In the quest for financial stability and success, we often focus on tangible elements like earning more money, saving diligently, or investing wisely.
But have you ever stopped to consider the role your mind, or more specifically, your financial mindset, plays in achieving your financial goals?
Understanding your financial mindset
Your financial mindset is a set of beliefs and attitudes you hold about money — how you earn it, save it, spend it, and invest it. This mindset largely influences your financial behaviours, habits, decisions and, ultimately, your financial success.
Each mindset carries a unique perspective on money and influences your financial decision-making process.
There are four common financial mindsets:
- The Spender enjoys the thrill of the present and often overlooks long-term financial security for immediate gratification. They don’t keep up with the Joneses, they are the Joneses. If you frequently find yourself making impulsive purchases, you may identify with this mindset. They also often take big risks when investing.
- The Saver is the opposite of the Spender. Characterised by frugality and a steady focus on long-term financial security. If you diligently maintain a budget, feel a sense of accomplishment when growing your savings, and don’t take big risks with your investments, the Saver mindset most likely resonates with you.
- The Avoider often spend more than they earn, not to make a statement, but simply because they don’t take the time to keep tabs on their financial comings and goings. They are often plagued by financial anxiety and tend to shy away from money matters. If you find bills and bank statements overwhelming or frequently procrastinate financial planning, you likely have an Avoider mindset.
- The Investor sees money as a tool for wealth creation. If you appreciate the potential of assets and are willing to take calculated risks for future returns, you are most likely aligned with the Investor mindset.
Identifying Your Current Financial Mindset
So how do you uncover your financial mindset? It begins with self-reflection –
- Do you often worry about money, or do you feel confident about your financial situation?
- Are you comfortable taking calculated financial risks, or does the thought of investing scare you?
- Do you view money as a tool for achieving your dreams or a necessary evil to be managed?
Examining your feelings and behaviours around money can provide valuable insights into your current financial mindset. This process is beneficial because it sets the stage for potential shifts in perspective that can improve your financial life.
Once identified, you can analyse your money behaviours, uncover potential blind spots, and take action to optimise your financial decision-making. For instance –
- If you identify as a Spender, incorporating a budget and automating savings can balance your financial outlook.
- Savers could benefit by introducing an element of investment to their financial strategy, allowing their savings to work harder for them.
- Avoiders must confront their fears and actively engage with their finances, perhaps by seeking professional guidance.
- While Investors generally have a positive approach, ensuring a diversified portfolio that reflects your appetite for risk is essential. Having a professional financial adviser by your side will help empower your success.
Transforming your financial mindset requires commitment, patience, and time. Take it slow and make gradual changes as you grow more comfortable with your changing perspective on money.
It’s not just about money; it’s about your attitude towards it. Adjusting your financial mindset means transforming how you see money and engage with it, paving the path to financial success.
Remember, the journey to financial success starts in your mind!
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
