Is your money mindset deterring you from building good money habits? Here’s how to change it.
While it’s true that money can’t buy you happiness, it can definitely help you feel security and power.
Not only that, but money can make certain aspects of your life much easier.
And to get the most out of your money, you need to develop a strong and healthy money mindset.
What Is Money Mindset?
Your money mindset is your attitude and unique set of beliefs about money. It drives your decisions about handling money, whether it’s saving or spending.
If you want to have a healthy money mindset, you should believe that:
• You have the freedom to spend, but you can also tell yourself ‘no’ to a purchase.
• You don’t have to compare yourself or your financial situation to others.
• It’s possible to achieve your money goals.
• Finally, you enjoy helping others who are struggling by donating.
Your money mindset basically shapes the way you feel about your finances, your attitude towards others who make more or less money than you, your ability to make smart investments, and more.
How Is Your Money Mindset Formed?
Various factors influence your money mindset. These include:
• The experiences you’ve personally had around money
• If you had a part-time job in high school
• How openly your parents talked about money growing up
• How your parents handle money
• If you’ve received generosity before
However, you can shift your mindset at any time if you desire to. So let’s review five steps to change your mindset about money and get the most out of your finances.
5 Steps to Change Your Money Mindset
1. Accept Your Starting Point
Your money mindset and how you approach your money decisions have been forming all your life long.
So it shouldn’t be surprising that if you’ve had positive experiences with your finances, you’re more likely to have healthier money habits. And if you’ve had negative money-related experiences, you’re most likely to have poor financial habits.
Either way, you should accept your starting point and focus on strengthening your money mindset. After all, the only thing you can take control of right now is the present. And that, in turn, can shape your future.
2. Focus on Abundance Over Scarcity
If you’re like most people, you’re probably focusing on scarcity rather than abundance, and this can add some financial stress.
Let’s illustrate what people with a scarcity vs. abundance mindset think about money:
• People with a scarcity mindset believe that there’s a finite amount of money out there.
• People with an abundance mindset believe that there’s plenty of money for everyone.
Here’s how to change your money mindset from scarcity to abundance:
1. First, consistently reframe your everyday thoughts from “I can’t afford it” to find a solution to “how can I afford it.”
2. Next, while $50 probably won’t help much in a crisis, you could use that money to start an emergency fund and gradually build it up. Having an emergency fund will provide you with the security you need if any unexpected bills hit you.
3. Instead of thinking, “I can never afford a vacation to the Maldives,” start thinking: “A vacation to the Maldives has been on my bucket list for a long time. Let me start saving money so I can go there next year."
Getting to a state of financial wellness may help you focus on abundance as well.
3. Cut Emotional Spending
The next best thing you can do to change your money mindset is to cut emotional spending.
Now, what does it mean?
We often make money decisions depending on our emotions. For example, you might buy another piece of apparel if you see it on sale, even if you didn’t think of spending any more money on clothing that month.
It’s best to self-reflect on why you make the purchases you do. What drives your spending? Is it retail therapy?
4. Educate Yourself About Money
Getting financial education can significantly change your mindset and attitude towards money.
This doesn’t mean that you must obtain a degree in finances. Instead, you can gain financial literacy by reading more books that teach you how to get the most out of your money.
As an example, the popular book “Rich Dad, Poor Dad” by Robert Kiyosaki is an excellent starting point to educating yourself about money.
5. Create a Financial Plan
Last but not least, having a financial plan in place can help you control your finances and give your money a reasonable direction.
The best way to plan your finances is to create a budget and set yourself short, medium, and long-term financial goals.
Examples of financial goals:
• Short-term financial goal - save money for a new household item or a vacation.
• Mid-term financial goal - save money for a new car, for a down payment for your next house, or to pay off your student loan.
• Long-term financial goal - invest your money for retirement.
Are You Ready to Change Your Money Mindset?
Improving your financial situation starts with changing your mindset about money and how you treat your finances.
So, if you want to change your future and strengthen your finances, you’ll need to change your mindset first.
Remember, changing the way you think about money can empower you to make healthier financial decisions.
Banking and saving apps can help you create a financial plan and set your money goals. See how Monorail can help you start to shift your money mindset.
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