Money Mindset Makeover: Transform Your Finances with These 5 Mindset Shifts!

It’s essential to stay ahead of the game when it comes to planning for your financial future. That’s not always easy and I’ve learned that your money mindset (the beliefs, values, experiences you hold related to money) is critical to your ability to plan effectively.

When you get your money mindset in check, you’ll be well on your way to achieving your financial goals. In this post, I’ll explore 5 key shifts that helped me which can help you develop a winning money mindset and set yourself up for long-term financial success. So, let’s dive in and start making those critical mindset changes that’ll get you on your way to a worry-free financial future!

Understanding Your Money Mindset

As mentioned, when I say “money mindset”, I’m referring to the beliefs, values and experiences you have related to money. These beliefs are often formed during childhood and are influenced by a variety of factors, including your upbringing, cultural background, education, and life experiences. Understanding your money mindset is crucial if you want to achieve financial success and plan for your financial future.

The Importance of Identifying Your Money Beliefs

Identifying your money beliefs is the first step towards changing your financial situation. Your beliefs about money can have a profound impact on your financial decisions and behaviour. For example, if you believe that money is hard to come by, you may be less likely to take risks or invest in yourself. Conversely, if you believe that you can create wealth and abundance, you will be more likely to take calculated risks and pursue opportunities.

When you identify your money beliefs, you can begin to challenge them and replace them with more empowering beliefs that support your financial goals. This process can help you overcome limiting beliefs and create a more positive relationship with money.

Questions to Help You Identify Your Money Beliefs

To understand your money mindset, there are a ton of questions you can ask yourself or you can consult a coach to take you through your past experiences. Here are several questions I find most helpful in uncovering your attitudes towards money:

• What is the first experience you recall related to money?
• Did you have a bank account as a child?
• How did your parents or guardians introduce you to the concept of money?
• Was money scarce in your home? How did you feel about the amount of money your family had?
• Did your parents or guardians have investment accounts? Did they hold any debt that you were aware of?
• When did you first learn about credit cards and what did you learn?
• When you started earning income what advice did you receive? How has that advice changed over the years?
• Did anyone in your life encourage you to save money and how?
• Did anyone in your life encourage you to spend money on items you wanted?
• When did you first confront debt? What were your personal feelings towards the debt, e.g. did you want to get rid of it quickly at all costs or did you feel find making just the minimum payments?
• Do you have the belief that you can make the money you need to be happy in life? Did someone instill this belief in you? Conversely, did anyone influence you to believe you cannot make enough money to get ahead?
• What do you think about people who are incredibly wealthy (celebrities, billionaires, etc)?
• Have you ever ‘lost’ money? How did this happen and how did you feel?
• Have you ever felt you missed out on an experience or opportunity due to money?

How Your Beliefs Affect Your Finances

As you can imagine, your money beliefs can influence your finances in a variety of ways. For example, if you believe that debt is a necessary evil, you may be more likely to accumulate debt without a plan to pay it off. If you believe that investing is risky, you may be less likely to invest in stocks, bonds, or other assets that can help grow your wealth.

On the other hand, if you believe that money is a tool for creating abundance and fulfilling your life goals, you may be more likely to take steps to save, invest, and grow your wealth. By examining your money beliefs, you can begin to see how they are influencing your financial decisions and behaviour, and identify areas where you need to make changes.

How to Address Financial Setbacks With a Growth Mindset

Financial setbacks are a natural part of the wealth-building process. No matter how carefully you plan, unexpected expenses, market fluctuations, and other challenges can arise that can impact your finances. However, by adopting a growth mindset, you can approach these setbacks as opportunities for learning and growth.

A growth mindset is characterized by a belief that your abilities and intelligence can be developed through hard work and dedication. If you haven’t read Carol Dweck’s book on the subject, I highly recommend it. When you adopt a growth mindset towards your finances, you begin to see setbacks as opportunities to learn and improve your financial skills, rather than as failures or roadblocks.

To develop a growth mindset, focus on the progress that you have made towards your financial goals, rather than fixating on setbacks. Celebrate your successes, no matter how small, and seek out opportunities for learning and growth. By adopting a growth mindset, you can overcome financial setbacks and continue on the path towards financial success.

Understanding your money mindset is an essential step towards achieving financial success and planning for your financial future. Over time and with effort, you can create a more positive relationship with money and build the wealth and abundance that you desire.

Let’s start with 5 key money mindset shifts to get your brain focused on how you think about money and how you can change your mindset to move you towards better financial planning.

