How to Have a Money Mindset and Achieve Your Financial Goals
Having the right money mindset is crucial for long-term financial planning. It can mean the difference between achieving your financial goals and falling short.
What is a money mindset, and what does it mean to have it?
According to Money Mentors, your money mindset can hold you back if financial decisions make you anxious, fearful, and intimidated. You can also harbor other negative thoughts about money, like feeling overwhelmed, frustrated, and unworthy.
Here are some tips for shifting from a negative to a positive money mindset and practical suggestions for implementing a plan to reach financial independence.
How to have a positive mindset
1. Understand the effect of a negative mindset
It's not surprising that many people have a negative mindset. The media understands that generating fear and anxiety attracts viewers, which increases revenues.
- The financial media is particularly adept at stirring up negative emotions, often by predicting market crashes and extrapolating the ramifications of geo-political events on the market.
- There's evidence that some people are genetically predisposed to view the world "darkly," so they are susceptible to negative information.
The problem is compounded when circumstances predispose you to have negative thoughts about money. If you believe you are "destined" to live paycheck to paycheck or harbor similar thoughts about your inability to achieve financial success, these views will likely become your reality.
What would happen if you could overcome negative self-talk and adopt a positive mindset? According to the Mayo Clinic, the benefits are as follows:
- Increased life span
- Lower rates of depression
- Lower levels of distress and pain
- Greater resistance to illnesses
- Better psychological and physical well-being
- Better cardiovascular health
- Reduced risk of death from cardiovascular disease and stroke
- Reduced risk of death from cancer
- Reduced risk of death from respiratory conditions
- Reduced risk of death from infection
- Better coping skills during hardship and times of stress
2. Create a positive mindset for financial success
Creating a positive mindset will permit you to take all that negative energy and convert it into an action plan for achieving your financial goals.
Some believe having positive mindset is "the only way you will be able to earn wealth without inheriting it."
3. Overcome adversity
There are many inspiring stories of wildly successful people who overcame extreme adversity. They believed in their ability to transcend their circumstances. Here are a few stories:
- Halle Berry once slept in a homeless shelter.
- Dolly Parton came from an impoverished family of 12 children.
- Ed Sheeran slept in subway stations.
- Perhaps the most compelling story is Oprah Winfrey's. Her family was poor. She was abused and molested by relatives. She gave birth to a child (who died) at age 14.
How to have a money mindset
1. Set goals
Whether saving for retirement, paying off debt, or building an emergency fund, you must have a solid understanding of what you're working towards. With a goal in mind, you can develop a plan to achieve it.
There's a skill to setting goals. Make them short-term, actionable, and achievable.
Here's an example: instead of setting a goal to become as wealthy as Warren Buffett, save a designated percentage of your weekly income for a year.
Short-term goals become self-validating. As you achieve one (like reaching your savings goal in week #1), you'll be more motivated to continue to week #2.
2. Create a budget
Creating a budget is one of the most important aspects of long-term financial planning. It's a plan for spending your money each month and should also have all your income, expenses, and savings. Creating a budget allows you to see where your money is going and adjust as needed.
Some helpful apps can take the drudgery out of budgeting.
3. Prioritize saving
Saving is an essential aspect of long-term financial planning. Set aside a portion of your income for savings each month. This can help you build an emergency fund, save for retirement, or invest for the future.
Before saving for retirement, build up an emergency fund (6–12 months of living expenses) to deal with financial setbacks.
If others depend on your income, protect them by purchasing life and disability insurance.
4. Pay off debt
Another critical aspect of long-term financial planning is paying off debt. High-interest debt, like credit card debt, can significantly hinder financial success.
5. Invest for the future
Investing is another crucial aspect of long-term financial planning. Start investing early to take advantage of compound interest.Investing in different assets, like stocks, bonds, and real estate, can help ensure your money works for you over time.
Seek professional advice
Consider seeking professional advice when planning your finances. A financial advisor can help you create a plan tailored to your needs and goals. A competent advisor can also help you navigate the complex world of investments, taxes, and other financial matters.
Remember, financial success is a marathon, not a sprint. Seeing the fruits of your labor takes time, effort, and patience. Celebrate small wins and stay committed to your goals.
Above all, reject negative self-talk and start believing in yourself! Consult a financial advisor Nevada has to offer.
Darrell Armuth founded Sensible in 1994. Since then, he has served hundreds of clients. Darrell is a Certified Public Accountant certified by the state of Nevada.