Why your 'money mindset' matters
Elizabeth Windisch is a certified financial planner and founder of Aspen Wealth Management Inc. in Centennial, Colorado.
In my experience working with women on their financial plans, I have learned that a one-size-fits-all, run-the-numbers approach isn’t very helpful. Before putting pencil to paper for budgeting or financial planning, it’s tremendously helpful to understand one’s money mindset.
But what is a “money mindset?” Very simply, it’s your specific and individual core beliefs about money and how it works in the world.
Why is your money mindset important?
If you’re always worried about money, it’s impossible to deal with it effectively, especially when you don’t know your money mindset. When you don’t understand our own motivations, you can procrastinate. And when it comes to money goals, even a little procrastination has a huge impact.
How many years have you been saying that you’ll get your finances in order? One year? Five? This can harm you in ways you don’t even realize. If you hesitate too long and miss even a few years of retirement saving, or keep that money in a low-interest savings account while you figure out what to do, it can cost you tens or even hundreds of thousands of dollars in missed growth.
How do you figure out what your money mindset is?
While every one of my clients is unique, I find that they fall into 1 of 4 money mindsets:
Givers: People who always put others before themselves, be it their children or charities.
Keepers: Those who are either fanatically frugal, or for whom no amount of money is ever enough.
Merry makers: These folks live only for today and enjoy spreading their fortune around.
Perfectionists: People who become paralyzed by the vast amount of information and choices related to money, and instead do nothing.
Whatever you call yourself is not important. What is important, though, is understanding why you make the financial choices that you do, and recognizing repeating patterns. I work with my clients to identify their money mindset by:
Discussing early experiences around money: Money patterns usually begin when we are children.
Determining repeating spending patterns: What are the choices and mistakes around money you keep making again and again?
Identifying your values: Why identify your values? Because figuring out what matters most to you brings clarity and holds you accountable.
Writing down your money history in a story format: It is often easier to get at your money mindset by looking from a narrative perspective rather than a numerical one.
How does your money mindset shows up in your life?
Money mindset shows up as the recurring argument that you have with your spouse over money, or as the constant fear that you’ll never have enough money. It can creep into your business as never charging enough for your work, or being too afraid to ask for a higher salary.
Much of the thinking around money mindset revolves around good and bad money mindsets. I don’t think what’s important about your money mindset is feeling shame, or striving to be something different.
Instead, the key about money mindset is understanding what your default mindset is and figuring out how to work with it. If you understand your mindset, you can keep it foremost when making choices or trying to overcome a challenge. You can use that understanding to break patterns and chart a different course for yourself.
Merriam-Webster dictionary defines mindset as “a mental attitude or inclination.” If money makes the world go ‘round, isn’t understanding our attitudes and inclinations around money the most important thing we can do for ourselves?
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