What’s the first thing that comes to mind when you think about money?
Do you feel stressed and like you have no control?
Do you feel empowered and relaxed?
Are you thinking about that dream home you’ve been saving up to buy?
Or those credit card bills you’ve been struggling to pay off?
When you think of money, there are a variety of thoughts and feelings you might experience. Your thoughts are very powerful and your mindset can influence your expressions and behaviors.
As you stress or worry about money, this leaves you with less energy to focus on activities that bring you joy and happiness.
While you might have the best intentions, if you’ve been struggling to pay off debt or reach your financial goals, it’s because you’re approaching it from the wrong perspective.
Changing your financial situation involves more than just adjusting your behavior. In order to make a lasting change, you need to address your beliefs about money first.
Today I want to talk about 5 money beliefs that hold you back from developing good spending habits and what you can do to change these limiting mindsets.
- 15 ways you throw away money (and how to save instead)
- 10 sneaky ways retailers trick you into spending more
- How to be rich in your 20’s
1. You don’t understand that change is a process, not an event
We are creatures of habit and have a tendency to maintain the status quo. While many of us might want to make a positive change, it seems easier to do nothing and keep things as they are.
This isn’t surprising because change takes effort. It involves thinking, decision-making and action. These poor financial habits may form familiar neural pathways which makes it difficult to disrupt and break this pattern of behavior.
For example, if you regularly overspend on clothing every month, there’s a good chance that you’ll continue to do so. However, your current state does not have to be your destiny. You have the power to develop good habits which are critical for your financial success.
Many people don’t realize that change is a process, not an event. Searching for quick fixes to save money by reducing your costs doesn’t lead to a lasting change in your financial situation.
The only way to permanently change your financial situation is to commit to making long-term changes to your spending habits that align with the purpose of your ideal lifestyle. An easy way to start is by automating your savings.
Set up automatic transactions to fund your savings. You can set this up at your bank or talk to your HR department and ask for a certain amount of your paycheck to be deposited into your savings account each month.
2. Someone else will/ should take care of this for me
Your financial future is your responsibility and the best time to start taking action is NOW. Stop wait for your parents, your employer, your friends, your spouse, or Prince Charming to bail you out. YOU are the person that you’ve been waiting for.
Instead of buying time by placing your financial responsibility on someone else, you can take control of your money. Even if you have someone taking care of you financially, such as your husband or wife, half of all marriages end in divorce. This is why being financially empowered is one of the smartest money moves you can make for yourself and your future.
3. Money is meant to be spent
The key to building wealth is to save and invest your money appropriately. If you spend all the money you earn, you will never see the potential of the financial abundance you could create.
This doesn’t mean that you can’t enjoy life and should feel deprived. However, it’s essential that your spending habits follow a plan and are aligned with reaching your financial goals, instead of putting you into debt.
As Warren Buffet said, “Do not save what is left after spending, but spend what is left after saving”.
[clickToTweet tweet=”Do not save what is left after spending, but spend what is left after saving. – Warren Buffet” quote=”Do not save what is left after spending, but spend what is left after saving. – Warren Buffet”]
4. Having a budget means being deprived
This is one of the biggest misconceptions about budgeting. It doesn’t matter how much money you make, having a budget can help improve your financial situation.
Many people get into financial trouble simply because they don’t have a plan for their finances and don’t know where their money is going. As Dave Ramsey says, “A budget is telling your money where to go instead of wondering where it went”.
[clickToTweet tweet=”A budget is telling your money where to go instead of wondering where it went. – Dave Ramsey” quote=”A budget is telling your money where to go instead of wondering where it went. – Dave Ramsey”]
Having a budget is less about depriving yourself of everything and more about implementing a strategy to reach your specific goals. Spending cuts should follow a plan and be based on your overall life priorities. Make cuts to expenses that are unproductive in terms of helping you reach your goals. You may even decide to eliminate them, if necessary.
5. “Getting by” is good enough
Too many people are living for today, but they’re not living with intention. They’re in a constant battle with their present and future self, with their present self often winning and sabotaging the success of their future self.
My psychology professor called this “hyperbolic discounting”. This means that people would rather receive $10 right now instead of $20 in a month. People prefer the immediate reward and discount the value of the later reward, by a factor that increases with the length of the delay.
That’s why it’s so hard for people to quit smoking. They know that smoking is bad for their health and that studies have shown that it can cause cancer, but instead of quitting, they continue to smoke.
Why? Because people value the immediacy of now (the satisfaction of smoking) over the positive benefits of their future if they were to quit smoking today.
You may think that “getting by” is good enough when it comes to managing your money, but what about the future? What will your savings look like as you head into retirement? The best time to start saving money was yesterday. The second best time is today.
Over to you — what’s the first thing that comes to mind when you think about money?
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