As a kid, you absorbed experiences and lessons through the adults in your home or school, often just by things you overheard. You weren’t in a position to determine whether those lessons were going to be helpful or destructive to your future – they were just normal events in your life.
You may have seen your friends go on fun family vacations or had friends who wore patched hand-me-downs and arrived at the school in rusted 20-year-old cars. This is about the time you begin to judge who has money and who doesn’t.
The messages you heard as a child from your parents might influence how you feel about each of these people. For example, if you were told that rich people are selfish and take advantage of others, then the friend who shows up at school in a brand new car has fallen lower in your opinion.
These lessons we’ve all learned throughout our lives affect how we think about money. If money was openly discussed in your home as a kid, you probably have a healthy relationship with money. Someone who grew up in a home where money was never discussed or was a source of conflict will have a poor relationship with money.
Our attitude is formed early and often sticks with us our entire lives. We bring our money mindset into adulthood. Even if you have success, you may feel uncomfortable with your wealth if you grew up with lack.
Determining your money mindset is vital in how healthy your relationship with it is. It’s how you know you’re heading in the right direction and how you feel about wealth.
If your money mindset isn’t healthy, you may be living way below your means. For example, you may not have a healthy savings or you may be living paycheck to paycheck.
25 Percent of Americans who are making at least $100,000 a year are living paycheck to paycheck.
33 Percent of Americans making $75,000 or more live paycheck to paycheck. (Source: CNBC.com)
People say a lack of financial discipline holds them back from achieving their money goals.
If you have the scarcity mindset, you might be wrecking your finances and don’t even know why. The scarcity mindset comes from focusing on everything we lack. You focus on what you can’t do, missing key opportunities for growing your wealth.
There are many money mindsets that you can have. In this post you’ll find out what they are and how you can change them.
Do you know what your money mindset is? Here are a few clues to get you started:
- Does money cause you uneasiness?
- Are you happy with your life?
- Did you consider yourself rich or poor growing up?
- Was money a source of conflict growing up?
- How do you see yourself? Are you successful or struggling?
- What are your earliest memories around money?
- Are you able to talk about money comfortably?
- How would you best describe how you feel about wealth?
- Does money play a central theme in your thinking?
- What is your level of stress around money?
Think through your answers. It’s a good indication that your money mindset is poor if your answers indicate anxiety and discomfort. If they give you comfort and ease, your money mindset is supportive of living a satisfying life.
As you’ll discover throughout this guide, you and you alone are in charge of your money mindset. You decide whether you want to change it, modify it or strengthen it. Are you ready to change your money mindset for the better?
Why People Have Trouble with Money
Most people don’t even realize that the way they think about money determines how they live. For example, you may believe you can’t live on $2,000 a month or $5,000 a month or whatever amount. The fact is you’ve set this as the limit you can earn by thinking this way. What money mindsets are holding you back?
- Not depriving yourself. We want things right now. We think we NEED to have the latest smart phone today. Why not? We work hard for our money, so why can’t we have the latest and greatest thing? The desire to have it is more powerful than the habit to save for it.
- Budgeting is too hard or too much work. For years we’ve been led to believe that it can be painful and time-consuming to budget. Managing your money wasn’t fun.
- Poor role models. It’s human nature to follow the same course as our parents and other role models. If your parents were terrible with money, you probably learned their bad habits. Like any habit, you can change it.
- Not knowing where money is going. Like putting your head in the sand, not knowing where your money is going can leave you floundering in debt or keep you from growing financially. In business, it’s referred to as bad bookkeeping.
- Live in the moment/ keep up with the Jones’s. According to a recent Federal Reserve survey, 31% of working people have no retirement savings. And many who have little or no savings are completely focused on living in the moment. One reason for this is they are trying to keep up with the Jones’s or Kardashians. These people believe buying things will make them happy or that they need to keep up with their neighbors.
- Bad luck. Not everyone that is in a lousy financial situation has bad habits. Sometimes they just have bad luck or irresponsible families they are constantly bailing out. Medical bills are a big reason for bankruptcy in the United States, even for those who have health insurance. Often huge medical expenses can eat up your savings.
