Why It’s Important to Address Your Money Mindset

If you’re looking to improve your finances, it’s common to want to jump headfirst into the “how.” We know there’s a problem. Now we just want to know how to fix it. What we fail to realize is that our money mindset — what we think, feel, and say about our finances — affects our ability to make and see significant change.

Often we start making adjustments regarding our finances only to eventually (or sometimes immediately) find ourselves right back where we started—or worse—a couple of steps behind where we were. Why? Because we worked on the “how” before we addressed what brought us to where we are. If you’ve ever paid down a credit card only to see the balance skyrocket again, then you can relate. You might have had the desire to lower what you owed, but you didn’t solve what led you to rack up charges in the first place.

In essence, we change what we’re doing without changing our attitude towards money. Unfortunately, this can result in years of walking in a financial circle—doing the same things over and over again, and going nowhere. This is why focusing on your money mindset is as important—if not more—than the practical steps needed to get out of your financial mess.

Steps to Addressing Your Money Mindset

Identify Your Why

Have you ever wondered how marathoners are able to accomplish the grueling and impressive task of running almost 30 miles (26.2 to be exact)?

The answer is motivation. There is a specific reason fueling their choice. It could be an internal one, or it could be driven by an external source. Either way, no marathoner randomly or lightly decides to put their body and mind through the rigorous task of running 26.2 miles. There is motivation—a “why”—behind what they’re doing, and when their bodies start to give up, they draw on that “why” to help keep them going.

The same goes for your financial journey. It is necessary to have a defined “why” behind wanting to improve your finances. What’s the motivation causing you to want change in your situation? What is the specific reason that will keep you going when things get difficult? It could be wanting to be in a position to be generous with your resources, or aiming to manage your finances in a way that is a positive model for your children, or planning to retire early—or any number of things.

Bottom line? Before you can begin to work towards something and achieve it, you need to define it. Once you do, you’ll have the motivation necessary to endure any sacrifice or challenge you may encounter on your journey. Without a clear “why ” it will be easy to give in and give up.

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Prioritize Your Values

One thing that is easy to overlook is if how we manage our money lines up with what is important to us. You are probably familiar with the term buyer’s remorse—the regret you get after plunking down your money. We tend to associate buyer’s remorse with big purchases like a home or a car. But, it can kick in at any price point. That feeling—the regret we experience—has a lot to do with spending our money outside of what we value. It happens when our “why,” which we just covered, is not established or is not driving our decisions.

How do you know if the way you handle your money does not reflect your values? Do an informal audit of where your money is going. You may have heard of a time audit where you record how you spend your time during a 24-hour period or even a couple of days and compare it to what is important to you. Do the same with your money. Write down several things that you value. It could be spending time with your children, personal development, travel, etc., — whatever you consider important in your life.

Now, evaluate the last three months of your spending by looking at credit card and bank statements and your checkbook. Would you say that what you spend your money on reflects what you value? If you value lasting experiences, but you spend a lot of your money on clothing and other material items, you are spending outside of what you value. If you value travel, but not a dime has gone towards travel in the last year, you are spending outside of what you value. This is extremely easy to do when we’re not intentional.

When you know what’s important to you — when you have identified your values — you have automatic boundaries for your spending and how you handle your money.

Watch Your Mouth

An incredibly powerful contributor to your money mindset is what you choose to say and think about your financial situation.

Our language and our thoughts have tremendous power over our actions. If you think negatively about where you are financially, (e.g., I am never going to be able to turn things around. I’m always going to be stuck in this mess, etc.,) then you are pretty much sealing your fate with those thoughts and words.

On the other hand, if you choose to surround your financial situation with a positive attitude, thoughts, and language, your actions will follow suit.

Alexandre Dumas said, “A person who doubts himself is like a man who would enlist in the ranks of his enemies and bear arms against himself. He makes his failures certain by himself being the first person to be convinced of it.”

We guarantee our failure or our success by what we think and say.

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Accomplish Your Goals by Addressing Your Money Mindset

Working on your money mindset may not seem sexy. After all, we want to take tangible action. Plans and specific action are important and 100% necessary, of course, but if you haven’t established your all important “why,” prioritized your values, and addressed your thoughts and words, the practical steps you take will not be effective.

Your money mindset will either fuel your efforts or thwart them. So, no matter what you’re trying to accomplish, whether it’s paying off debt, retiring early, or saving for a down payment on a home, increase your chances of realizing your goals by addressing your money mindset.

Have you overcome a poor money mindset? How has that changed your financial situation?