Most people have limiting beliefs about what they can accomplish in life. Some of these beliefs get in the way of achieving wealth and happiness. Often, we’re programmed with these ideas in our youth. Your parents, teachers, and other influencers likely instilled beliefs in you that you still hold today. Some of these beliefs are about money. If the major influencers in your life had an average, or below-average income and net worth, then it’s likely that you turned out the same way. It’s also possible that they encouraged you to take steps to earn a greater income than their own.
Even when that happens, where you have a higher income, you might still hold beliefs about money that limit your financial potential. Fortunately, there are ways to overcome this and make the most of your wealth and net worth.
What is a Money Mindset?
Put simply, your money mindset will determine how you think and act when it comes to money. It affects your choices in saving, spending, and managing your money. It also impacts how you choose to manage your debt. These beliefs will affect major decisions you make about your finances, which can have a tremendous impact on your accumulation of wealth, and your retirement.
What are Some Aspects of Your Money Mindset?
Now that you understand what a money mindset is, you need to understand how it applies to the financial decisions you make. The core beliefs you have about money may impact:
- How you spend your money
- How you save your money
- How you manage your debt
- How much wealth do you think you deserve
- How you accumulate and grow wealth
- Your financial risk tolerance
What is a Scarcity Mindset?
If your family lived paycheck to paycheck, then they likely had a scarcity mindset. They were anxious about where the money would come from to pay the bills. Maybe they juggled debt in a way that it never seemed to go away. Consequently, they felt that resources were scarce, and behaved accordingly. If they never quite got out of that hole, then it’s likely that this scarcity mindset was transferred to your own thinking.
If you find that you’re overwhelmed by the idea of managing your finances, you might have a scarcity mindset. Does managing money make you depressed or apathetic, or if you feel jealous or angry when you witness other people’s success? Do you believe that for someone to win, someone else must always lose? If so, then you probably have a scarcity mindset. The good news is that you can overcome it, and develop an abundance mindset.
What is an Abundance Mindset?
Contrary to a scarcity mindset, an abundance mindset is one where you believe that resources are plentiful. Even when your finances aren’t perfect in the short term, you recognize that with proper planning, they will be much better in the long run. To learn more about the difference between these mindsets, read this article from Duke University.
This abundance mindset can carry over into other areas of your life, too. For example, someone with a scarcity mindset might see their colleagues as competition. In response, they may be protective of information that they consider valuable. For example, they might not train their direct reports to learn new skills, because they’re worried about being replaced. By contrast, someone with an abundance mindset would be thinking about how to collaborate with their colleagues. And, they would recognize that training their teams on useful skills would free up their own time to do higher-level tasks. This puts them in a position to become a leader within their organization, and beyond. In this example, the person with the scarcity mindset would likely be doing the same thing for the rest of their career. By contrast, the person with an abundance mindset will grow into a position of greater responsibility, and greater financial rewards.
Apply an Abundance Mindset to Your Money Mindset
Now you understand the difference between a scarcity mindset and an abundance mindset. It’s time to apply this knowledge to your money mindset. Start by reframing your thoughts, and your inner voice. Many people engage in negative self-talk. These internal thoughts block you from achieving your best, and they can get in the way of your financial decisions. To overcome this, you just need to take a few steps:
- Be aware of your current money mindset. Do you have a scarcity mindset or an abundance mindset? What kind of mindset did your parents have? Were they spenders, or savers, and how much debt did they hold? How do you approach big and small financial decisions today?
- Be positive about money. Instead of believing that money is scarce, believe that it is abundant. You deserve to have more money, and you can overcome challenges with managing your money. It’s okay to make mistakes, too. You’ll learn from them and do better next time.
- Start saving and making long-term investments. What do you see yourself doing in the next few years? Are you taking advantage of good investment opportunities? Do you plan to retire, and if so, what would you like your life to be like at that time? Figure out how much you need to sock away, and get started today.
- Be mindful of your spending habits. Start tracking your spending on a daily and monthly basis. Keep a record of how you spend your money on bills, entertainment, and other things. Also, take notes on how you feel when you get your paycheck, and if you spend that money right away, or put some of it away. When you spend money on entertainment and other things, how do you feel? Do you spend money emotionally in response to different triggers in your life? Write those things down, too.
- Start moving into a positive money mindset. After you track results for about a month, you’ll easily identify your good and bad financial habits. Start working on building better habits. Set a budget for your spending and saving. Make plans for investing in your future. Be positive and think abundantly.
Try these tips and see if you can turn your life into one of more abundance. You can also follow simple tutorials, like these tips from Dr. Amanda Barrientez published on Snackable Solutions. With a little work, you can have a positive money mindset and a strong plan in place that will maximize your happiness today and in the future.