5 ways to develop a healthy financial mindset

It may be news to some that your bank account, credit score or serviceability are not the most important aspects of a healthy financial life. Many are surprised to learn that the rate of return or superannuation fund is also not the most significant. The most significant is your mindset, and it is the most malleable – which can be a great or bad thing, pending who you allow to influence your mindset.

Your mindset essentially refers to your thoughts, beliefs and visions around your capabilities and what’s possible. There’s lots of literature in the self-help world around growth and fixed mindset; essentially those people who are willing to learn to be and do more.

For those with a growth mindset, taking conscious control of your financial future can be exciting. Below are five tips to improve your growth mindset: 

1. Keep the main thing the main thing 

Align your dreams, goals, and actions- keep the main thing the main thing 

To make the most impact on your financial well-being, you have to prioritize thinking long-term, and by aligning your goals, dreams and actions you can ensure you keep important things a priority. 

It’s important to remember when you’re saving, it’s not for an indulgence for the next day- it’s for your retirement. Start with your dreams. What do you want? Whatever you can see in your mind’s eye you can hold in your hands (with a lot of effort, action and advice from the right professionals) but first, you must be able to see it for yourself. Start with your dreams and dream big. Seek help to make dreams into achievable goals, and learn the action steps needed to take them.  

2. Know yourself

Part of a healthy financial mindset involves being honest about who you are, and the only way to do this is to know yourself. Often this comes with age, and we can all be impulsive, emotional, messy human beings. Developing overly tight budgets that don’t allow for your occasional impulse can torpedo all of your efforts towards financial self-improvement and leave you feeling deprived and resentful. Feeling deprived can make you lash out and resent your efforts in impulsive ways, so treat yourself within reason. More importantly, know what your impulsive vices are and plan to reduce those in healthy ways while still giving yourself the occasional reward. Allow yourself to enjoy life while working towards financial wellness.

3. Don’t fall victim to lifestyle inflation

A very common phenomenon, lifestyle inflation refers to an increase in spending when an individual’s income goes up and it is a slippery slope. Given how common this is, it’s fair to say that it’s easy to fall victim to lifestyle inflation and indulge in the finer things in life. Unfortunately, engaging in lifestyle inflation makes promotions and raises moot in the long run. Resisting temptation can pay off tenfold and help us in increasing our wealth over the long term. Don’t fall victim to lifestyle inflation. 

4. Roll with the punches

The trajectory of financial success is never a straight line, as the saying goes, ‘blessed are the flexible for they never get bent out of shape’. Rolling with the punches is a critical attitude to build and keep a healthy financial mindset. Changing behaviours, investing, and trying to better your financial status all come with associated risks, and so you must be willing to experience a negative return, they do happen. Can you diversify and accept that your funds will be working for you in several different places? Accepting the constant presence of change and uncertainty and remaining self-assured that your strategy WILL work for you is essential for your mindset.

Market downturns do happen, and any type of action involves risk – staying flexible during this time is critical. Tusting in your strong strategy to weather market volatility is a cornerstone of a healthy financial mindset. 

5. Express Gratitude

Being thankful for what you currently have and for the future you are building will help immensely. It will help your general health but also your financial health because true appreciation has many benefits. True gratitude means celebrating others’ good fortunes and contributing to a better world through your self-improvement. Your most valuable asset is you, and you should be thankful for the commitment you are making to yourself and your life as you begin this journey towards a better financial life.

Want to learn more about effective money management principles and see how we improve our clients’ lives? Contact us to discuss how we can help you on your financial journey.

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