Do you have a healthy relationship with money? Your beliefs and attitudes about money, earning, saving, and spending are what ultimately shape your financial life. They can have a bigger impact on your financial future than how much you earn or how much you sock away in your 401(k).
Changing your beliefs about money can give you a healthier outlook on your spending and saving habits, and make it easier for you to manage your personal finances in a way that helps you realize your goals. A lot of it comes down to examining your past experiences that have shaped your beliefs about money, and breaking down negative money beliefs that could be holding you back. But you also need to have a realistic picture of where your finances are, and where they could be. And, while you should make a budget and set goals for spending and saving, don’t let mistakes leave you so discouraged that you give up on changing your money habits altogether.
1) Examine Your Past Experiences
Most of your beliefs have been shaped and influenced by your past experiences, including — perhaps especially — those you may have had in childhood. If you grew up in poverty, for example, you may be afraid to spend money on anything, for fear that your family will need it later. That may be great for your savings account, but it’s not great for your ability to enjoy some of your money. You may even find that you struggle to let yourself use money to meet your basic needs.
Your childhood experience of family finances is the biggest factor influencing your adult ideas about money. If you grew up in a family where money wasn’t discussed, you might not have the faintest idea how to go about making a budget or managing your personal finances. If your parents fought a lot about money, or there wasn’t much of it in your family, you might be afraid to spend or even afraid to take investment risks that could be vital to meeting your financial goals. Write down your childhood experiences about money, and look for patterns that could be appearing in your interactions with money today.
2) Break Down Your Negative Beliefs
Many, if not all, of your bad money habits probably go back to negative beliefs you hold about money. You might believe that “money is the root of all evil”, that accumulating more money than you need is morally wrong, or simply that you don’t deserve more money or that money is a scarce resource that’s hard to come by and won’t stick around long when it does.
You might believe that money is the primary, or perhaps only, source of happiness and life satisfaction, or even that the amount of money you earn or have defines your self-worth. You may simply believe that saving money is more important than spending it for your own comfort or enjoyment. These negatives can, at worst, undermine your efforts to earn, save, and reach financial goals — at best, they can leave you with plenty of money in the bank, but not much to show for it because you’re afraid to enjoy any of it. Once you’ve identified these negative beliefs, you can start correcting them.
3) Get a Clear Picture of Your Finances
You need a clear and accurate picture of your finances in order to figure out how you can improve them. Depending on what negative money beliefs have held sway in your mind, you might be able to account for every penny you’ve present, or you might have no idea what’s going on with your accounts. Take the time to sit down, alone or with a financial advisor, and figure out how much money you have, what assets you own, how much debt you’re responsible for, and what monthly bills you have to pay. There are plenty of online money management tools on the market to help you with this part.
4) Compare Yourself to Others
In any other situation, comparing yourself to others is a fast track to low self-esteem, if not worse. But when it comes to finances, you should be comparing yourself to others — others in your field and at your level of experience, or even others in similar life situations — to see how much money you should be earning and to start to dismantle some of your negative beliefs about money. Talk about your salaries with colleagues who are at similar places in their careers in your field, and do research online so you know how much you should be earning. If you’re reluctant to work towards a better financial situation because you think someone in your situation can’t do any better, look at others who have succeeded and ask them what they did to change their financial lives.
5) Don’t Let Mistakes Derail Your Progress
You’re bound to make mistakes from time to time when you’re working towards dropping bad habits. When you overspend your budget or find yourself hesitating to make a needed major purchase because you’re afraid of spending the money, take it easy on yourself. Get back on track with your goals as soon as you can.
Bad money habits typically grow from bad money beliefs. Change your money attitude, and you’ll be pleasantly surprised at how much, and how quickly, your financial life can improve.
