Do you feel confident, secure and energized about your financial life? Or are you constantly anxious, guarded and worried about making ends meet, feeling as if you’ll never have enough?
I’m not talking about how much you actually make, have or spend right now. I’m talking about how you feel about money. What you believe about money. Your money mindset.
What is Money Mindset?
Money mindset is your unique attitude and perspective about money. It’s the story you hold about how money works in the world.
Your money mindset informs what you believe you can or cannot do with money, how much you’re able to earn, how much you’re entitled to spend, and your overall approach to investing. It influences your judgements of your own and others’ financial habits. It even affects your feelings about money: whether you feel empowered and confident or intimidated and anxious.
Ultimately, your money mindset shapes your thoughts, beliefs and actions around finances.
Which do you have? A Scarcity or Abundance Money Mindset?
“I can’t afford to [insert dream].”
“Money is always tight.”
“Money is the cause of evil.”
“There’s not enough money to go around.”
“Time is money.”
Do these thoughts sound familiar to you? If so, you might have a scarcity money mindset.
Scarcity money mindset means you believe there’s never enough.
You constantly tell yourself that you can’t do things because money is “tight”. You might even beat yourself up about your financial situation and feel shame or guilt around taking on debt. You view time and energy as money.
People with a scarcity money mindset tend to judge others’ spending habits. They also believe that the wealthier someone is, the more materialistic, greedy and bad they must be.
Scarcity mindset is fear-based. It’s a mindset and has very little to do with how much is actually in the bank.
An abundance money mindset, on the other hand, means you believe there’s enough money to go around.
You believe that even if you spend money, more will be on its way. You trust that everything will be ok and recognize that value, not time or energy, is what creates money.
People with an abundance money mindset don’t attach self-worth to money, nor do they judge others based on their financial habits or status.
If you have an abundance money mindset, these thoughts might sound familiar to you:
“Money comes easily and effortlessly to me.”
“I am capable of overcoming any money obstacle in my life.”
“Money is a tool I can use to change the world.”
“Money flows in and money flows out. There’s enough money to go around for everyone.”
“My value is what creates money.”
Why does Money Mindset matter?
As Henry Ford said, “Whether you believe you can do a thing or not, you are right.”
Studies have shown that your money mindset affects the neural mechanisms underlying goal-directed decision making. Basically, there’s a correlation between your money mindset and your financial health. In fact, a Ramsey Solutions study of over 10,000 millionaires showed that 97% of millionaires believed that they could become millionaires. They had an abundant money mindset.
Your mindset impacts your behaviors and, ultimately, your outcome. So if you think money is scarce guess what will happen?
Your money mindset was learned, which means it can be unlearned.
For many of us, our money mindset was formed in early childhood as we observed and absorbed what we saw and heard from parents, friends and others who influenced our upbringing.
- How they talked (or argued) about money
- How money was spent (or not)
- Our own lived experiences of money (i.e., divorce, unemployment, illness) and of working (i.e., age of first job, types of jobs)
These experiences taught us how to think about money. The good news? You can shift your mindset because what has been learned can also be unlearned.
Five steps to shifting your Money Mindset.
Step #1: Understand your starting point.
The money messages you received from your caregivers is likely still having an impact on you today. They may influence whether you pick up the bill or not. Whether you hold tightly to your paycheck or spend it immediately. How you feel when negotiating your salary or telling a new client your pricing.
Understanding your money mindset, where it came from and becoming aware of your current thoughts and beliefs gives you choice to re-route your financial destination.
Spend some time journaling on these prompts to better understand how you view money and where these beliefs might stem from.
- What did you see and hear about money growing up? Consider:
- What were your family and/or caregivers’ values and attitudes about money? Saving, spending, budgeting?
- What did your caregivers teach you about money? Saving, budgeting, spending, donating?
- How was money talked about? Calmly or was there tension and fighting?
- How did you view these ideas as a child? What did you agree with? What did you disagree with?
- How do you feel about those teachings now?
- As a child did you have an allowance? How did you view this as a child? Today?
- Did you work as a young adult? Why or why not?
- What does money mean to you personally? Why?
- How do you think about the intersection of time and money? How do you feel when someone forgets a scheduled meeting with you or when they show up late?
- Tell your money stories…
- What is your most painful money memory?
- What is your happiest or best money memory?
As you gain awareness and understanding of your mindset, you also gain greater agency to transform your money story. Consider:
- What’s one thing from my family’s money history that I want to replicate?
- What’s one thing from my family’s money history that I want to do differently?
Step #2: Change your script.
Where focus goes, energy flows. If you continuously tell yourself you don’t have enough, then you won’t. It’s a self-fulfilling prophecy.
So it’s time to reframe the thoughts you have into empowering beliefs. Here are a few examples.
Old Belief: Money is hard to figure out and I just don’t get it.
New Belief: Like everything else, money and financials can be learned. I am a resourceful learner.
Old Belief: It’s greedy and not fair for me to want more money when there are so many people in the world suffering and less fortunate than I am.
New Belief: Money is a tool. Having more money enables me to do more and contribute to making the world a better place for everyone.
Old Belief: Money will make me evil.
New Belief: Money doesn’t change people. It brings out more of who someone is. I’m kind, caring and generous and money will bring out more of that in me.
Now your turn!
Reframe the beliefs that reflect your current reality into empowering beliefs. Write these empowering beliefs on post-it notes and post them up all over so you can see them every day. Repeat these empowering beliefs in the morning as you brush your teeth.
Change your beliefs, change your outcome.
Step #3: Decide to be Financially Successful (and know your Why).
Financial success is a decision. When you make this decision with full faith your behaviors will follow.
So dream it. Envision it.
- What do you want your life to look like?
- How would it feel once you’ve achieved this?
- What would change in your life?
Most importantly: Why does this matter?
A majority of people never sit down to consider why they have certain financial goals. But when there’s a strong why, your behaviors will follow because your why gives you the reason, serves as your purpose, and provides you with continued motivation.
Consider these questions:
- Why do you want your financial situation to change?
- Why would you like to earn more money?
- Why do your ultimate financial goals and dreams matter to you?
Figure out your why and you’ll be steps ahead!
Tip #4: Build your financial knowledge.
Financial knowledge can be learned. Consider how you like to learn and as you gain knowledge, you’ll also gain greater confidence.
- Read books, blogs, articles or listen to some podcasts. The knowledge will help you broaden your perspective. To get you started, here are some resources
- Talk with family and friends who have an abundant money mindset and good financial knowledge. Ask them questions and learn from them.
- Hire a financial advisor or financial coach. They can offer you professional advice and practical tips and tools for achieving your financial goals.
Step #5: Start taking small steps to take control of your financial future.
Large goals can feel daunting. So break up your goal into smaller steps. Consider what you can do to start taking control of your financial future. For example, you might start to:
- Track your expenses
- Track your spending
- Create a budget or spending plan
- Set aside a percentage of your paycheck for savings or investment
- Pay off those debts
- Calculate what the lifestyle you want really costs
Taking the first step gets you one step closer than you were before. What first step will you take?
Money is not a positive or negative thing.
As you embark on this journey remember that money is neutral. It’s a tool: like a hammer or a screwdriver. And as a tool it can be used to do good for the world if you so choose.