The psychology of money is an intriguing and dynamic topic. There are many facets that play into how we view money, how we save money, and most commonly done, how we spend money! Understanding how you view money matters, and the role that view plays in your financial life is critical to your financial success. So buckle up, we’re about to dig into your financial mindset, the barriers it may present and how you can overcome those barriers!
Yes, money is just a thing, but, understandably,we put a LOT of emphasis on money. Getting it…Keeping it…Managing it…Understanding it!
Do you stress and worry over money? If you do, what have you started doing differently to alleviate that stress and worry?
Considering that we are creatures of habit, I’m willing to bet the answer is:
“Not much. I just keep worrying.”
So, why do we not make changes when something is stressful, or not working?
Simple, we either act out of habit, or we just don’t understand the underlying reason for the stress.
Luckily, the steps toward positive change in your financial wellbeing are few and easy to follow:
The first thing to determine about how you deal with money is your mindset. This may seem a little "out there", but stay with me.
You either have an abundance mentality or a scarcity mentality.
With an abundance mentality you are thankful for what you have, you know that you can make more money and you aren’t in a constant state of panic regarding your finances.
With a scarcity mentality, on the other hand, you focus on what you can't afford, fret over bills and probably get anxious about having to spend money at all.
In order to be successful with money, you need to get yourself into an abundance mindset.
One way you can start to reset your thinking if you’re finding yourself in a scarcity mindset, is to go online and make a small contribution to your favorite charity, or buy someone’s coffee for them.
Just the simple act of flowing out a small amount of money can help with your mindset!
Who do you surround yourself with?
The people who we surround ourselves with have an impact on our finances. This factor is an extension of mindset. While you can’t control how others view money, you better make sure that you and your partner agree on money matters and mindset. This goes for business partners as well as personal partners.
Things will never flow with your finances if you and your partner are not on the same page!
Also, since you can’t control how others think, what if you come to realize that you are surrounded by people with a scarcity mindset?
Should you hand them a “pink slip” and tell them to get out of your life?…
No, of course not. While it wouldn’t hurt to find some people with an abundance mindset to spend some time with, you don’t necessarily need to kick others out of your life. Maybe they are the friends you buy coffee for while you practice maintaining your abundance mindset.
Having the right mindset to make your finances successful will make this section even more enlightening for you!
Here’s a question to kick us off: How much money do you need to retire?
If you are able to answer this question, Bravo!
Many people can’t answer this question and I believe this has to do with the psychology of how we associate with money, how we feel about money, and our mindset.
If you don’t like to think about money and feel like you never have enough, the last thing you want to do is sit down and figure out your financial future!
The thing of it is, though, your future is going to come whether you’re ready for it or not. So I kind of started this section off with a hard ball, but it breaks down into smaller parts than the total end figure you need to retire. In fact, the point of bringing it up is to show you how crazy it is to realize some of the things that we don’t do when it comes to money. In the very beginning of this article I mentioned it seems odd that even though we are creatures of habit, we still don’t change, even when what we are doing causes us to worry and have anxiety.
Alright, all this information probably has you saying, “Yeah, I know people do this, and we are creatures of habit, but what do I do to change this?”
Aside from overcoming the mindset, another psychological aspect is figuring out your own personal “why.” We all have barriers to why we don’t do things, but many times we don’t know the real "why".
There's a super-simple exercise you can do to determine your personal "why" in any situation in which you recognize barriers.
Ask Yourself: "Why?"
I told you it was simple! But, there is just a bit more to it: Don't stop asking.
When asking yourself, "why", you'll usually need to go 5 to 7 layers deep.
Let’s use an example not related to money:
Say you plan to play with your kids every night for at least an hour, but you never seem to be able to make that work.
Here's what the process of "asking yourself why" would look like:
Why don’t I have enough time to spend with my kids everyday?
Because I work too late.
Why do I work too late?
Because my lunch break takes about an hour and a half so I have to stay an hour late to make up the time.
Why does my lunch break take an hour and a half?
Because I wake up too late every morning and don’t have time to pack a lunch, so I have to leave the office to get food.
Why do I wake up late every morning?
Because I go to bed too late.
Why do I got to bed too late?
Because I'm on Facebook in bed for two hours instead of actually going to sleep.
So, after asking yourself five "why" questions, you see that the real barrier to you spending more time in the evening with your kids is your staying up on Facebook at night!
When you break it down like this, it can be fairly easy to get to a solution.
In this case, not going onto Facebook after getting into bed will give you time to spend with your kids at the end of the day .
This exercise can be done with any area of your life you are experiencing barriers to something you want to do, or somewhere you want to be. So first, take a glance at your mindset, and get that right. Then work on your barriers. Once you have an abundant mindset, and have gotten past your psychological barriers, it would be a good time to get in touch with a reliable accountant to help build your financial future!