We all want more money – no questions there. And it’s easy to see why. On the most basic level, having more money can improve your well-being. So even if money, in fact, can’t buy you happiness, it can contribute to you being in a better mental state. Which, to be fair, goes hand in hand with being happy. Doesn’t it?
Yet when it comes to improving your finances, it isn’t always as simple as contributing to your pension, investing in an ISA, or finding a reliable way to improve your credit score. You see, many people are held back by limiting beliefs they hold around their finances – called a money mindset.
In this article, we’ll delve deeper into what a money mindset means, how you can understand yours, and how you can create a new one.
What is a money mindset?
A money mindset is a set of beliefs and attitudes towards money. It’s what shapes the way you feel about money and drives the decisions you make when it comes to your financial life.
Your personal money mindset is influenced by a variety of factors, including the experiences you’ve had in the past and what you were taught about money while growing up. Since we each have different histories, this explains why many of us have completely different money mindsets.
The two main mindsets when it comes to money are:
- Scarcity mindset – This is the fear of not having enough. This can lead to feelings that what you have isn’t enough, preventing you from enjoying it. Feelings of scarcity can also create negative behaviours like hoarding or unnecessary frugality.
- Abundance mindset – This is the belief that there’s enough to go around. It makes you feel like what you have is enough and help you enjoy what you have. It’s generally more positive than a scarcity mindset. But it can also lead to negative behaviours, such as overspending and taking financial risks.
Each mindset has its pros and cons. The main thing is to recognise which one you’re working with and challenge the more negative behaviours that come from it.
Understanding your money mindset
Before you can create a better money mindset, you need to understand your current set of beliefs and attitudes.
Reflect on your relationship with money by asking the following questions:
- How do you feel about spending, saving, borrowing, and lending?
- What did you hear and see about money while growing up?
- What did your parents do with money that you want to emulate?
- What did your parents do with money that you don’t want to do?
The answers to these questions will help you gain insight into why you feel and act the way you do when it comes to your financial life.
How to create a new money mindset
So, once you know more about your current money mindset, what can you do to improve it? Consider following the steps below.
- Forgive your mistakes: Everyone makes a few bad decisions over the years. Some decisions are so bad, you might still be feeling the consequences of them decades later. Even so, you don’t need to continually beat yourself up over them. If you don’t let go and forgive yourself, you won’t be able to move on.
- Change your focus: Stop thinking about the terrible things that have happened to you around money in the past. Instead, focus on all the positive things you’ve done. This might be difficult at first, but if you look hard enough, you’re sure to find them. Next, think about all the positive things you can do right now and that you’ll be able to do in the future.
- Create a new script: Pay close attention to how you talk to yourself around money. It’s a well-known fact that negative thoughts lead to negative feelings. Negative feelings lead to negative actions. And negative actions lead to negative results. But if you think positively, you’ll break this vicious cycle and begin to rewire your brain to have a better relationship with money.
Transforming your money mindset is challenging. But hopefully, it’ll be significantly easier after reading this guide? What limiting beliefs about money are holding back your finances?