Shift 1 – From Scarcity to Abundance

Money is a major concern for most people. The scarcity mindset is very common when it comes to finances. Recognizing the scarcity mindset is the first step towards transforming your financial future.

Recognizing Scarcity Mindset

The scarcity mindset is characterized by a fear of not having enough money. People with a scarcity mindset are constantly worried about running out of money and often feel like there is never enough to go around. They may also feel like they are undeserving of wealth and may have a negative view of money in general.

If you are constantly worried about money, it’s possible that you have a scarcity mindset. Once you recognize this, you can start to shift your mindset towards abundance.

The Upside and Downside of Scarcity Mindset

The downside of the scarcity mindset is that it can be paralyzing. People with a scarcity mindset may avoid taking risks or investing in themselves because they are too afraid of losing what little they have. This can lead to missed opportunities and a lack of growth.

However, there is an upside to the scarcity mindset. People with a scarcity mindset tend to be very resourceful and frugal. They know how to stretch a dollar and make the most of what they have. This can be a valuable skill when it comes to managing money. For a real life proponent of the scarcity mindset, I highly recommend Kristy Shen story in her awesome book, Quit Like a Millionaire.

Embracing Abundance Mindset

Embracing an abundance mindset means shifting your focus from scarcity to abundance. It means believing that there is enough to go around and that you deserve to have wealth and prosperity in your life.

One way to embrace the abundance mindset is to practice gratitude. Instead of focusing on what you don’t have, focus on what you do have. Take time each day to appreciate the things that you are grateful for.

Another way to embrace the abundance mindset is to invest in yourself. This can mean taking courses to improve your skills or starting a business. Investing in yourself is a way of saying that you believe in your own worth and potential.

Finally, embrace the idea that money is a tool that can help you achieve your goals. Instead of seeing money as a source of stress, see it as a way to create the life that you want.

Shift 2: From Fear to Confidence

Identifying Fear-Based Thinking

One of the biggest obstacles to achieving financial success is fear-based thinking. This type of thinking can hold us back from taking risks or making smart financial decisions. Fear-based thinking can manifest in many ways, from avoiding investments to overspending to not negotiating for a raise.

It’s important to identify when fear-based thinking is affecting our financial decisions so we can address it head-on. One way to do this is to ask ourselves why we are making a particular decision. Are we avoiding something because we are afraid of what might happen? Are we overspending because we fear missing out on something?

By identifying fear-based thinking, we can start to challenge those thoughts and make better financial decisions. It’s important to remember that taking risks is a necessary part of building wealth, and that avoiding risks out of fear can ultimately hold us back.

Building Financial Confidence

Building financial confidence takes time and effort, but it’s an important step in achieving financial success. One way to build confidence is to educate ourselves about personal finance. The more you know, the less you will be afraid of what you don’t know. This can involve reading books or blogs, attending workshops, or working with a financial advisor. To start, check out my post on the top books to build wealth and achieve financial independence.

Another way to build confidence is to start small and gradually work our way up. We can start by setting small financial goals and achieving them. For example, maybe it’s too early for you to jump into an investment account, but can you set up an automatic transfer for a certain amount weekly into a high interest savings account? This can help build momentum and confidence to tackle your larger goals. Celebrating your successes along the way can also help you stay motivated and confident.

It’s also important to surround ourselves with supportive people who encourage us to take risks and pursue our financial goals. Having a network of friends or mentors who share our values and goals can make a big difference in our confidence and success. There are plenty of online groups out there you can join as well for encouragement and support.

Remember, building financial confidence is a journey, not a destination. It takes time, effort, and resilience to overcome fear-based thinking and achieve our financial goals. But with the right mindset and support, we can build the confidence we need to create a secure and prosperous financial future.

Shift 3: From Procrastination to Action

The Dangers of Procrastination

Procrastination is a dangerous habit that can hinder your financial growth and prevent you from achieving your goals. Putting off important tasks can cause unnecessary stress and anxiety, as well as missed opportunities. When it comes to your finances, procrastination can lead to missed payment deadlines, late fees, and even damage to your credit score. If you wait to open bill statements or check your credit card bill each month, you may be in this boat.

Procrastination in any aspect of your life can have a snowball effect, causing a backlog of tasks that become overwhelming and difficult to tackle. This can lead to a sense of helplessness and further procrastination, creating a vicious cycle that is hard to break.

So how do you gain control over your financial procrastination habits and get your finances on track?

