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Transform your money mindset

SUNDAY MAGAZINE
By Pauline Muindi | November 22nd 2020

Each person has a money mindset — a set of beliefs and attitudes regarding money. Whether you know it or not, your money mindset drives your spending, saving and handling money.

Your money mindset can have a big impact on your ability to achieve financial goals.

If you have a positive money mindset, you’re more likely to make decisions that take you to financial freedom. On the other hand, a negative money mindset breeds detrimental financial decisions. A negative mindset usually stems from emotions such as fear, defeatism, and procrastination.

People with negative money mindsets also have scarcity mentality. They hold beliefs such as “you can’t survive in today’s economy without debt” or “money is the root of all evil” and “rich people are evil”. Many people with such a mindset also believe that financial freedom is for a select few, which doesn’t include them.

They believe that they will always live pay cheque to pay cheque and trying to change that won’t work.

People tend to learn their money mindset from their family as they grow up. It’s not surprising, therefore, that many people have the same money mindsets as their parents.

However, some people might consciously decide not to follow their parents’ money mindset, especially when it was harmful.

Fortunately, changing your scarcity mindset to one of abundance is not difficult if you’re determined and disciplined. Here are some tips to help you shift from a negative money mindset to a positive one:

Let go of the past

If you grew up poor, you might have developed a mindset that living from pay cheque to pay cheque is OK and normal. You might believe that financial freedom is an unattainable goal for you and that you will always be in debt, no matter how hard you try. You might even believe that debt is a necessary part of modern society.

To have a good understanding of the money mindset, take pen and paper and write down the beliefs your parents passed to you about money. What did you see or hear about money when growing up? What things did your parents do with money that you want to replicate? What would you like to do differently compared to your parent?

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Whatever your parents’ money mindset or reality was, it doesn’t have to be yours. You can stop living pay cheque to pay cheque, pay off your debts, and learn how to save and invest for a better future. There are many people who have achieved those goals…and if you put in the work, so can you!

Focus on the future

Part of letting go of your past is focusing on the future. Thing about the financial goals you want to achieve such as building an emergency fund, getting out of debt, building your own house, saving for retirement and so on.

It is advisable to sit down with pen and paper and write down all your financial goals. After that, map out a plan of action to achieve your goals. Remember, your goals should always be SMART (specific, measurable, achievable, realistic and timely).

Break down your goals into bite-size steps you can work on every month. For example, you can decide to set a certain percentage of your income to pay off debts each month. Or you can set a percentage to go into your savings account for your long-term goals.

A budget is a helpful tool to achieve your goals. If you’re a beginner, start with a zero-based budget — which means you allocate your income down to nothing on paper.

Wait, shouldn’t you leave some little buffer money for “miscellaneous” expenses? Not if you are battling bad money habits! That money is safer when allocated to a specific category such as emergency fund. If you leave it lying around, it’s almost certain you’ll end up spending it.

Read books about money

Many people with negative money mindsets never take the time to understand money. To change your mindset, make time to educate yourself about money. Look out for books that especially delve into the psychology of money and developing positive financial habits.

Don’t read Rich Dad Poor Dad and call it a day. To challenge and engage your brain further, actively seek out highly-recommended personal finance books.

To kickstart your library, look for these books: Thinking, Fast and Slow by Nobel Laureate in Economics Daniel Kahneman, Switch On Your Brain by Caroline Leaf, Dollars and Sense by Dan Ariely, and The Total Money Makeover by Dave Ramsey.

If you’re worried about the cost of buying books, go for e-books. If you don’t like reading or are pressed for time, you can opt for audio books or book summaries from an app such as Blinkist or BookNotes. You don’t have an excuse to not expand your money knowledge and shift your mindset.

Practice gratitude and contentment

While it is important to aim for more, don’t forget to be grateful and contended with what you already have. This might seem counterintuitive at first. But to shift your mindset from scarcity to abundance. This will help quell the desire to spend your hard-earned status symbols that leave you in debt.

Operating from a place of contentment will also help you avoid get-rich-quick schemes where millions of people have lost money. You’ll be in a good place to plan your long term goals, make sound financial decisions, and achieve financial freedom.

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