The psychology of money: Understanding your money mindset
Clearly, money plays a central role in our lives.
Not only affecting our financial wellbeing but also our emotional and mental health.
Constantly worrying about our financial circumstances â whether itâs about bills and debt or future financial security â can affect us long-term.
Furthermore, itâs a vicious cycle: 72% of respondents to Money and Mental Healthâs survey said that their mental health problems had made their financial situation worse.
I’ve written here before, according to the American Psychological Association, financial issues are the number one cause of stress in the United States.
Even so, in Ireland there is such a stigma around money and talking about money.
Getting to know how we think and feel about money, often referred to as our âmoney mindsetâ, helps.
It can significantly influence our financial decisions, behaviours, and overall financial success.
As a consequence, our wellbeing improves.
In this article, we’ll delve into the psychology of money and explore various money mindsets to help you gain insight into your own relationship with money.
The Foundation of Money Mindset
Our money mindset is shaped by a complex interplay of factors, including upbringing, cultural influences, past experiences, and personal beliefs.
These factors combine to create a set of attitudes and beliefs about money that guide our financial decisions.
Your money mindset is usually established early in life.
If you were surrounded by adults who found money stressful, for example, youâll likely have the same worries whenever you start thinking about finances.
The Scarcity Mindset
Firstly, one common money mindset is the scarcity mindset.
People with this mindset often feel that there is never enough money to go around.
As a result, they worry about running out of money, even if they have a comfortable income.
This mindset can lead to excessive frugality, hoarding, and a reluctance to invest or take calculated financial risks.
These people may never get to enjoy the money they have with this mindset!
The abundance mindset
In contrast, on the opposite end of the spectrum is the abundance mindset.
Those with an abundance mindset believe thereâs an abundance of opportunities and resources available to them.
This cohort are more likely to take risks, invest, and seek opportunities for financial growth.
This mindset can be empowering and open doors to financial success.
On the other hand, it can also lead to recklessness and negative consequences if not kept in check.
The money as a measure of self-worth mindset
For some, their self-worth is closely tied to their financial success.
They believe that their value as a person is determined by their bank account balance.
This mindset can result in constant striving for more wealth, even at the expense of other important aspects of life, such as relationships and health.
The balanced money mindset
Some people have a fear of money, often stemming from deep-rooted beliefs that money is the âroot of all evilâ or that having wealth will change them negatively.
This mindset can lead to self-sabotage, missed financial opportunities, and difficulties in building wealth.
Money shouldnât be frightening â but there are ways to change your money mindset.
How do you identify your money mindset?
In conclusion, understanding your money mindset is the first step towards making positive changes in your financial life.
Start by reflecting on your attitudes and beliefs about money. Ask yourself questions such as:
- How do I feel about money?
- What are my core beliefs about wealth and financial success?
- How do I react to financial challenges or windfalls?
Once you identify your money mindset, consider whether it serves your financial goals and wellbeing.
If not, work on shifting your mindset through self-awareness, education, and, if necessary, seeking support from a financial therapist or counsellor.
Your money mindset definitely has a profound impact on your financial decisions and, ultimately, your financial success and happiness.
By understanding your money mindset and working to reshape it healthily and constructively, you can take control of your finances and build a more secure and fulfilling financial future.
Remember that your relationship with money is not set in stone; it can evolve and improve over time with conscious effort and self-reflection.
Get in touch
Weâd be delighted to chat about this with you â please get in touch any time.
Contact us and take the first steps to getting your finances in order.
Email us at info@fortitudefp.ie or click below to schedule an introductory call at our expense.
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