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As I’ve become better with managing money and more aware of my money mindset, I’ve become more observant to the differences in daily money habits and personality traits of successful, wealthy people compared to poor people.
Money is something that isn’t often talked about so it’s hard to gauge what ‘good money management’ is or what a good savings rate is. It’s easy to want to have nice clothes and bags, buy $20 cocktails or bottles of champagne but ignore your future needs. I would still be spending $10,000 a year on take-away and cocktails if it weren’t for the personal finance blogging community waking me up to my financial hole I created for myself.
How we think about money is the beginning of building a healthy relationship with money. It is our attitude and emotional relationship with money which impacts how we each handle it and the direction that it takes us on our financial journey. Just like our core values, a money mindset creates the foundations that we build our financial future on.
So how can you radically change your money mindset and build wealth?
ONE: DIG DEEP INTO THE TRENCHES OF YOUR TRANSACTIONS
First step is to understand where your money is going. Take the last 3 months worth of bank statements and go through each transaction line by line. Categorise these into specific spending groups such as groceries, take-away food, public transport, cocktail bars/pubs. Read Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money (the financial independence bible) over and over again until it’s burned into your memory.
TWO: TAKE FULL RESPONSIBILITY FOR YOUR MONEY DECISIONS
The second step is to take FULL responsibility of all your past, current and future financial decisions. Missed credit card payments, feel stressed when bills arrive, blown your whole paycheque but have nothing to show for it? It’s easy to throw money away and wander into debt but it’s a marathon to get out of it. Rich people are rich because of their money decisions and poor people are poor because of their money decisions. Think about that for a minute. Let me drill that in: Rich people are rich because of their money decisions and poor people are poor because of their money decisions.
Taking responsibility means acknowledging that each decision was made by you consciously and knowingly. No one put a gun to your head as you swiped your card for another bottle of champagne or the $10 take-away lunch 4 times a week. Playing the victim perpetuates the problem, even if that problem is you. Blaming economic times, lack of government support, big corporate, inadequate university systems, growing up in a religious cult and overpriced housing are excuses that shift responsibility from you to someone else, feeding an excuse to be inactive instead of proactive.
I have easily in the past blamed many of those above reasons why I have negative net worth today, however the only real reason is because I’ve prioritised lifestyle and short-term gratification over repaying debt and building a future. You’ll only hurt yourself by playing the victim and pointing the blame to others, so accept the facts, be kind to yourself and build goals to work towards.
THREE: MAKE GRAND MONEY GOALS AND THEN CUT THEM IN HALF
This sounds a little counter-intuitive but the best intentions and biggest master plans can lead to disappointment and demotivation if they’re unattainable and unrealistic. It’s better to make a goal to save $200 a month and achieve it than aim for $1000 a month and fail by $5. Set small baby step money goals to slowly train your mind and change your habits and the more small milestones you achieve the more you’ll want to achieve.
FOUR: EDUCATE YO’SELF
Education is the key to having a stronger money mindset, building wealth and creating a prosperous financial future. By education, I don’t mean a formal education. I’m referring to having the curiosity and interest in your financial freedom and investing the time to feed your mind. Education is easily accessible and free so there is no reason why you can’t further educate yourself and avoid student debt or high university/college fees. Whether it is through Google, Youtube, the personal finance community, podcasts or books, education is the golden ticket to a higher salary, better investments and a healthier relationship with your mind and money.
Do you agree or disagree? What is your advice to changing your money mindset and building wealth?
xx Miss Piggy
Cover illustration by Kelly Beeman