Financial freedom offers you the ability to live the life you want without ever having to rely on a paycheck again. We all dream about living financially free, for various reasons such as:
- Security and peace of mind for our family,
- freedom of time to do what we want, when we want,
- making an impact on our community by giving like we’ve never given before, or
- leaving a legacy that we can be proud of for generations to come.
Unfortunately, those dreams, for most people, never become a reality.
Sadly, living paycheck to paycheck is the norm, rather than the exception, in America. It doesn’t matter how much people earn, $50,000, $75,000, or even $500,000 a year, most are still living paycheck to paycheck.
Our mindset affects our ability to change.
It’s not about how much money you make. It’s about what you do with the money you have.
Before writing down your budget or financial plan for the year, you must understand your money mindset.
When you don’t know where the root problem is, you’ll most likely apply a band-aid fix at best. Keeping track of your mindset, at all times, is a tough job. Still, when you understand your own motivations, you can easily work around the hurdles you have mentally and emotionally.
The opportunity to live a life of freedom and abundance is available to everyone. It’s a matter of choice, how we choose to think, behave, and act. We cannot change other people or circumstances in our life, but we can change how we react to others and the events around us.
We’ve all heard the saying, “change your mindset, change your life.” The same can be said for your relationship with money.
If you want to stop living paycheck to paycheck and become financially free you must change what you are doing and really look at your relationship with money to understand your money mindset. That is what we are going to talk about today, your money mindset.
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Money Mindset Defined
Money mindset is about our beliefs and how we think, feel, and act about money; it’s all about our relationship with money.
“Personal Finance is 80% behavior & 20% knowledge.”
This famous quote by Dave Ramsey sums it all up. Granted, keeping your mindset in check while you tackle your finances is hard to do. Whether or not you succeed is based more on your attitude and behavior towards money than your knowledge.
Sure, it’s great to have formal knowledge about how finances work but buying hundreds of books on “How To Invest” or “Being MoneyWise” will not change your mindset entirely. For a complete overhaul of your relationship with money, you need to work on getting uncomfortable and unlearning certain behaviors. This level of discipline is required if you really want to do what it takes to get to your end goal.
Improving your mindset is not a once-off thing. A good money mindset is a continuous learning process. Just like your body has muscle memory, so does your mind. You might not be aware of the certain tendencies that you exhibit towards money. Still, these subconscious micro-decisions, impulses, and beliefs all impact how you make financial decisions.
Why do you spend the way you do? Why do you find it hard or easy to get into debt? Why are you obsessed with investing or shopping? All these questions have a root cause, and if you want to understand why you behave the way you do with money, knowing your money mindset is crucial.
Our money mindset is formed at a very young age and stays with us as we grow into adults. There are different money mindset types, which we will get into a little later, but first, let’s look at several factors that influence our money mindset along the way.
Money Influencers come in all different sizes. How you saw your parents, family, friends, society, and the world around you reacting to and dealing with money has a significant impact on you throughout your life. Another two big money influencers are marketing and social media.
According to the 2019 Modern Wealth Survey, “FOMO [Fear of Missing Out] has fueled American spending. More than one third of Americans admit their spending habits have been influenced by images and experiences shared by their friends on social media and confess they spend more than they can afford to avoid missing out on the fun.”
Money influencers affect your money script and how you handle money more than you might think. Who is influencing your money script?
What are Money Scripts and how does it impact our finances? Our money scripts are basically our money story or origin. Our money story is what forms our beliefs, thoughts, feelings, actions, and money and affects our financial behaviors.
Your money script refers to the unwritten rules that determine your financial life. It encompasses all the things you tell yourself about money, such as:
I can’t afford that –VS– I choose to spend my money differently.
Money scripts show your beliefs about money and include both the good and the bad financial decisions you’ve made over the years. Knowing your money script is not only empowering. It can aid you in making the best decisions for yourself.
Your money script, or story, impacts every area of your life. It creeps in when you least expect it. The bottom line is, every financial decision you’ve made has had its foundation in your money script.
The first step in gaining perspective of your money story is to know how it was developed. We all have a money story that is a culmination of our past financial decisions and learned behaviors.
I say learned behaviors because the foundations of how we deal with money can be traced back to your formative years as a child. The same way you find yourself enjoying your morning coffee cup precisely the way your dad did is the same way you can pick up views on money.
When you understand how your money story began, it allows you to be a neutral observer of your own life. The barriers that were once difficult to recognize or address become a lot easier to identify. You can now separate your emotions from the facts. You can’t necessarily erase these behaviors, but you can learn to manage them to your benefit.
As a toddler, your money story begins internally, in your mind. Your first taste of money is through your senses, what you see, hear, and feel. When you think back to your childhood, consider the following questions, and ask yourself what your observations and thoughts were and how they made you feel.
- Did your parents talk about money?
