A very common perspective about finances is that they are dependent on one’s income and spending patterns. This may be true, however, there is another factor which greatly impacts your financial health which is your financial mindset or what is more popularly known as Money Mindset. This term refers to one’s outlook regarding money and all matters related to it. Everyone might have a different money mindset from each other based mostly on their education and cultural values. Below are some of the psychological factors that might affect your financial matters that you may be able to identify.
Beliefs around Money
Your financial behavior is mainly molded by your beliefs regarding finances. For instance, some people think that money can’t buy happiness and will not give much importance to acquiring much wealth in their life and would focus on other experiences in life, letting some opportunities pass by. On the contrary, the people who believe that money is the basis of quality will spend most of their days planning finances and coming up with ways to be more financially secure.
The way you spend is likely to impact your finances greatly. People who don’t like to spend money do not find it hard to stay in budget in comparison to those who spend impulsively and are always lagging behind their financial goals. Some people strike a balance between being one of the two kinds and plan their finances to prioritize what they really want e.g., travel, buy a house or education.
How you perceive Wealth
Your perception of wealth plays a major role in defining your financial health in the pattern of spending. There are people who take wealth as a status symbol and a way to gauge success and happiness. Such a group will spend above and beyond their means to prove the point, even if they have to take loans for the purpose.
How you perceive Debt
Your idea towards debt is one of the influencing factors when it comes to your financial situation. If being in debt is a non-acceptable situation for you, you’d be likely to spend carefully as you wouldn’t have an option to borrow. However, if you don’t mind being in debt, you’ll frequently find yourself messed up in interest rates and repayment of installments.
Importance of Financial Security
Your financial planning will mostly work around how important you think financial security is for you. Your need for a financial cushion will drive you to save up and have a specific amount on your reserves. However, if financial security seems like a distant dream to you, chances are you will not even make an effort to achieve it and save up for it.
Importance of Investing
Your financial future is based on the importance you give to making investments. Being scared of losing money and not taking a risk might save you from financial losses but it will also keep you away from coming across some good opportunities of gaining returns on the investments. Your fear of investments will never let you benefit from stock market shifts and other breaks that you might get otherwise.
Mindset towards your Income
The structure of your finances is dependent on your income and the activities that you are willing to undertake to improve it. If you become negative about your income and believe that it’s going to remain that way; you will probably ignore the opportunities that you might come across, such as career advancements or secondary jobs.
Importance of Financial Goals
The way you look at your financial goals directly influences your effort to fulfill them. Slacking in your efforts and seeing your goals as unattainable will leave you unsatisfied with your financial situation. However, if you stick to the plan to reach your financial goals and take all the necessary steps, there are high chances that you will be able to improve your financial condition with time.
Mindset towards Giving
If you are a giver, your finances are likely to be impacted by this. Your perspective towards charity can play a major role to shape your finances for current times as well as the future. If you believe in charity, it is recommended to plan the amount you want to give away and incorporate that in your plan instead of giving without any financial planning.
Importance of an Opportunity
They say you’ll only find what you’re looking for. Likewise, if you’re looking for an opportunity, you’ll either be coming across many or you’ll be able to create them. However, if financial growth is not your focus, you will miss out on your chances of financial gains from investment or business advancements. The way you look at an opportunity makes all the difference in how you deal with it to your advantage.
Financial education is a relatively new concept but people seem to be invested in it as it brings them lifelong knowledge to gain returns from various financial situations. Financial education increases one’s knowledge of how to plan a financial structure and identify opportunities which might be beneficial in the future. However, if one thinks they do not need any financial education and are better off on their own, they might have to face certain drawbacks later.
Perspective towards Work
The work you do is directly related to your income, thus, your financial planning. If you are willing to do any kind of work to build up on your finances, including the off jobs; then chances are you will build up on your wealth faster in comparison to someone who thinks otherwise. If you let certain career opportunities go and consider them inferior, your accumulation of wealth will be slower comparatively.
Importance of Material Possessions
Your financial health is also impacted by the weightage you give to owning material possessions. If you give more importance to owning luxury items like expensive cars and high value properties then you are likely to exceed your budget every now and then. To avoid such a situation, it is suggested that you focus more on savings than investing in things that do not earn you any gains.
The mentioned factors can influence the way you plan and execute your financial patterns. If you identify certain aspects in your own mindset, it becomes easier to get over them and adhere to a healthier financial mindset.