When was the last time you stopped and really thought about how you think about money? Has it been a while? It may not be something that you stop to ponder often. But understanding the hidden side of your money mindset can help you overcome the barriers that have been standing in your way with your finances.
What is a money mindset?
Your money mindset is made up of a few different components.
- How capable you feel about your ability to handle your own finances
- Your beliefs about money and its relationship to you
- Your belief about your ability to learn and develop new habits in general
The capability component
Do you feel confident in your ability to handle your own finances? If the answer is anything but a resounding “HELL YA!” you have some opportunities to level-up your money mindset.
So how do you become more confident in your financial abilities? The same way you do with any other task, practice. Managing your money is not something you are born knowing and it is certainly not intuitive. Just as with any other task that you learn the BEST way to gain confidence is to take action. Don’t wait to feel confident to start working on your finances. Confidence happens after the action takes place.
But I get it, you’re nervous. You don’t know where to start…
Here are five things you can do to help you take action and gain more confidence today:
- Take the Secret Money Style Quiz and find out what your budgeting style is (and snag the free roadmap it will help a TON!)
- Increase your retirement savings by 1%. You won’t miss it for a second because it’s TINY but it will make you feel incredible. Don’t even worry about where to invest it, just to say that you are saving for retirement will make you feel like a rock star!
- Use the IRS withholding calculator (for those in the USA) to make sure you are withholding the right amount in taxes.
- Rename your checking account “Needs only” and your savings account “Peace of Mind”. Trust me it’s less comfortable taking money willy-nilly out of an account called “Peace of Mind”.
- Check out the Organize Your Finances Bundle and get started sorting, tossing and streamlining all those financial documents once and for all
Your money mindset beliefs and values
Whether you consciously think about it or not, we all hold specific beliefs and values around money. Do any of these sound familiar?
- Money doesn’t grow on trees
- A penny saved is a penny earned
Even things we say instead our own heads, like, “I’ll never get ahead” or “Why can’t I ever seem to save money?” Each of these statements affects not only how we feel about money but how we handle our money as well.
So how do we overcome those limiting beliefs? I’ll share some of my favorite tips:
- Make it harder: Let’s face it, we do what feels good and what’s easy. So make it just a tiny bit harder to continue whatever habit you’re trying to change. Lock your credit cards away in your safe deposit box. Erase all your saved cards off of your favorite shopping apps (or better yet, delete the shopping apps themselves). Keep your emergency fund at a bank that’s far from home and not connected to your other bank.
- Trick your brain: Don’t get caught in the trap of checking your bank account balance to see if you have “money”. Use the You Need a Budget app to piece out your money toward your different budget categories. Then DON’T check the bank account balance, check the YNAB app and see if you have “money” for what you want. So if you want a book but you don’t have any “book money” then you don’t get the book. Simple right? Click here to get 34 days free (I get a free month myself if you decide to enroll long-term).
How you learn and develop new habits
Have you ever heard of the concept of having a fixed or growth mindset? If you haven’t it’s an idea developed by Carol Dweck. The idea is that people with a fixed mindset think you are born with a certain level of skill or capability and that’s it. You are only able to achieve what is in your genes and no more. A growth mindset person thinks that you can achieve more than that it just takes practice and the dedication to learn.
So what does this have to do with money? A lot! How you view your ability to learn and become more skilled at money affects how successful you will be. If you have a growth mindset about financial management you will accomplish more than someone who won’t even try because they believe they will never be good at it.
How to use growth mindset tools to help you with your finances:
- Start talking about the journey: Don’t describe your financial goals as if they will be a “one and done” scenario. You will adjust and flex your money skills throughout your life as your circumstances change. That’s a good thing! The more flexible your thinking and the more you realize that good financial management is a process, not an end in and of itself, the better you will feel.
- Evaluate quarterly: Part of the growth mindset is learning from what doesn’t work and making corrections, not giving up. Set quarterly goals and at the end of the quarter really evaluate what worked and what didn’t so that you make adjustments toward being more successful in the next quarter.
- Don’t let a little setback derail your whole plan: You should EXPECT to slip-up when changing your money habits. It will happen. That doesn’t mean that you (or your plan) are a failure. Just start fresh again with the very next moment.
Getting your money mindset right
It takes practice, my friends. Practice. Practice. It takes trying and failing. Please don’t be discouraged if you aren’t successful with everything from day 1; it doesn’t work like that. Just take one small step today and then another. That’s how you make true progress so when you look back; you see how far you’ve come.