing on what they can control like savings, spending, investing, goal-setting, and more.
When it comes to personal finance, whether or not you feel in control has everything to do with perspective. Your financial perspective is also known as your money mindset. What is a money mindset and do you have the power to change it? Let’s find out.
What’s a Money Mindset?
Similar to a money script, a money mindset is the unique attitude, perspective, and narrative you weave using your thoughts, actions, and beliefs toward money. Your money mindset extends beyond the bounds of your personal life and enters into your general feelings toward finances.
Your money mindset informs the way you manage, save, spend, and invest your money. When you better understand your perspective toward your money, you begin to see where your financial habits come from. A money mindset influences your thoughts and actions, which can have both positive and negative consequences.
Someone with a healthy money mindset likely feels confident, secure, knowledgeable, and energized about their financial life. Someone with a negative money mindset might feel anxious, guarded, or uncomfortable about their financial situation. Not sure where you fall? Ask yourself some questions to help shed light on your money mindset:
- How does your financial situation make you feel?
- Are you comfortable talking with your spouse, parents, friends, etc. about money matters?
- Do you like your financial habits?
- Are you secure in your financial future?
- Do you often compare your financial situation to others?
- Are you confident you can achieve your financial goals?
These questions help reveal how you view money. It illustrates how you see your debt, whether you make healthy financial choices, how confident you are in your financial future, and so much more.
How is Your Money Mindset Formed?
Your money mindset is formed from your distinct lived experiences. Everyone has a different story and relationship with money because everyone has had different experiences with it throughout their lives. Someone who worked during high school and college might have a different perspective on saving than someone whose first job was well into their 20s.
Along with your personal experiences, your mindset is also formed by how money impacted the people closest to you.
- Was money a taboo topic in your house?
- Were your parents or loved ones constantly stressed about money?
- Did your family prioritize charitable giving?
- Was financial literacy a core topic of conversation in your house?
All of these past experiences likely influence your attitude and approach toward money today. Someone who grew up in an environment where money was a sore spot might not like managing their finances (or might always worry about having enough money to support themselves and their family).
Your attitudes and perspectives are shaped by the people around you, and those closest to you tend to profoundly influence your thoughts and beliefs. As the saying goes, you are who you spend time with,
Why Care About Your Money Mindset?
As noted earlier, your money mindset is directly connected to your current financial habits. It affects how you approach money, the way you view and use debt, how you think about your future, and how you view the financial habits of others.
When you know how you approach money, you’ll be more equipped to make intentional decisions that push you in a positive direction. After reflecting on this concept, you may realize you lean on your credit cards too often for purchases you don’t need and that don’t further your goals. You may also discover your propensity for giving comes from a long line of generous role models.
Your money mindset also reveals both your positive and negative traits regarding financial management. This concept isn’t inherently intuitive. It’s critical to spend some time thinking through these questions and being honest with yourself about your attitude toward your money.
The best thing about a money mindset? Like perspectives, they can shift. Here’s a few ways you can change your mindset to improve your financial outlook.
5 Steps to Change Your Money Mindset for the Better.
Personal finance fluctuates and changes, which always leaves room for improvement. Remember, your money mindset is something you can control. Here are some ways you can evolve and make progress:
1. Believe You are Destined and Deserve Success
Too often, a negative mindset leads people to give up on their financial goals. It’s important to approach your money from a place of openness, curiosity, and excitement. Believing that you can reach your goals and find success is the first step. Once you have that foundation, you’ll be able to construct habits that support those beliefs.
This doesn’t mean your entire financial road will be paved with rainbows and sunshine, but it does mean you’ll allow yourself to find success. How can you shift this perspective? Spend some time setting new financial goals. Your goals are the foundation of your financial plan. Once you have your goals, set some key milestones to celebrate as you work toward them.
Starting from a positive headspace will help you make choices that are aligned with those productive thoughts.
2. Picture Your Future Self
Sometimes it’s crucial to flip this tough interview question back on yourself. Where do you see yourself in 5, 10, 20, even 30 years? Where have you grown? What have you accomplished? What do you want for your future self? Picturing your future can be a telling exercise as it can reveal if you’re on the right path to attaining it.
Maybe starting your own business is a critical milestone in your life. You might suddenly realize you haven’t started saving for this venture or really thought about the type of business for you. Fill in those missing pieces so you can set yourself up and bring that future vision to life.
You might also try picturing your dream retirement. Where are you living? How are you spending your time? Are you fulfilled? When you can see your future self, you can find the motivation you need to get there. Maybe this year commit to maxing out your retirement accounts or increasing the contributions to your other investments.
3. Give Freely and Generously
Your comfort level with giving back to causes, organizations, and people you care about says a lot about your money mindset. In general, those who intentionally make space for giving feel more confident, secure, and fulfilled with their money.
Every person will have a different capacity for giving, but when you feel comfortable giving away some of your money, you’ll move from a space of scarcity to one of abundance.
A scarcity mindset is a dangerous narrative, one that leaves you constantly chasing the idea of “enough”. Abundance, on the other hand, is about setting yourself up for financial success and structuring your money in a way that brings meaning and fulfillment.
4. Immerse Yourself in Knowledge
One of the best ways to combat negative habits is to learn healthier ones. Financial management isn’t simply intuitive, it’s something you need to work toward and spend time with to get right.
- Take some time to read books, blogs, and articles. These resources can broaden your perspective and help you improve the areas where you’re struggling.
- Talk with family and friends about the questions you have. They might be able to share their wisdom or perhaps just open a line of conversation.
- Seek out a professional. A financial advisor can help address your money mindset and give you practical tools to improve it.
Knowledge is power and making the most of the resources available to you will help you shift your perspective.
5. Know Where You Are and Where You Want to Be
To change something, you need to understand two elements:
- Where you are.
- Where you want to be.
Let’s use investing as an example. When you know you veer into a scarcity mindset when the topic of investing comes up, you can use the tools and resources around you to overcome those feelings. If you want to reach your financial goals, odds are you’ll have to embrace investing.
To embrace the role investing plays in your finances, do some research on what investing means to you. Understand your risk tolerance, set goals, and work with someone you trust. All of these elements will help you build a positive and fulfilling mindset.
Your money mindset powers your thoughts, attitudes, and perspectives toward your finances. Remember, you can control how you view, approach, and manage your money. By understanding your current money mindset, you’ll be able to create positive habits that help you accomplish your goals.
We love talking about money around here. If you want to learn more about your money mindset, give us a call.