How you think about money has the potential to damage or strengthen your ability to earn, use and ultimately keep your money. A positive mindset can send you on the path to financial happiness. A negative money mindset can result in you drifting or worse veering off into financial disaster. The good news is you are mostly in control of where you end up. With a little work on your knowledge, habits, and attitude to money, you can significantly improve your money mindset for wealth, health and happiness.
What has influenced your money mindset?
Basically, its the sum of your experiences around money for better or worse.
- Successes and failures with money, yours or family and friends
- How our parents and wider family managed and dealt with money
- How our friends and frenemies talked and acted around money
- The books, magazines, tv and ideas around money that we actively or passively exposed ourselves to over the years.
All of these are also, of course, ongoing today again actively or passively. We can choose to concentrate or expose ourselves to more positive mindsets or not as the mood takes us.
How do you think about money?
How and what you think about money has a profound effect on the cash flowing through your life.
Do you see money as the end or merely the means to an end? Is it the prize or just a tool to reach your prize?
Research by financial psychologist Brad Klontz has identified four money scripts or ways you might think about money. Are you any of these?
- Money avoider: Do you avoid money either thinking it is evil or something to be wary of? Rich people must be greedy, so you want nothing to do with them or become one.
- Money worshiper: More money will solve all my problems. In fact, they will never have enough money, and the more money they have, the more happiness and power they will feel.
- Money status(er): Stuff, especially expensive stuff, will bring you more status. Status brands are the must “oh is that the time” you say glancing at your Rolex.
- Money vigilant: Are you like a hawk watching your spending and budgeting? Frugality is your middle name you like to save more than you want to spend.
Whichever one or more you are might help explain why you do what you do with your money.
Possessions vs experiences
Whether you want things that look like they are (or were) worth a lot of money might say a lot about your money mindset. Is the possession of expensive things what you really want to achieve, or do you want the memories of amazing times to be the legacy of your spending?
Some of us need to be able to hold something to feel like we have got our money’s worth. While some of us just need a memory of a good time to know what our money was well spent.
This is the age-old challenge of possessions over memories, and all depends on how you are wired to spending and the feelings the things or experiences you buy give you. Whether its inner satisfaction or the external satisfaction of having others look at what you have all indicates what your money mindset is and how or where you are likely to spend your money.
Risk vs reward
Maybe you felt spending all your money was always worth the risk of running out of money as you got a massive kick from what you spent it on.
This is less risky when you can keep earning it, but as time and your luck run out, this becomes a more precarious scenario. Running out of money when you can’t make it back is going to be a painful lesson learnt.
Have a think about what it’s going to be like to run out of money when your old and limited in how you can start working again? Hmm doesn’t sound like fun.
Now at some point, you might well want to take some risk like investing in assets of one sort or another to get a greater return on your money. But this is likely to be a calculated risk after improving your financial literacy and with a higher chance of reward over the long term.
Planning or living for the now
Likewise, are you planning how you will spend your money or just spending it unconsciously?
Do you ever hear yourself say “I don’t know where it all goes?” if so, it sounds like you don’t have a plan or at least not a very good one.
Want to have more money? You’re probably going to need a better plan.
If you want to have more money your going to need to learn how to keep more of the money you already earn.
Better to enjoy your money now while also planning for a bright future.
How can you improve your money mindset? 12 ways to improve your money mindset
Yes, you can improve your money mindset every day in every way. Maybe just a little bit here and there but gradually to set yourself up for financial success and happiness.
1. Forgive your past
First things first forgive your old self. What mistakes you made with money in the past should not keep dragging you back there. Take these mistakes as learning opportunities, i.e. you have learnt not to do them again.
Disastrous purchases, bad debts or painful losses need to guide you on how to make better decisions in the future.
Try and remember what feelings you had at the time, the decision-making process you went through and figure out a way to learn from this.
2. Focus on the future
Make sure you have a vision of an ideal future and keep heading towards that. Even if there are bumps and detours in the road, you should still be heading in the direction of your vision.
Write down what you hope to be doing in 1, 5, and 10 years’ time. The exercise of writing them down will help clarify them to you and allow you to reflect if that’s what you really want.
Writing them down will also help you to start thinking about how they might be achieved
3. Take your time
- Can you spend more time thinking about your money decisions?
- Can you consult with a trusted friend, coach, advisor (who is known for good money decisions)?
- What information do you need to make a good decision?
- What are the short term and long terms advantages and disadvantages of any current money decision?
- Can you find it cheaper elsewhere?
4. Call Brian to improve your money mindset
If you’re about to make a big purchase think what would BRIAN do?
Think about the
- Benefits– what are the benefits of this purchase?
- Risks– what risks does this purchase have?
- Information– do you need more information to understand if this is a good deal?
- Alternatives– are there any alternatives to spending this money? Cheaper or better uses?
- Nothing – what would happen if you did nothing for 24 hours, 30days or nothing at all? Would this help you not to spend the money or at least give you time to think?
I am not sure where this acronym originally comes from. I first heard it at an NCT (National Childbirth Trust) class. However, at that time, BRIAN was more centred on different birthing options and not purchases.
5.Create a spending plan – including for fun
A spending plan sounds much more fun than a budget.
