Photo by Joe deSousa
We all tend to be unaware of many of our own actions and why we make them well into adulthood. Even though we can suggest that we formed our opinions and behaviors about money from our parents to a large extent, we have to at some point in time be able to draw a distinction from past behavior and take full control and responsibility for our actions moving forward. Especially how we develop our Money Mindset.
As a result, how do you now handle money since you have become an income producing adult? Do you believe that you are continually hamstrung by what you learned about money growing up?
In order to be able to change your Money Mindset and create a healthy relationship with money it’s going to be particularly important to be able to decode what it is you currently do and identify why you do it. As such, you’re going to have to answer a lot of core questions about how you feel about money and why it is the way you think the way you do about money.
How do you deal and interact with debt?
Many people who struggle with a poor Money Mindset have a very bad relationship with debt in their life. Unfortunately, they may have grown up in a household that was frequently hamstrung by high debt payments to service a consumerism lifestyle whether in the house that they lived in, the cars that they drove, the vacations that they took or more recently, the schools that they attended.
Whatever the underlying circumstances that drove the debt, more now than ever, and especially in the United States, people are under a mountain of debt.
We need to first understand what our relationship with debt is in order to be able to change it. To that end, what is your relationship with debt? Do you take debt on for any type of purchase both large and small? Does it have to have a strategic purpose before you incur debt, such as a house or transportation purpose?
Do you have any rules or parameters as to when you will take debt on such as the duration of payments, the interest rate, etc.?
There are many schools of thought on debt. Some in our culture look favorably on it in certain purposes and for certain items. Others abhor the use of debt at all.
As this is a very difficult subject matter, I can be sure of one thing as it relates to the creation of wealth; although there may be a few right ways to use debt correctly there a WHOLE lot of ways to use it incorrectly!
What is your relationship with credit card debt?
Not to recite the obvious but credit card debt is out of control at least in the United States and is seriously jeopardizing the ability of many people, especially younger people, of ever being able to become financially secure, let alone financially independent.
Do you carry a monthly balance on a credit card? Do you have multiple credit cards? Are you making the minimum monthly payment and only the minimum monthly payment each month? Do you know what the annual percentage rate is on all your cards?
If you have credit card debt that you are struggling to reduce or eliminate, do you know why?
Do you think it may be a combination of high interest rate and continued spending along with only being able to make the minimum monthly payment?
As I’m sure you are well aware of, having a high interest rate payment combined with continued spending and only being able to make the minimum monthly payment each month is one of the primary ingredients for financial destruction.
Being a Spender or a Saver
Much of our Money Mindset and the actions that we take with money are directed by whether we are a spender or a saver. To a high degree, our ability to keep money and manage it responsibly is driven by which category we find ourselves in.
Obviously, if we are a spender we will always be under a certain amount of financial pressure and will be more vulnerable in difficult financial times or quick retractions in the economy.
It goes without saying that it’s nearly impossible to save money if the minute it comes into our grasp it’s going out the other end on something that ‘we had to have’.
Chances are if we are a classic spender we also raise the probability of having other money problems in addition to lack of savings such as poor credit, due to missed payments, high outstanding credit card debt and the lack of an emergency fund.
Being a spender stems from underlying issues
In addition, being a spender usually stems from underlying issues and attitudes with money. In order to understand why we are a spender we need to ask ourselves some probing questions.
Why do you think you are a spender? Do you associate spending with relieving pain or filling some void? Is spending a behavior that you modeled from a parent or someone else when you grew up?
Do you think spending is a problem? Is there a pattern to your spending; Do you spend after a bad day? When experiencing high anxiety? When you are feeling low?
Now everyone of us needs to spend money every once in a while but the type of spending that we’re talking about here is the type that I would categorize as recreational or habitual spending.
The type of spending that leaves you with dozens of the same thing but in different colors. The type of spending that should have gotten your attention for a while yet you might not know how to stop.
What are your beliefs relative to how much money you are entitled to have?
To some degree, although spenders are accumulating ‘stuff’ while spending they are also making a statement that they may not be worthy having money.
This sounds counterintuitive because by spending they may be signaling that they value money but there’s a lot of academic research that suggests spenders actually have difficulty seeing themselves as being worthy to accumulate or have money so therefore ‘relieving themselves’ of money is the obvious solution.
So have you ever thought about how much money you are entitled to have?
Interestingly enough, your answer to whether you think of yourself as being entitled to have money may have EVERYTHING to do with how much money you are comfortable of having in your possession at any given time.
Strangely enough our attitude about how much money we think we should have creates the ‘thermostat’ as to how much money we think we deserve to have.
When the level of our ‘money thermostat’ is hit, we then tend to get uncomfortable and find ways to relieve ourselves of that excess money.
This money thermostat is a very powerful phenomenon and has a huge bearing in other areas of our Money Mindset. For the most part, we set an internal limit in our mind as to what we think we’re entitled to earn.
Think about it. How long have you been working and how much difference has your salary or hourly wage changed after you reached proficiency in your career? Perhaps 10%? Maybe a high of 20%?
Your wage will not change much over your career
For most of us once we reach maturity in our careers and trade we tend not to change more than 10% in the salary or wage that we earned when we first hit that level of maturity. Unfortunately, this self-limitation on the amount of money we earn tends to spill over into other areas of our money life and also sets the upper limit in all potential income earning opportunities.
In other words, since we’ve already hit the uppermost limit that we allow ourselves to earn, we tend to shut down our money making engine. In order for us to make more money, we have to reset our money making thermostat to a higher level.
What are your beliefs regarding people with money? Do you think that people with money somehow got their money by taking advantage of others? Perhaps less fortunate people?
Do you think that people who have money think that they’re better than others who don’t have money? Do you think that they’re greedy and only interested in themselves?
Conclusion
What you think about people with money matters
How you think about people with money sets the moral tenor of how you will respond to the acquisition of money in your life. If you think that having money will make you greedy, self-centered and lead you to take advantage of others you may make a subconscious decision to not want to have money because having money is a moral disconnect with who you think you are.
This poor and broad interpretation of what money does to someone’s core moral character may be a strong deterrent to ever getting it.
However, if you grew up observing people with money who were very generous and also the people in your community who continually gave to good causes, maybe you see people with money as being good and altruistic. This would give you an entirely different perspective of how you think people with money are as human beings.
What you think about money shapes your approach to earning and keeping money
Although this seems to be a trivial thing it’s actually one of the core beliefs that you will develop about money. If you don’t think money is worth having because it would require you to be less of a person, than you’re not going to be motivated to get money. In fact, to the contrary, you’ll work to make sure that you don’t ever hang onto money.
What do you think about people without money? Do you view people that don’t have money as somehow being more morally righteous because they work hard to make money but somehow it always eludes them?
How you see people without money is perhaps as strong a core belief as to what you think people with money are all about. Much of this is due in part to the fact that it forms a core belief of how you judge people.
If you believe somehow that people without money are somehow being taken advantage of by the system or those that have money, you’ll start to believe that you are being taken advantage of if you don’t have much money. This will further solidify your beliefs that people without money are destined to not have money in the future either because the game is always being rigged against them.
In order to even get to a point where you may have the chance to change your Money Mindset, it is crucial that you give these questions your honest assessment. Really think long and hard about each and every answer to each question.
Remember, this isn’t about judging yourself. Let past thoughts and past decisions be just that…things that are something to be left in the past.
