People often think that managing personal finances boils down to saving money whenever possible and minimizing spending, but this is a very simplistic point of view. In reality, one’s financial wellbeing is more about mindset than actions. While actions are what get people out of debt and boost their savings, individuals need to take the time to step back and reflect critically on how they think about money. How people handle their money is a learned behavior, and with work individuals can retrain how they think about their finances to put them in a better situation. Taking the time to do this makes spending less and saving more a natural process that is much less painful. Some strategies for reframing your financial mindset include the following:
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Let go of past financial mistakes.
Everyone has made financial mistakes. The important thing is to learn from them and keep moving forward. When people let themselves get distracted by the past, they can get caught in a circle of negativity with no ultimate benefit. In the end, individuals cannot change what they have done. They can only begin to create new, better habits for the future. Reflecting on past mistakes is a great way to figure out why people made the choices that they did, but then they need to move on by thinking about the changes they can make here and now.
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Avoid the urge to compare.
People tend to think that the individuals around them are in better financial shape than they actually are. However, it is impossible to know whether others actually have their finances in order or are merely comfortable going into debt to get what they want. When people see their friends and neighbors buying new cars or taking expensive trips, they need to resist the urge to feel bad that they cannot do the same. These individuals have may have made great sacrifices to create substantial savings. Instead of feeling bad about things they can’t have, people should use other people’s success to propel them toward similar goals. Everyone has a different financial path with varying personal obligations, which makes comparison impossible. Instead, individuals need to focus on their own situation.
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Keep everything as simple as possible.
People sometimes avoid thinking about their personal finances because the whole process seems so complicated. In reality, though, everyone is in control of their money, and things only become complicated when people let them. Individuals can simplify finances in a way that works for them. Not everyone needs extensive Excel spreadsheets. In fact, many people do better using a small notebook to write down how much money comes in and how much goes out so that they can start to see where they can cut corners. Another way to simplify one’s finances is to automate everything, from bills to deposits into a savings account or retirement fund.
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Figure out what appeals to you.
For a large number of people, the topic of personal finance is boring. But saving can become much more interesting when individuals make it relevant to themselves. People should take the time to explore what options are available and what seems interesting, especially in terms of investing. When people get excited about what they do with their money, they become more vested in what happens to it and begin making better decisions. For some individuals, this may mean investing in a company that creates their favorite products. For others, simply moving to a credit union instead of a bank makes them feel more connected to their accounts.
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Build space in the budget for rewards.
Everyone needs rewards to keep motivated. However, when people do not plan for rewards, they can act impulsively and spend outside of their budgets. For this reason, it is important to set aside money for rewards. People should splurge on the things that bring them the most joy and celebrate savings milestones. It is also worth noting that some rewards, such as a staycation, a camping trip, or even a relaxing bath, are not costly at all.
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Take everything one step at a time.
Thinking about the end goal can provide motivation, but when individuals focus solely on that one thing they can begin to have unrealistic expectations. If people feel like they are not making strides toward their goals, they can start to feel deflated and stop caring about how they spend. To avoid this issue, individuals need to set small, achievable goals that take them on the right direction toward their ultimate aims. That way, people can see how far they have come. Getting out of debt takes a long time, as does building a decent savings. By taking it one debt or savings goal at a time, individuals can see real, meaningful progress.
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Build confidence through education.
Everyone is the manager of their own financial situation. Just as someone would not walk blindly into a management position, individuals should not throw themselves haphazardly into financial decisions. While people do not need to become financial authorities, they should spend a little bit of time learning about the decisions they face, whether this means seeking advice from friends, taking a class, or simply reading a blog. Education brings confidence that can completely change the ways in which people think about their personal financial health and its potential.