Where do you want your money to go? To your pocket or other peoples?
Can you give every one of your £/$/€ a job to do including building you your wealth?
By detailing out where you want your money to go, you are going each pound earnt a job to do. Now that you know where they should be going, including to fun things, you can keep track of what is working or not.
Ongoing reading on personal finance will help to build up your financial skills and muscles. Adding in a book on money, investing or self-development into your reading list will slowly expand your knowledge around the subject.
Reading around the subject of personal finance even if you are a complete beginner will slowly begin to expand your familiarity and knowledge of key financial terms and principles. Reading about how other people overcame debt or stated investing will help you see how you might do it.
Over time this accumulation of knowledge will have a massive compounding effect on your success with money. Just like bank interest either the way you earn or pay it compounds, so does your knowledge overtime.
You can read or listen to books now, so there are limited excuses for not reading more.
7.Create Good habits around money
Automating your finances might be one of the easiest ways to get on top of your money.
Set up an automatic savings amount every month and live off the rest of the money left over. This is the idea of paying yourself first before sending your money to everyone else.
Automate your bills and repayments, so you don’t have to think about it anymore, it’s all done for you. If nothing else this will free up your time and stress from having to do it manually every week, month or year.
As your positive money habits get stronger it will help to improve your money mindset.
8.Track your finances
There are now numerous apps that can track your expenses for you. These will help provide daily, weekly or monthly check-ins to see where your money is going and if you’re happy with that.
Have a yearly check in on your finances to see if you can get cheaper utilities, gym memberships or other subscriptions you have signed up to. Most of these companies are counting on your inertia just to keep paying no matter the price.
Set up a calendar day or week to go through them and search out a better deal. Don’t agonize over getting the best deal. A good deal will likely be good enough.
9.Set financial goals
Without any goal or at least a vision, how will you ever get where you want to be? You might even end up someplace you don’t want to be.
You don’t have to have concrete goals if you are and anti-goaler type of person. However, at least a vision of what you would like your life to be would be helpful to keep checking yourself against.
A vision of a good life might help you figure how far away you are and how to get to be where you want to be.
A clear and present danger we all face is drift. Slowly but surely drifting into debt, higher and higher spending and no financial safety net for us now or in the future.
If you don’t know where you are going, you’ll end up someplace else.
The further you drift, the more difficult it will be to correct yourself and get back on the right path. Better to stick to the proven path of financial happiness. Enjoying your money now whilst also saving and investing for a brighter tomorrow.
Set financial goals that you can work towards. Ideally SMARTY ones
- Specific – What do you want to achieve?
- Measurable – How will you know you have achieved it?
- Achievable – Could you really do this?
- Relevant– is it what you really want, what you really really want?
- Timebound – By when?
- Joy- Is this going to be an enjoYable goal? (Taken from A Good Plan)
An example might be:
I will save £8,000 over the next 12 months to pay for an around the world trip. I will do this by automating my savings, cutting down my expenses and tracking all incoming and outgoings over the period.
10. Be grateful and happy with what you have
This is the quickest route to happiness but possibly not the easiest.
Comparison will be the bane of your life and keep you perpetually unhappy if you are not careful. There’s nothing wrong with being restless and wanting to achieve more but not if it’s eating away at you.
Let’s face it; someone will always have more than you. Be happy and grateful for what you have while you are working to better yourself and your family.
One idea might be to keep a journal. Here you can write down goals and action steps to achieve them.
You can also record things you are grateful for. Small things or large things that make you smile. Once they are written down, you will be able to look back at all the good things that happened and hopefully be a little more able to put things into perspective.
11. Realize money is a tool and nothing more.
Money can take you many places good and evil. Throughout your money travels, make sure you remember that you are the driver and not just a passenger along for the ride.
Make sure you use the money to build the things that align with your goals—using money to achieve what you really want, buying a house, travelling or allowing part-time work. These and many other things are far more positive uses for your money and likely to lead to far more happiness than mindless spending on stuff.
If you use money as a tool to achieve your most significant goals, you will find looking after it much less time-consuming. It might even be fun to see how managing your money is getting you closer to your targets.
12. Get some help improving your money mindset
Books, podcasts and YouTube are full of great life and money insights. You just need to filter out the cat videos.
Your local library will have many books on money and mindsets for free.
You could even think about getting some face (Zoom) time with a money coach like me!!
Improving your money mindset is a process and not an event. Looking back to what has formed your money mindset and then working on turning it around will take time.
Be kind to yourself.
You can’t run a marathon the day after you decide to do one. It takes time to get fit through training, diet and working on improving your mindset, i.e. can you really run 26 miles in one go?
Build yourself some training blocks, reading about money, listening to podcasts and planning your finances will play an important part in improving and strengthening your money mindset.
As a financial coach, I can help you to think about how to manage your money for a stress-free life and what your options for budgeting, saving and investing might be.
Through this guidance process, you will be able to make informed choices for yourself and start taking action towards your Financially Happy life now before it becomes even more painful and expensive.
I won’t be recommending specific products or trying to sell any. If you need product advice, then a financial advisor might be your best call.
Contact me here for a free chat about what options you might have for making money work for you.