Your money mindset is the beliefs and attitudes you have about money.
You likely learned financial rules of thumb from your parents or grandparents and later on, friends, colleagues and social media influences tend to rub off too. From there, you’ve either consciously or subconsciously developed a unique set of beliefs toward money based on your life experiences.
The good news is that, regardless of your background, your money mindset can be strengthened and/or changed depending on the information you consume today. It is important to examine your adopted money mindset to evaluate whether it is still serving you.
Two opposing mindsets are often described – the scarcity and abundance mindsets. Popular media states that a scarcity mindset is bad, and an abundance mindset good.
The Scarcity Mindset
A scarcity mindset often develops in families with little financial resources, or those that overstretched themselves with huge mortgages or poorly managed cash flow. Those with a scarcity mindset think “I can’t afford that” or “I’ll never be able to achieve my financial goal”.
We have been fed unrealistic expectations for our incredible lifestyles, and as a result, can feel like we have no room for saving. If you don’t think achieving financial freedom is possible, then you will never make the changes needed.
The Abundance Mindset
So, what is an abundance mindset anyways?
It’s knowing that there is more than enough in the Universe for you and everyone else to succeed. The idea of the abundance mindset is to believe you have more than enough money, and you just have to choose your priorities.
Positive mental imagery, writing down your goals and believing in yourself are important tools in all achievements. Your habits are the things that will determine whether you achieve your goals or not. You just need the right mindset to set goals and stick with the steps required, especially when they take a long time.
When the Abundance Mindset Goes Wrong
“I can afford it”. It’s not just a single person who gets sucked into this mindset, but surely there are more culprits out there.
The abundance mindset that comes with a decent salary can lead to a belief you can (and should) afford every luxury you can think of over the years. It can lead to an assumption that you will be able to retire when you like, and will never be susceptible to financial shocks. By the time many realise this is not true, they are 50+ getting very interested in when they can retire… and with too little time to build substantial wealth.
A financial plan is essential. Get someone who will be able to weigh up options and assess risk/benefit for yourself. Once you have your plan, and your investment money is put aside, you know how much you have to treat yourself with. You only live once, yes! But the plan and saving should come first (your future self will thank you for it!)
How to Change Your Mindset Money
Whatever mistakes you have made in the past (well we’ve all got some), let it go and move on. Focus on factors you can change. Anything else is wasted time and energy.
Start now. NOW. No excuses.
No matter whether you want to retire early, adopting a “financial independent mindset” will provide you with flexibility and options. Work out how much you can afford and set a direct debit up to force a savings habit. It doesn’t matter if it’s a ridiculously tiny amount. It doesn’t matter if it seems ridiculous.
Remember as savings grow, confidence compounds.
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