How to Create a Healthy Money Mindset
January 11, 2023
Like it or not, money plays a huge role in all of our lives. Our finances shape how much we have to work, where we can live, and the things we can enjoy. Our ability to change our financial situation is often limited. But we can always change our relationship to money, which can help foster positive change.
What Is a Money Mindset?
Your “money mindset” is how you think about money. It’s a set of beliefs and attitudes about finances that drive your decisions when it comes to money. Your money mindset shapes the way you feel about your spending decisions, investing, debt, charitable giving, and more.
A healthy money mindset can help you reduce financial stress, work towards goals, and build a positive financial future.
What Contributes To Your Money Mindset?
Your money mindset is a product of how you were raised, your experiences with money so far in life, and even the type of financial education content you consume.
We pick up a lot of our habits and attitudes toward money from our families. In fact, research shows that financial habits are formed much earlier in life than you might expect. One study found that many foundational money habits are actually established by age 7.
But it’s not all family influence. The attitudes we have towards money as an adult are shaped by our experiences, our social circles, and the books we read. And here’s the key to remember: Your money mindset can change. If you feel like you don’t have the healthiest relationship with money, you can start making actionable changes today to reframe your financial mindset.
How to Create a Healthy Money Mindset
We’ve established what a money mindset is and why it’s important — but how do we actually create a healthy mindset around our finances?
Identify Your Goals and Values
Understanding your goals in life — particularly as they relate to money — is a great place to start. Keeping your goals in mind can help you make financial decisions that move you in the right direction. Here are just a few ideas of how your goals could influence your money mindset:
- If you have the goal of retiring early, you might prioritize investing over optional spending. Did you know that $100 invested today could potentially be worth over $1,700 in 30 years (assuming 10% average stock market returns)?
- If you have the goal of sending your children to top-tier colleges, you might prioritize saving over spending.
- If you have the goal of supporting charitable causes, you might prioritize donating to charity or supporting your church.
Personal values also play a role in your money mindset. Here are some examples:
- If you value supporting small businesses, you might opt to shop more locally — even if it means spending more.
- If you value family, you may prioritize spending on entertainment and fun activities with your family.
- If you value your career, you may prioritize self-investment in professional training and networking.
Get Clear on What Matters — And What Doesn’t
It’s easy to get caught up in the little things in life, but in the grand scheme of things, a lot of stuff we worry about simply doesn’t matter very much. This can play out in our finances on a day-to-day basis.
For instance, saving for the future is of course important — but saving every last dollar possible can take a lot of enjoyment out of your life. So do set up that monthly transfer to your retirement account, and don’t worry about the occasional splurge on take-out.
In your own life, identify what matters to you, and what really doesn’t. Focus your energy on the small percentage that matters most, and you’ll achieve better results.
Be Kind to Yourself
Kindness and self-compassion go a long way in every aspect of our lives, and our finances are no different. A healthy money mindset means forgiving yourself for past mistakes, adopting a positive attitude, and looking forward to a brighter future.
This also means forgiving yourself for little slip-ups throughout your journey. Maybe you set a goal to spend less on restaurant meals, but a stressful week led you to overspend on take-out. You can acknowledge your mistake, take note of how you can prevent it from happening again (meal prep, anyone?) and move on — there’s no need to beat yourself up about it.
Dream Big — and Start Small
It pays to have big dreams. Maybe you’d love to retire early and travel the world. Or perhaps you’ve always wanted to own your own home and raise a family. Or maybe you want to be a multimillionaire and own a vacation home and a boat.
Whatever your dreams may be, dream them — and then take small, actionable steps toward those dreams. Setting big goals can be intimidating. It’s wise to break them down into smaller chunks so that you can make slow and steady progress.
Say you want to retire as a millionaire, and you have about 30 years left in your career. Well, saving $1,000,000 sure seems intimidating — but how about $480 per month? Believe it or not, if you have 30 years to invest and you can earn 10% returns in the stock market, saving just $480 per month could potentially result in an ending balance of around $1 million.
Read Helpful Books and Blogs
Learning more about personal finance is a great way to improve your money mindset. Whether you choose to read blogs, listen to podcasts, or even watch YouTube videos, there’s plenty of valuable free information out there.
Ready to start now? Browse The Happy Money blog for insights on paying off debt, budgeting, investing, building credit, and more.
Discuss Money with Loved Ones
Money can seem like a taboo topic to discuss with others, but openly discussing finances can be part of a healthy money mindset.
The first place to start is to talk with your partner — not just about day-to-day finances, but about your bigger goals and plans. Talking about money is important to the health of your relationships, and it’s particularly important around key life transitions like getting married.
Talking with your friends and family about money can also be beneficial. You don’t have to get into specifics, but simple strategies like asking for advice or sharing a small financial win of yours can help start the conversation tactfully.
Understand the Trade-Offs of Every Spending Decision
A key part of a healthy money mindset is understanding what it actually means to spend money. Consider these facts.
- Every dollar you spend is a dollar you can’t spend on something else.
- Every dollar you spend is a dollar you can’t save or invest.
- Every dollar you spend is a dollar you can’t use to pay down debt.
These statements might seem simple, but there is deeper meaning when we pause to think about them.
If we’re trying to pay off debt, each optional purchase we make delays that goal. If we’re trying to save for retirement, each purchase slows our progress. That doesn’t mean that we shouldn’t make optional purchases — it simply means that we might want to pause and consider the trade-offs of each of our spending decisions.
Want a unique way to spend with more intention and adopt a savings mindset? Try out the 30 day rule, which asks you to pause for 30 days before making an unplanned purchase. If you still want the item after 30 days, go ahead and buy it — if not, save the money or use it to pay off debt.
Adjust As Needed
A healthy money mindset also means being flexible and adapting to changes as they occur. Making plans and setting goals is great, but it’s also important to be willing to change course as needed. This could mean cutting back on spending if you have an unexpected major expense pop up. Or it could mean budgeting more for travel because you recently got a raise.
In any case, the key is to be flexible and adaptable and to keep the principles of self-compassion and kindness in mind if you do need to change course.
Healthy Money Mindset = Financial Wellbeing
Your money mindset is your set of beliefs, strategies, and habits around money and personal finance. Developing a healthy money mindset is key to building a brighter financial future — and helps you find peace with your current situation, wherever you may be on your journey.
Want to reduce your financial stress, improve mindfulness, and adopt a healthier money mindset? Sign up for Peace by Happy Money. Peace is a science-backed financial mindfulness course delivered straight to your email inbox, for free. When you sign up, you’ll receive a series of stress-reducing skills and insights to help you find peace with your personal finances.