The way we feel about money may have a big impact on our overall financial health. A positive outlook on money tends to make us more conscious savers and spenders, while a negative one can lead to harmful money habits.
"Your mindset predicts your income, net worth, financial behaviors, and debt levels," says Brad Klontz, a certified financial planner who founded the Financial Psychology Institute. Optimists are almost seven times more likely to exhibit better financial health than pessimists, according to recent research conducted by Frost Bank, for example.
Our core beliefs around money inform our behavior—and our behavior shapes our financial decisions.
"If you want to do well with money, it's actually pretty simple: Save for the future and don't spend more than you make. But those are the two areas that people get in the most trouble over," says Klontz. "So why aren't we taking better care of ourselves? The answer is mindset."
The money mindset Klontz says is associated with strong financial health and higher net worth is called “money vigilance.” It assumes you have the right amount of financial anxiety—enough to keep you motivated, but not so much that you're stressed out.
"It's understanding that it's important to save for a rainy day, or feeling like you'd be a nervous wreck if you didn't have money saved for an emergency," says Klontz, adding that many wealthy people have and benefit from that mindset.
This money mindset goes hand in hand with financial literacy. Education helps build confidence and awareness, which in turn can help you feel empowered to handle your finances.
Here are three of the most common money mindsets that Klontz says can be bad for your financial health:
A lot our beliefs around money, Klontz says, are subconscious. The act of bringing awareness to your beliefs can jump-start change.
First, Klontz suggests asking yourself where your money beliefs came from. What did your parents teach you about money, and what was it like for them growing up in terms of their socioeconomic status? What were your family’s finances like when you were growing up? These aren't small questions—and thinking about the answers can help you better understand and change your relationship with money.
"Those experiences and messages directly link with the story you make up in your head around what money is, how it should be used, and what it means," says Klontz.
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