How to Change Your Money Mindset

How to Change Your Money Mindset

It’s not just the money you make that determines how wealthy you are. Your mindset around the money you earn, use, and keep plays a huge role in how successful you are at using that money well, and feeling satisfied both with your finances and your life as a whole.

If you work from a place of scarcity or believe that money is limited and you can only earn so much of it, you may not be able to use it as a useful tool in your life because you’re thinking about it from a fear-based mindset.

Some people are afraid to use money to accomplish their goals. They can save and invest it, but they don’t want to leverage the wealth they create -- which means missing out on some things they’ve identified as really important in their lives.

How you think about money and the stories you tell yourself about what it means to be wealthy (and who can be wealthy) both tend to influence your actions. That, in turn, has a real impact on those numbers in your spreadsheets and investment reports.

You need to have a positive, growth-oriented mindset when it comes to your finances. Otherwise, your negative, limited mindset could be the most significant thing standing in between you and the kind of life you want to enjoy.

Your Mindset Impacts Your Actions

Let’s look at a few examples of how a negative or scarcity-based mindset can influence your actions and prevent you from taking actions you need to take or missing out on things that are important to you.

Say you’re young and successful. You earn a high income but you don’t just spend it all on status symbols or signs of material wealth: you save responsibly, you set big  financial goals, and you work with a financial planner to set up an investment strategy that will allow you to create even more wealth.

In fact, at the rate you save and invest, you’ll end up with more money than you need to reach your stated goals. What a great place to be in, right? That means you could spend a little more freely today and enjoy more experiences now, rather than waiting for some point in the future where you’ll have “enough.”

Feeling Anxious about Money

The problem is, you feel extremely anxious about spending money. Even though you logically know you’re on track to have more than you need today and into the future, you feel like you need to hoard your cash or keep throwing money into your investments to grow wealth.

You might have goals to travel, to buy a house in your favorite city, or maybe even start a new business. Maybe you want to enjoy a few basic lifestyle upgrades that would add huge value to your life -- but you don’t take action toward these goals or desires because you’re too afraid to spend. 

Or imagine this scenario: you’ve worked hard for years to build up your wealth. You saved diligently and invested wisely. As a result, you’re now in a position to live the life you want -- and you have enough money to help others.

Charitable giving was always a big goal of yours. It means a lot to be able to use your money to make a positive impact in the lives of others.

But while your scarcity mindset might have made it slightly easier to save during your working years -- since that likely predisposed you to squirreling away as much money as possible while you had it -- it could begin to work against you now that you’ve reached your goals and are at a point where you could freely give to causes you care about, but don’t because you’re afraid to part with any sum.

We see this happen with lots of people we work with: even though they have amassed enough wealth to cover their own needs several times over and have expressed a desire to explore philanthropy or to support charities, they simply can’t make the donations they keep talking about.

Both examples illustrate what it’s like to operate from a negative, fear-based, scarcity mindset that keeps people stuck and not doing what they’ve expressed a desire to do.

The Consequences of Failing to Maintain a Growth Mindset Around Money

Operating from a scarcity mindset doesn’t seem so bad when you’re in the “asset accumulation” phase of life: where you need to save and invest as much as possible if you want to create and grow your wealth.

It tends to drive people to save large percentages of income and invest strategically to make the most of it. But it’s not necessarily the best means to that particular end.

This mindset comes from a place of fear, from a feeling of “there’s never going to be enough.” That’s not rational -- and it’s also why we do financial planning and in-depth projections, to be able to put a precise value on what “enough” really is.

Knowing what’s “enough” means you know when you’ve finally gotten to the point you’ve been working toward most of your life. But if you never learn to flip over to an abundance or growth mindset around money, it won’t matter when you hit “enough.”

You won’t be able to get past the irrational fear of “but what if there’s not enough?”

How to Change Your Mindset Around Money

Changing your views on finances, from limitation and scarcity to an abundance and growth mindset around money, means taking small steps along the way. It’s more about a nudge than a giant, dramatic change.

Here’s a quick process you can use to get over irrational fears and change your mindset to one that’s more empowering and positive.

First, clarify your goals or if you don’t like the idea of “setting goals” define your list of values that are important to you. If you say you want to give to charitable causes but haven’t made a single donation, is that truly your goal? If you say you want to set aside some money to use for travel but never book a flight or plan a trip, is that what’s really important to you?

It might be if your mindset is the only thing stopping you. But sometimes, you might find yourself dragging your feet or avoiding the actions you know you need to take to meet your goal because it’s not the right goal for you.

There’s nothing wrong with changing up what you want, or realizing that what you once stated as important no longer provides value to you. That’s okay -- you just need to make sure you take some time to reflect on what is important, so you can use your money to move closer to that.

Then, identify one small step to take. Again, it’s not about making massive moves. Once you clarify your goals, choose the one that’s most important to you -- and break it down into the smallest possible steps.

Then, just take that first step. Do one thing that brings you closer to your stated goal. Many times, we find that the first step is the hardest for people but once they’re in action, their momentum makes every other step forward easier and easier to take.

Explore what’s really going on beneath the surface. If that one small step is still something you just can’t take, it’s time to look deeper into what’s truly holding you back.

Often, what causes stress or anxiety around doing something isn’t the action itself: it’s a past trauma, bad experience, or negative event that happened to leave you with a sense of ongoing fear or unease.

If you find yourself in this place, it’s helpful to work with an objective third-party who can identify the root cause of your hesitation to take action -- and, more importantly, show you that it will be okay.

Financial planners can run the numbers and data to show you if your plan will work or not. They can also coach you along the way and hold you accountable, so you start aligning your actions with the kinds of outcomes you really want (without letting fear hold you back).

Brandy Branstetter, CFP®