Money Mindset

How to Change Your Money Mindset: Understanding and Improving

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A major reason you may not be achieving your financial goals is your existing money mindset.

In this article, we’ll discuss the scarcity mindset, your attitude about money, and the money habits of rich people. And most importantly, how to shift your beliefs to abundance and growth.

So, what’s your attitude towards money? Did you know your mindset about money has a huge impact on your personal experiences and life goals?

What is Money Mindset?

Your money mindset comes from your unique set of beliefs and attitudes about money. It’s what drives decisions about spending, saving, and handling money. 

The common money mindset definition is the thoughts and feelings you have developed about money based on your life experiences. Our relationship with money can consider having an abundance mindset or scarcity mindset. Having a positive money mindset can help improve your financial life.

On the other hand, a bad money mindset can impact your ability to achieve financial success. Because your thoughts often control your actions, having negative feelings about money can lead to financial decision-making that impacts wellbeing.

The first step to shifting from a scarcity to an abundance mindset is awareness.

Awareness of your thoughts and feelings

The awareness of your self-sabotaging thoughts is the first step to improve your mindset. Some examples of self-sabotaging thoughts are:

  • I will never make enough money to realize my dreams.
  • Debt is a part of life.
  • I don’t have enough money to save.
  • Investing is only for the rich.

Do you hold these types of negative beliefs about money?

Take time to reflect on your thoughts and feelings. Make an effort to be aware of how you feel when the topic of money comes up. Do you cringe when someone mentions money? Do you tend to tune out when others talk about investments? How do you respond when someone talks about credit or debt? Are you dishing out money advice you don’t take yourself?

Track these thoughts and feelings to help you understand your mindset and highlight areas where you need to make some changes.

Healthy Money Mindset Examples

Having a healthy or positive money mindset is essential in creating wealth and experiencing financial peace. Some examples of healthy money beliefs include:

  • Having money goals such as emergency fund
  • Little to no credit card debt
  • Contributing to retirement accounts
  • Use monthly budget to stay on track

We all have a money story that affects our financial management. Below are examples of money beliefs:

Money isn’t important

But money is important to live and function in our society. It takes money to afford the necessities such as food, housing, and clothing. Additionally, money enables us to purchase some luxuries. Having a mindset that money isn’t important often leads to mindless spending. When money isn’t important, then decisions are made not to save or invest money. Often the question arises, “Why to make more of something [money] that isn’t important?”

Read more on money beliefs with 5 beliefs to better your financial wellbeing.

Appreciation of money and credit

Sometimes we demonize money or credit. Money and credit are tools. They are neither good nor evil. How the tool is used determines its impact on your life. When you appreciate money, your actions reflect that appreciation by using it mindfully to create the life of your dreams. When you appreciate credit, you don’t mindlessly charge purchases but use the tool to create opportunities to build wealth.

For example, you financed a car that allows you to drive to/from your dream job. Or you used student loans to pay for your education to enter a profession.

Become educated and financial knowledgeable

Knowing about money and finances isn’t just for financial professionals or those with money. Everyone can benefit, and that means you too. When you’re educated about money, you’ll feel more control about your future. The more you understand personal finance, the better equipped you are to make decisions to achieve your financial goals and improve your life.

Want to read more about mindset and money scripts?

Dr. Brad Klontz, in his recent book, Money Mammoth, explains how our brains are wired to protect us. This natural safety mechanism can often support a scarcity mindset. The key, he argues, is shifting your beliefs by first understanding what they are then purposefully altering behaviors.

For more, read the Money Mammoth here (Amazon affiliate link).

The Connection Between Wealth and Money Mindset

Wealthy individuals, and those pursuing wealth, understand that compound interest is the force that underpins personal finance as a field of study and the practice of retirement planning. Once compound interest is truly understood, other personal finance concepts (e.g., the value of starting early, the rule of 72, the 4% rule, avoiding debt, electing not to take out 401(k) loans, etc.) are tied together and make much more sense.

The ability to delay gratification means you understand that having the most ‘stuff’ and buying the latest consumer good may appear wealth. In fact, the opposite is true, and wealthy people approach buying goods and services differently. They understand that true wealth means carefully evaluating when and how much to pay for a good or service. A wealthy mindset prioritizes having your money do the work for a longer period of time. Basically, make money with money.

How Mindset Affects Your Spending

Spending is a part of life. We spend our cash and spend our time. How we choose to spend cash or time is up to us.

I understand that spending gets a bad rap. Stop your spending. Don’t overspend. Spending is what leads you to debt. All those things are true, but if we truly repressed spending, we could find ourselves with a whole bunch of savings and not enough living.

But, spending doesn’t always lead to a comfortable life. Spending can actually lead you to a life of servitude. Tied to your job until the magic age when we should be living. At times 50 years from where we are today.

However, it’s not about stopping your spending altogether. It’s about spending on things that matter. Often, we spend on things because we can or to prove to ourselves that we can. 

There’s a psychology of spending. I’ve read reports on how we spend to keep up with others, which is partly true because we are social species. We have a desire to fit in or to survive better than the person next to us. Again, it’s tied to that brain Dr. Klontz wrote in Money Mammoth.

Change Your Mindset And Start Building Wealth

Now that you understand why it’s important to shift your mindset. I challenge you to focus your effort on wealth creation. Use your newfound abundance mindset to earn and make more money.

You already earn money with your first job, but you’ve wanted to make a bit more. Who doesn’t want more money to pay off debt, build savings, and invest for retirement?

On the road to financial wellness, it’s important to have multiple sources of income and invest your money to have it work for you.

We’re often told to cut expenses and use the savings to pay towards these goals. But there is a limit to how much you can cut. What’s often forgotten is the discussion around increasing your income. And if it does happen, it’s limited on how to get a pay raise at work.

There are no limits to income generation and diversification. Earning more and making more money is a good way to build wealth. I explained the differences between earning and making money. It’s a good read that I recommend.

Basically, earning income requires your time in exchange for money, while making money involves less of your time with a potentially increasing monetary gain. 

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