Understanding Your Money Mindset
Understanding Your Money Mindset
Have you ever checked the Nutrition Facts label on your favorite prepackaged snack only to find out it wasn’t nearly as healthy as you thought it was? Odds are, you wound up buying it anyway.
Here’s another hard fact: 74% of American adults are overweight or obese. The government has mandated nutritional labels for years, especially for prepackaged food and on restaurant menus. They assumed, if consumers knew how unhealthy their food was, they’d make healthier choices. In reality, reports consistently show that the availability of nutritional information decreased overall calorie consumption by a measly 1.8% despite the majority of Americans regularly consulting nutritional labels. It’s easy to see that knowledge isn’t the only thing powering our decision making.
The same is true for money. Just as our eating habits are often motivated by emotional cues, our biases and underlying emotions (like anxiety, fear, or shame) can influence our day-to-day financial choices. Being “financially literate” isn’t enough. That’s where your money mindset comes in.
What is my money mindset?
Your money mindset is more than just what you know about finance – it’s also how you feel towards money. Your money mindset can be influenced by your upbringing, past experiences, and emotional triggers, directly shaping how you save, spend, or invest.
Why should I care about it?
A recent Gallup poll found that 70% of purchases were driven by emotion, and Gallup even recommended that businesses prioritize the emotional experiences of their customers. If advertisers and businesses are paying attention to how you feel about money, you may want to think about it, too.
How does understanding my money mindset help me?
Whether you struggle with impulse spending or you anxiously avoid looking at your accounts, simply “budgeting better” won’t help unless you address the feelings behind the actions. If you want to understand how your emotions could be impacting your financial choices, here’s a few ways to get started:
Practice mindfulness.
Notice how you feel the next time you impulsively reach for your credit card. Ask yourself: How am I feeling right now? Where am I feeling that in my body? It can be helpful to look at an emotion wheel if you’re having trouble. Identifying what you’re feeling is the first step to understanding why you may be feeling that way.
Learn to self-regulate.
Everyone self-regulates differently, but these ideas may help:
- Develop a “replacement” coping skill. Reach out to a friend, go for a walk, or get creative instead of opting for retail therapy.
- Track your emotional triggers. When you feel tempted to overspend or buy on impulse, take a moment to write down what happened and how you felt about it. You may notice a pattern emerge.
- Avoid financial “doomscrolling.” Even positive financial habits (like monitoring your accounts) can damage your mental health if they become an obsession. They could even lead to a fear-based, rushed decision down the road.
Include emotions in your financial plan.
Accounting for emotional “fun” money in your financial plans allows you to have a rough day without wrecking your budget.
Your Turn: How have your emotions impacted your relationship with money? What does your money mindset feel like? Share your experience with us!
