In this lesson you will learn 💸
- What a "money mindset" is
- The benefits of a healthy money mindset
What is a "money mindset"?
Money is a necessity, allowing us to pay for the cost of living, food and much more. Throughout our lives, we’re given so many different messages about how we should feel about money, including the idea that we should aspire to make more, but that it’s also the root of evil. With all of these mixed messages, how can you expect your mindset to keep up?
Your money mindset is your set of beliefs regarding your finances, the relationship you have with your money and the value that you attribute to this aspect of your life.
What influences our money mindset?
- Our childhood and how money was presented to us growing up
- Societal norms and values
- Our experiences with money
- Our financial education
For many people, money is, and remains, a complicated and emotional subject. In our research we asked people what word describes their relationship with money.
What are the signs of a healthy money mindset?
✔︎ You know how much you earn and spend
✔︎ You see your values reflected in your financial decisions
✔︎ You have clear short, mid and long-term financial goals
✔︎ You embrace the good your money can do for the world
✔︎ You can easily talk about your finances
✔︎ You can understand your personal risk tolerance
We tend to avoid things that make us uncomfortable, so if you already feel anxious about your finances, you can end up spending as little time as possible dealing with them. Over time, this will prevent you from fully understanding your personal finances, making it that much harder to gain control.
The benefits of a healthy money mindset
Mental health is closely linked to your mindset. Experiencing difficulties with your finances can lead to increased stress or anxiety, which impacts all areas of your life.
A healthy money mindset can lead to:
- Reduced stress
- Less arguments in relationships
- Greater sense of control
- Increased overall level of confidence
- Sound financial decisions, which can translate into better monetary outcomes, including negotiating pay and investing
What's your money mindset?
To start improving your relationship with your money, you need to know what actually needs improving. That means figuring out the current state of your mindset. You can do this with a simple reflection exercise. You can also watch the short video in lesson three of this module and use the checklist to gather your thoughts.
For this reflection, finish these sentences and see what comes to mind right now:
- Success is...
- Being rich means...
- Talking about money is...(easy, difficult, stressful...)
- My biggest fear related to money is...
Do you notice any patterns or distinct feelings? If you do, then try to understand why you feel this way. Being aware of these underlying feelings can help you to increase your confidence.
Why you should adopt a growth mindset
Our mind decides how we deal with tasks, problems and challenges, in short, whether you approach it all seeing the limitations (prefer not to make mistakes) or the possibilities (I can manage it or simply learn it).
The US psychologist Carole Dweck has proven in various studies that having a so called "growth mindset" is essential for success.
People with a growth mindset have a hunger for learning and see mistakes as an opportunity to learn and grow. They can develop their skills further, learn to understand and experience things better, and ultimately achieve better outcomes.
Why is this important for your finances?
Your attitude consciously or unconsciously influences how you deal with money, whether you are negotiating pay or investing. A growth mindset can help you to free yourself from a possible paralyzing fear of making mistakes and therefore being stuck doing nothing at all.
When it comes to investing, cryptocurrency or financial planning, being financially confident is not about the massive big leaps. As the world of finance constantly changes, learning never stops. So give yourself the time to explore, experiment with small amounts and to learn. With these small steps you will see your confidence grow!
Money as a tool can give us independence and protection. It also allows us to make our own choices and a real difference in the world.
Your financial education impacts your money mindset - the more you understand your money, the more confident you tend to feel about managing it. Congratulations on starting your journey to financial freedom. Keep going!
What comes next?
You know what a money mindset is and why it is important, so now it’s a good time to take action and explore your money mindset with exercises in the next lesson. Have fun!