- Did your parents fight about money and what did that look like? Were they angry and loud or were they sad and silent?
- Were there stacks of bills piled up?
- Did you feel like there was never enough money or did you get the sense or feeling that money grew on trees and there was an abundance of it?
- What did your friends think about money? Did they have money? Where did they get their money? Did they get it from their parents? Did they have to work for it?
- Did your friends talk about money? Did you talk about money to your friends?
- What role has social media played in forming your money story?
Money influencers play a big role in your money mindset and how you formed your thoughts, feeling, and actions about money from your childhood all the way through your adulthood. Any negative thoughts and feelings you have about money BLOCK YOUR FINANCIAL SUCCESS. We call these thoughts Money Blocks.
Money Blocks are negative money beliefs ingrained in your mind over time, in your subconscious, emotional, mind that prevent you from achieving what you desire in your conscious mind.
Money blocks: Negative thoughts and feelings about money that get in the way of your financial success.
Remember, your money story is formed at a very early age and continues to form throughout your adulthood, based on the money influencers in your life. The good news is your money story is not permanent and you have the power to change it anytime you want.
Your money story and money blocks play a key role in our money mindset type. Once you identify and understand your money mindset type you can work on improving it to change your money story.
Money Mindset Types: The psychology behind your decisions
The two types of money mindset sometimes carry different labels but mean the same thing, the most common labels are the scarcity and abundant mindset. Let’s take a closer look at both of them.
The scarcity mindset is a term coined to explain the individual who sees wealth as a finite pie. In other words, there are certain people that view money as a limited resource. People who have a scarcity mindset believe there is never enough money and there’s nothing they can do about it.
Their mindset is fixed. Once they miss an opportunity or things don’t go their way, they believe that they are stuck and will never get another opportunity again. It’s the reason why you can never make enough money.
A scarcity mindset leaves you with self-doubt and a lack of confidence. It’s self-sabotaging. It causes you to blame the circumstances around your or other people for your lot in life, which puts the power and control over your life in the hands of others.
It keeps you focused on what you don’t have, rather than the abundance of opportunities that are out there waiting for you.
A scarcity mindset looks something like this:
- Living pay-check-to-pay-check for years and feeling like there is no end insight
- Constantly wondering how you’ll ever make enough money
- Stressing over bills and taxes
- Saving but never having enough cash left over for something as small as a movie date
Whether you earn a minimum wage salary or not, a scarcity mindset will always see the glass as half-empty.
Additionally, this type of mindset is more easily plagued by negative self-talk such as:
- I’m bad with money
- Wealthy people are greedy
- I wasn’t born into privilege
- I was dealt a bad hand in life
- My life sucks
I know you’re probably thinking, “…but this IS my life. I just don’t have enough money.” This is precisely the scarcity mindset in action. The good news is that you aren’t stuck here. There is hope for a new way of thinking.
A person who has an abundance mentality believes that there are plenty of resources for everybody. They see everything with a glass-half-full mentality and think that the world is beaming with opportunities.
These types of people tend not to get frustrated when they miss a chance. They don’t feel the need to rush because they have a constant belief that the future is filled with new and exciting things.
Their mindset is one of growth. They take ownership of their behavior and actions, which gives them all the power and control over their life. They believe there is plenty of money available to everyone and there is always enough to go around. An abundant mindset leaves you positive and optimistic. It’s a healthy mindset that creates freedom and opportunity to think big and turn your dreams into reality.
An abundance mindset looks like this:
- You appreciate all you have regardless of the situation
- You love extending generosity
- You are confident about your ability to make more money
- You have an infinite belief that there will always be enough and more
- You don’t obsess over bills or incidental expenses
A person with an abundance mindset finds it easy to think along these lines:
- I can take control of my finances
- I am enough the way I am
- I love reading about and understanding money
- Money is a resource that I use to give others and myself opportunities
Money Mindset Matters
Your money mindset matters. It is your financial roadmap, your mile markers, to your financial destination. Your mindset affects your behaviors and actions and your ability to change.
A scarcity mindset is fixed and unhealthy with no room for growth. It creates a weak financial roadmap with unstable roadways that will not sustain even the smallest detour, let alone a catastrophic loss.
An abundant mindset is healthy and constantly growing. It creates a solid financial roadmap with stable roadways that will sustain your lifestyle of multiple detours and speedbumps. It offers security and peace of mind, freedom of time to do what we want, when we want, the opportunity to make an impact on your community, and leave a legacy you are proud of for generations to come.
A healthy mindset will allow you to take control of your thoughts and feelings and align your money habits with your values to create the results you want. The opportunity to live a life of freedom and abundance is right in front of you; you just need to take it.
Do you know your mindset type? What is your relationship with money? Take that first step to financial freedom and abundance by understanding your money mindset and creating your financial roadmap to your final destination, one mile marker at a time.