If you really want to change your life, you need to have the right financial mindsets. The power of the mind is very strong. If you will it enough, it is possible for it to happen in your life. This is why you need to think carefully about how you will set your mind in the coming months. It is powerful enough to affect your financial position this year.
Improving your finances is not that easy. The concepts are simple but it is not easy to follow through with them. You sometimes have to make sacrifices in order to improve your financial situation. For instance, if you are in debt, you need to sacrifice some expenses so you can pay more towards your loan. It is these sacrifices that will require you to have the right financial mindsets so you can overcome them.
According to an article published on USAToday.com, Americans do not have a financial literacy problem. The reports may say that we make the wrong decisions but that does not necessarily translate that we are unaware of the best practices of financial management. We know how to make the right choices about our money. The problem, based on the author of the article, is that we have a financial behavior problem. It is this behavior and the decisions that usually get us into trouble. It is what put us in a financially compromising position. The article mentioned a simple yet perfect example. We all know that we should never spend more than what we are earning. It is only logical after all. But does that mean we follow it. Some people still end up in debt because they spend more than what they are earning.
Having read that, what do you think is the real problem? Obviously it is not financial literacy. It is our financial behavior. And when it comes to correcting bad behavior, we all know that having the right mindsets will allow you to do just that. Your behavior is usually influenced by your perceptions in life. You act based on what you believe in. So if you have the right financial mindsets, your behavior will follow suit.
5 money mindsets you should change this year
The truth is, our money mindset evolve over time. It is influenced by what we think is the norm in our society. For instance, debt used to be a taboo in our country. Only those who are desperate borrow money. And the people who used to lend money are shady characters. This was why only a few people borrow money.
Now, with credit being readily available and offered by legitimate financial institutions, borrowing money has become the norm. In fact, using credit, in the form of credit cards, became a status symbol of sorts. If you can use your credit cards on the most ordinary purchases, you are deemed to be affluent and your carelessness with spending is translated as you being financially well-off.
You see how the behavior changes because of the way our mindsets are influenced by the norm in society? Although we have no control over the evolving norms in society, we can control our mindset. We can set our minds to believe certain things that will influence our financial behaviors and in effect the decisions that we will make.
To help you start, here are 5 financial mindsets that are the norm in our society today but you should actually get rid of starting today.
Using debt to reach your dreams.
This can actually be quite confusing. A lot of people say that it is okay to be in debt as long as it will help you reach your dreams. There is some truth to that but you should probably put everything into the right perspective. Buying your own home and getting a higher education are some of the supposedly “good debts.” It is okay to borrow for these if you can reach your dreams because of that debt. Not so fast. It may be logical to use debt to reach these but here’s the key to really make it work – you should not abuse it. If you will get a home loan, buy a house that will help pay for itself. That way, the debt will not be a burden for you. When it comes to student loans, make sure that you work while studying to help pay for your loans while in school. Do what you can to keep debt from being a burden so it will not hinder you from reaching your dreams.
Thinking you do not need an emergency fund.
Remember the phrase, “you only live once,” right? That should no longer be your mindset – especially when it comes to your finances. You always have to think about the immediate future. If you really want to enjoy this life, you need to be smart about it. Do not splurge everything on present things that you think will make you happy. It is okay to postpone your enjoyment so you can build up your emergency fund. You are not as invincible as you think even if you are still young.
Settling for a stressful job to pay off debt.
Among the financial mindsets that you need to erase is forcing yourself to stay in a stressful job just so you can pay off your debt. You are justifying the miserable experience that you are going through in your job because you need it to meet your financial obligations. This is the wrong mindset. You need to put yourself in a financial position where you will never be forced to stay in a job that you do not like. Live a life that does not require you to spend a lot so you can pursue a low paying job and still afford to pay your debts. You need to think like most of the Millennials. According to TheAtlantic.com, younger Americans prefer to find a job that they love or one that will help them make a difference in society. You may want to learn from them so you can find fulfillment in your work.
Delaying your retirement savings.
Some young adults think that their retirement savings can wait. Some of them think that they need to pay off their debts first before they can start thinking about the future. This is not the right mindset if you want to improve your finances. You have to save for retirement even when you are drowning in debt.
Failing to have a backup plan.
The last of the financial mindsets that you need to forget is not having a backup plan. Do not leave things to chance if it involves your finances. You have to make a plan and not just that, you need to have a backup plan. If you have an emergency savings fund, do not rely on that alone. What if one emergency happens after another? Where will you get the funds to pay for everything? Think about that before you act.
Tips to help change your mindset about money
Changing financial mindsets is not as easy as you think. You need to change certain habits and sometimes, that is not so easy to do. But despite being hard, it is a necessary step to take if you really want to improve your financial position this year.
According to Robert Kiyosaki, as published in an INC.com article, a shift in your mindset will allow you to take control of your life. Even if the odds are against you because of uncontrollable external factors, you need to hold firm to the mindset that will help you get the job done no matter what. It all starts with your mind.
Here are some tips that will help you with the process of changing your financial mindsets.
- Start by analyzing how you feel about money. Is it a tool for you or is it what makes your world go around? Do you feel powerful when you have money? All of these will help define what needs to change about your perception of money.
- Think about the money situations that you are comfortable with. What makes you happy? Is it really your ultimate goal to earn a lot of money? What amount will be enough? Sometimes, there is more burden in having a lot of money. Think about it. What specific financial situation do you really want to be in. Because in all honesty, having a lot of money is not a guarantee that you will be happy.
- Train yourself to focus on what you have rather than what you lack. This is probably hard for some people but with some practice, you can change your mindset to focus on what you own. Do not mourn over the small house that you have. Rejoice that you can afford to have a roof over your head. That is how you can find genuine financial happiness.
- Be specific about your financial dreams. Lastly, you need to picture what you want to achieve. What is the ultimate financial state that will really make you happy? What type of home should you have and the lifestyle you will live? If you make it visual, it is easier to find the motivation to reach them.
Try to practice these so you can be successful in changing your financial mindsets. That way, the norms in society may change but your financial behavior will always be on the right track.