Tips for Taking Action

The good news is that procrastination is a habit that can be broken. Here are some tips to help you take action:

• Understand why you procrastinate: Identifying the root cause of your procrastination can help you better understand your behaviour and find ways to overcome it.
• Break tasks into smaller chunks: Instead of tackling a large task all at once, break it down into smaller, more manageable pieces. This will make the task less daunting and easier to accomplish.
• Set realistic goals: Setting realistic goals can help you avoid becoming overwhelmed and give you a sense of accomplishment when you reach them.
• Eliminate distractions: Distractions can be a major obstacle to taking action. Try to eliminate them as much as possible by turning off your phone, closing unnecessary tabs on your computer, and finding a quiet place to work.
• Reward yourself: Celebrate your accomplishments by rewarding yourself with something you enjoy. This will help you stay motivated and encourage you to continue taking action.

Shift 4: From Debt to Saving

When it comes to planning for your financial future, one of the most important mindset shifts you can make is to move from a debt-focused mindset to a savings-focused one. This involves understanding the impact of debt, building a savings mindset, and developing an income-generating mindset.

Understanding the Impact of Debt

Debt can have a significant impact on your financial future. When you have debt, you are essentially paying interest on money that you have already spent. This means that you are not only losing money but also limiting your ability to save and invest for the future.

In order to shift from a debt-focused mindset to a savings-focused one, it is important to understand the impact of debt on your financial future. This means taking stock of your current debt and interest rates, and creating a plan to pay off your debt as soon as possible. Consider consolidating your debt or negotiating with creditors to reduce interest rates.

How to Build a Savings Mindset

Building a savings mindset involves making a conscious effort to save money on a regular basis. The best way to do this is to set aside a certain percentage of your income each month or week to cover your basic expenses and automate predictable bill payments. That way, whatever is left is yours to enjoy. 

Likewise, you can set up automatic transfers from your chequing account to a savings account or investment account to get you on track to have your money make you money. For more tips on moving to a savings mindset and beginning your investment journey, see my post on Mastering Your Money.

Developing an Income-Generating Mindset

In addition to saving money, it is important to develop an income-generating mindset. This means looking for ways to increase your income, whether through a side hustle, freelance work, or investing in stocks or real estate. 

An income-generating mindset may not come naturally to you. I luckily learned at an early age that extra money could be put to work for me. First, I was aware that my parents had funded the purchase of our house using money saved from a rental income property. Second, they taught me as a child about a simple investment tool (a GIC) which locks in your invested amount for a period of time and pays out a guaranteed interest rate. 

Later, I was introduced to a financial advisor and I learned about using Canadian financial tools like an RRSP to invest money (TFSA accounts were not yet available). Slowly, over time, I saw my initial small investment grow and I finally took a stronger interest in its potential and financial basics in my 20s. Once I started making enough regular income to add to my investment portfolio, I next focused on buying my own rental income property.

If this mindset doesn’t come naturally, it’s time to do your research on what may work for you. Consider taking courses or attending workshops on investing or entrepreneurship to develop your skills and knowledge. By shifting from a debt-focused mindset to a savings-focused one, you can take control of your financial future and create a solid foundation for long-term financial success.

Shift 5 – From Short-Term to Long-Term

The Downfalls of Short-Term Thinking

With regards to finances, we often fall into the trap of short-term thinking, focusing on immediate gratification rather than long-term planning. While this mindset may provide temporary relief, it can also lead to financial instability and stress in the long run.

For instance, constantly splurging on expensive dinners and vacations may feel great in the moment, but it will quickly drain your bank account and leave you with little savings for the future. Similarly, relying on credit cards to cover expenses can lead to high interest rates and debt accumulation that can take years to pay off.

Planning for Long-Term Financial Success

Fortunately, it’s never too late to shift your mindset from short-term to long-term thinking to create a stable and secure life for yourself and your loved ones.

One of the best ways to start planning for the long-term is by setting clear financial goals. This could include saving for a down payment on a house, paying off debt, or building an emergency fund. By creating specific goals and outlining a plan to achieve them, you can start to make progress towards your long-term financial success.

Another important aspect of long-term financial planning is investing. While it may seem intimidating, investing your money can provide significant returns over time. Consider speaking with a financial advisor or doing independent research to find the best investment options for your specific goals and risk tolerance.

In summary, shifting from short-term to long-term thinking can have a significant impact on your financial stability and success. By avoiding the pitfalls of short-term thinking and focusing on clear financial goals and investments, you can create a brighter and more secure financial future for yourself.

Conclusion

In conclusion, shifting your money mindset can be a game-changer for your financial future. By implementing the five mindset shifts discussed, you’ll be well on your way to achieving your financial goals. So go ahead, take that first step towards financial freedom. Your future self will thank you for it!