These money mindsets can keep you from having a healthy relationship with your money. The good news? These are habits that can be changed.
What behaviors to look for
As many of you know, bad money behaviors can be extremely hard to change. Even when you want to build your savings or stop splurging, impulses and old routines can take over.
If you’re ready to change your money mindset, there are several behaviors you should be aware of in yourself.
- Here and now. This is the habit that “I have to have it now” and the “I can always start saving tomorrow” mindset. When you catch yourself ogling the newest gadgets, take a few days or weeks to think about it before you purchase it. Ask yourself how many hours of work you’d have to do to pay for it or what you could do in retirement with that money.
- On the paycheck to paycheck treadmill. Living the paycheck to paycheck lifestyle is a habit that often comes from being overextended or buying more than needed. You already know if you live paycheck to paycheck. To break the habit, you have to learn to get rid of extra expenses and stuff and begin saving.
- Upgrading lifestyle. Are you continually increasing your standard of living as your income increases? This mindset has you taking out a loan for a home or car you can’t afford. Instead of upgrading every time your income increases, consider changing your thinking into how adding the increase to your savings will change how you feel.
- Never take risks. A poor money behavior is a fear of taking a risk on investments or other financial decisions. Taking risks is necessary for making your dollar stretch further. Mistakes along the way help you build confidence in other challenges.
- Scarcity or the either/or mentality. Having an either/or mindset keeps you from trying anything or taking risks. The scarcity mindset revolves around the idea there’s not enough to go around. You think there’s only so much money in your paycheck and if you don’t spend it now, you’ll lose it or only some are allowed to have more. When you catch yourself thinking like this, remember there is always enough for everyone.
- Not learning something new. This mindset is the unwillingness to learn anything new about your finances or learning to manage your finances. It means you won’t know your credit score when you try to get a home loan. You don’t have a grip on day-to-day spending. One way to break this habit is to get familiar with your finances every day. Check your bank statements. Know where you are spending and what is coming in. Take a financial management class or read books to help learn how to manage your money.
- Not seeing the big picture. Wealthy people know wealth is more than a big paycheck. It’s about their net worth. That means in the long run, you want to be saving and investing for the future. If you find you have this mindset behavior, you have to learn to curtail spending, pay off debt and begin investing.
- Own worst enemy. This mindset means you don’t advocate on your own behalf in money matters. You can become a target of predatory lenders, shady used car dealers and other scams. It this behavior feels all too familiar, you have to start putting up a fight, making waves, and following up aggressively so you are taking charge of your finances.
Money behaviors are just habits learned over a lifetime. To combat them you have to be aware of the behavior and diligently work at changing the behavior. Everyday be aware of how you are thinking about money. Do you catch yourself with a scarcity thought or are you living paycheck to paycheck? Confront these thoughts and take steps to start making changes.
How to Shift Your Money Mindset
Everyone can have a bad day with money. But when you have poor money mindset, every day can be a pain. To get over this way of thinking you have to learn to face the fear of what’s keeping you repeating the same money behaviors over and over. You have to learn to shift your mindset to a more abundant or healthy one.
Changing your mind isn’t always easy. In fact, it can seem downright impossible. It is possible, though, and you can start by following these 4 steps:
- Be aware of your thoughts and what your money challenges are. Look at them for what they are. It’s okay to have bad feelings during this step. It helps us want to make changes.
- Accept what you’re feeling. It means you’re giving yourself permission to open the door to accepting how you feel: guilt, shame, greed, anger or frustration. It’s natural to feel resistance to these emotions. But it allows you to think more objectively and accept what we are resisting as an emotion. Acceptance lets you see how important it is to understand your feelings about money.
- Allow change to occur. Getting the emotions out of the way allows you to take a step back and shift your attention to what is causing the feelings. That way you can recognize your money behaviors.
- Take action by setting up a budget or diving into investing or taking a class to educate yourself on financial planning and management.
Once you’ve taken inventory of your money behaviors and the feelings they give you, you can begin to change your poor mindset to one of abundance. An abundance mindset, as opposed to a poverty mindset, is a crucial part of how you live and lead your life.