I’m going to say something a bit outrageous: you can actually think your way to a better financial situation.
Money is more about psychology than numbers. Your beliefs and ideas about money directly influence your financial decisions, and therefore your financial results.
I know this because a few years ago, I started a financial education platform to help people take control of their finances. I worked with financial professionals to pull together our Mastering Money program.
One of our ‘secret ingredients’ that unlocks huge change for our students (and can for you too) is helping them become aware of, and consciously reshape, their beliefs about money.
Today, I’m sharing three mindset shifts that can help you change your financial situation.
1. It’s not about spending 'less', it’s about spending 'well'
Many people who love spending money hate being told to spend less. Yet, what does all the financial advice out there tell you to do? Spend less.
This can be particularly hard to stomach if you grew up with parents who couldn’t afford, or didn’t allow you to spend money. You may have grown up waiting for the day you could spend your own money, only to be told by society that you’re being “irresponsible” if you spend it.
So, stop trying to spend less. Instead, focus on spending well.
Spending well means you are clear on what your priorities are and you spend accordingly.
For example, imagine that every week you get a limited supply of water and it has to last the whole week. You’re going to prioritise how you spend that water, right? It’s important that you have drinking water. Does the car need a wash? That can probably wait.
With money, most people are not clear on their priorities so it just gets spent anywhere. When you are clear on your priorities, you can allocate spending towards things that are actually important to you.
You can also identify ‘low-value spending’ (things that don’t give you much value). It’s easier to eliminate low-value spending without feeling deprived because you won’t really miss it!
This mindset shift has transformed many of our students from ‘spenders’ into ‘savers’.
Sara is a great example. She went from being a broke ‘spender’ to accumulating $80K, and a big part of that was changing her mindset about spending.
2. Earning money is great; managing it is crucial
Many people think: "I’ll care about my finances when I have money to care about."
The reality is: "I’ll have money to care about when I start caring about my finances."
Something I hear a fair bit is: “I got a promotion, I was earning more money and I was still struggling.”
It’s easy to fall into the trap of thinking that if you just earned more money, it would solve all your money problems. Yes, earning more can definitely help, so if you can do it, do it.
However, don’t put all your eggs in that basket because financial success requires two parts: earning money and managing it. Even if you earn a lot, if you never learn to manage it, it’s really hard to achieve financial security (just look at the many bankrupt lottery winners).
The majority of our students who turn their financial life around, started doing so on the same income they had when they started with us.
Their income didn’t change, their ability to manage it did. So, start today with what you have.
3. Getting on top of your finances is hard; not being on top of them is even harder
Have you ever walked the long way around the office floor to avoid an awkward conversation? Or put up with a mild but persistent toothache to avoid going to the dentist?
We’ve all done it. You put up with what you feel is a ‘lesser’ pain to avoid a ‘bigger’ pain.
Humans will go to great lengths to avoid things we think are painful.
So if you think fixing your finances seems painful, hard, complicated, guess what you’re going to avoid? Your finances.
I’ve noticed that many of our students who make real change do so because the pain of their current situation is greater than the pain of doing the work to fix it. They’ve got to the point of: “I’m not living like this anymore. I want better, and I’m willing to do what it takes to get there.”
See, there isn’t an ‘easy’ option. Facing your finances may not be ‘easy’ but is living with financial anxiety easy? Is putting up with the nagging voice of: “I should figure this out, I don’t understand what I’m doing, I feel so lost” easy?
Many people have ‘numbed’ themselves to the pain of their financial situation. It feels ‘easier’ to pretend it’s not that bad than to admit it’s not working, because that would be embarrassing and then we’d have to do the work of fixing it.
As hard as it may be, there’s enormous power in becoming fully present to how much financial discomfort you’re in because that ‘pain’ will drive you to take action.
Once you start taking action, don’t be surprised if your life starts to change.
Paridhi Jain is the founder of SkilledSmart, an independent financial education platform helping adults learn to save and invest their money. For more money tips, you can get a free e-book on 5 Money Mistakes Costing You Thousands via their website, and follow them on instagram.