Yes, you can change your money mindset for the better

Are your finances at the mercy of a bad ‘money mindset’? Good news – it’s possible to change your thinking and set up a lifetime of rewarding habits. Our experts tell you how.

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Ever wondered why you keep buying things you don’t need with money you don’t have? Why you can’t seem to save even though you’re earning a decent wage? Or why you’ve just never got around to investing, despite your rational brain saying it’s the sensible thing to do?

If this is you, or someone you know, it’s likely that your (or their) ‘money mindset’ is at play. 

Your money mindset is, quite simply, how you approach and think about money and financial matters. It is a product of the money mindsets you were exposed to early in life and, to a lesser extent, other influences like extended family, friends and perhaps even your first employer.

There are many different ways to approach money mindsets – for example, positive and negative, healthy or unhealthy, or scarcity and abundance. 

We asked two experts – financial planner Michelle Stone, who deals every day with people making financial decisions, and behavioural economist and psychologist Phil Slade – for their views on how to foster a healthier approach to your money mindset. 

How does a money mindset form? 

“It’s very simple how it comes into being,” says Stone, founder of Feel Good Financial Planning.

“Although it’s multi-layered, it’s the family you’re born into [who] give you your ‘normal’ of what money is.”

“And the potential for that is that you either agree and conform with it – or you disagree with it if it’s painful. In that case, you may seek to do the opposite.”

“If your parents were constantly worried about money,” Stone adds, “the chances are they will instil that fear in you. The alternative is you become the exact reverse – that is, a spendthrift, as you rebel against what you found to be a stifling approach.” 

Where do you belong? 

In Slade’s view, when it comes to money mindsets there are three main world views: groupies, authoritarians and purists. 

“From a money perspective, looking at these world views is really interesting,” the founder of decision-making firm Decida says.

As the names suggest, groupies like getting on with the group and believe they are stronger together. Authoritarians like to take the lead and don’t see control as an issue, and purists are about ideals and what they believe is the right thing to do.

Slade explains how that looks in practice. A groupie will want to spend on something that will make them look good to the group, an authoritarian will look at the data and find the best bang for their buck, while a puritan will spend money on, or invest in, something that matches their ideals. 

This ‘world view’ approach is more likely to predict how someone will act in the future when it comes to financial decisions, and looks at an individual’s motivations for the particular decisions they make. 

Can you change your mindset?

When it comes to changing or moving beyond your current money mindset, Slade and Stone have similar ideas. They both say it can be very difficult to shift a mindset, but it is possible to work with them.

Stone says recognising your particular money mindset “box conditioning” is the first step in moving towards a healthier mindset. 

“You change it by bringing awareness to your beliefs,” she says. 

“Once you accept what your programming is, you put down what your goal is and then you work with someone who can help you achieve that goal, taking into account your strengths and weaknesses.”

Stone says that people need to understand that the journey is hard, but if they really want to adjust their money mindset, they need to do the work. And that work involves setting goals and mapping out paths to achieve those goals – there is no magic bullet. 

Slade points out that the important thing about money mindsets is that they’re all based around emotional activity. So, as Stone suggests, if you can recognise and understand how you emotionally react to financial situations, you can start removing some of your blind spots. 

“One of the things to counter this, no matter what your money mindset is, is to try to de-intensify your spending behaviours [and] take the emotion out of it,” Slade says.

“If you can start to look at your emotionally reactive side, you can start understanding where some of the blind spots are, and why, and just slow the process down a little bit.”

For example, people who have recognised they have an unhealthy money mindset that prevents them from saving could set up a regular direct debit into a savings account. By doing so, they have taken the emotion out of individual savings decisions. 

A series of seemingly small actions like this can begin to create new neural pathways, putting you on the right track to a much more positive money mindset. As our experts say, it won’t happen overnight, but it will happen.

Your 4 money mindset takeaways:
  • Identify your money mindset patterns
  • Recognise those patterns are learned – and can be changed
  • Set financial goals to create the changes you want
  • Take the small steps to reach those goals

Important information
This document has been prepared by IOOF Investment Management Limited (IIML) ABN 53 006 695 021, AFS Licence No. 230524 as Trustee of the IOOF Portfolio Service Superannuation Fund ABN 70 815 369 818 (Fund). IOOF Employer Super is a Division of the Fund. IIML is part of the Insignia Financial Group of Companies, consisting of Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate. This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Please obtain and consider the PDS before making any decision about whether to acquire a financial product. Information is current at the date of issue and may change.