Whether you love it or hate it, money is something we all need.
But our own mentality and attitude towards money makes a massive difference for how we do in our finances.
Here’s a new and empowering way to look at money that will turn your financial life around.
1) The lesson behind wanting more
The majority of us would love to earn more money and enjoy financial freedom.
However it’s also easy to become stuck in a mentality of wanting more just for the sake of having more.
This is more of an ego-stroking activity than an actual pursuit of money, and if we put material gain above all else we risk having a bad life.
Your reputation, liberty and quality of life are never worth putting in danger just to get more when you already have enough.
That’s why the first of the key lessons from the psychology of money that will change how you think about money is to define what enough means for you.
Once you have that, do what you love and work as you want. Don’t push yourself to immense lengths just to get more that you don’t need!
2) Risk is the price of long-term gain
The second of the key lessons from the psychology of money that will change how you think about money is that risk is the price of long-term gain.
Every new business venture and great idea has an element of risk behind it.
Even building a housing development is a risk:
What if there is a natural disaster in five years or a fire burns down the buildings? What if there’s a robbery or crime spikes in the neighborhood, driving down prices?
Every new venture and money-making opportunity we have carries some element of risk.
Life itself is risk and making money is no different. Take the risk, reap the reward.
If you fail, dust yourself off and try again with lessons learned.
3) Improving your relationship with money
Many of us grew up with toxic ideas about money and wealth.
We were taught that money is very difficult to come by or had it associated with injustice, pain and evil.
Things like “love of money is the root of all evil,” from Biblical roots also continue to influence many.
But the truth is that money is not inherently good or bad. It’s a tool, and it’s all about how you use it.
Improving my own relationship with money has made a very big difference in my own financial life.
A big part of how I started changing my attitude about money started with watching the free prosperity masterclass from the renowned shaman Rudá Iandê.
Rudá presents many helpful tips about how to see money in a new way and begin attracting more of it to ourselves.
4) Understanding compound interest
Another of the crucial lessons from the psychology of money that will change how you think about money is understanding compound interest.
Looking around at those making more money than you and having businesses you look up to can be discouraging.
You may feel like you’ll never get there, or wonder what trick or scheme others used to get to such a great position.
The truth is that many more years of work, planning, frustrations and comebacks are behind most successes than we often imagine.
Compound interest is the success that comes from patience and sticking to something.
If you stick to your goals you can enjoy great success and wealth as well, but never expect it to happen overnight!
5) Accepting what’s out of your control
Next up in learning how to relate to money in a healthier way is accepting what’s out of your control.
Just as many emergencies and unforeseen events are unplanned and out of our control, it’s the same with the economy and money.
Many people in the financial and real estate sector didn’t see the 2008 subprime mortgage collapse coming, for example.
Others saw it and averted their eyes, hoping to profit short term before the whole ship sank.
The point is that if you’re investing or relying on the market in some way, you need to accept an element of risk and what’s out of your control.
6) Expecting the unexpected
This ties straight into the next point:
The only thing you can be sure of in the economy and with money is expecting the unexpected.
This includes unexpected expenses and crises that arise.
But it also means market movements and changes that you never thought would happen.
Always have some extra savings, and keep a cool head when others are panicking.
Sometimes having a steady hand is the best strategy of all.
7) Stop trying to star in someone else’s movie
Many of us get caught in the trap of buying as much as we can to “feel” rich or make others think we are.
Who cares about this…
Money is about you being able to live the life you want and build a successful future.
It isn’t about driving the hottest car so everyone on your street thinks “wow that lady is super rich.”
8) Avoid wasting money on unnecessary things
If you want to be wealthy and have a better relationship with money, stop wasting it.
The biggest hidden drains of money I’ve found are the following:
- Buying unnecessary clothing and shoes
- Buying subscriptions you don’t need online
- Eating out at restaurants too often due to being too lazy or busy to cook at home
If you make a conscious effort to start saving more of this money, your relationship with your finances will definitely improve.
9) Saving for the sake of saving
This brings us to saving…
As you stop spending as much on unnecessary things, you can also start saving.
Instead of saving for something specific, save for the sake of it.
Save because you can, and save because one day you are likely going to need some spending money.
If possible, put the savings in an account that earns at least a modest amount of interest and is safe from fluctuation.
10) Practice market long-termism
When it comes to investing, think long-term.
As someone who’s lost overall in the stock market, I know this advice to be true.
When you’re impatient and pull out money too often, you end up down.
Looking back several years later I was horrified to see many stocks I pulled out of at double or triple where they had been.
In fact, in one day of investing you’re at a 50% chance of being down. At one year you’re at a 66% chance of being up.
This rises to 88% after 10 years and 100% after 20 years.
Let your money sit, and resist the urge to day trade unless you’re actually a professional and have the right programs and equipment.
11) Everybody’s financial life is different
Take all advice with a grain of salt, even from experts and people you respect.
Everybody’s finances are different and what they want out of life depends on their situation and dreams.
Always make sure that you are making authentic decisions with your money that reflect the life you want.
The one caveat here is to try to prioritize saving:
If you can save some money from every paycheck you will undoubtedly be glad of that at some day in the future even if you don’t think you’ll need it right now.
12) Be skeptical about hype merchants and doomsday prophets
Much of the financial market thrives on doomsday prophets and alarmism as well as hype merchants.
Beware of really dramatic positive or negative language around the economy and investing.
This is often trying to sway your emotions or make you choose something that’s not in your best interests.
Make sure you do your due diligence before investing, making big purchases or deciding what to do with your money.
13) Be careful about confirmation bias
Confirmation bias is when we think something is true and then see evidence that it’s true as a result.
In a typical example from an internet search, if you search for “why pitbulls are bad” you’ll find a lot of horrifying stuff!
But if you search for “why pitbulls are actually sweet” you’ll find a lot of reassuring love for pitbulls and hear the other side of the story…
The same goes for monetary decisions and investing.
If you believe something strongly and only go looking for evidence to confirm what you believe, you’ll never open up to new opportunities and ventures.
14) Don’t lock yourself into a future you don’t want
Working hard for many years is admirable, and often we have obligations to others that also keep us at a job.
But whenever possible, don’t lock yourself into a future you don’t want.
Consider your goal with money to be using money to find freedom and be able to build a better life.
Never stay miserable for your whole life just to get money:
Once you’re able to enjoy it you’ll already be near the end!
Building financial freedom
Focus on building financial freedom in your life.
True wealth is measured in freedom and your ability to build the life you dream of for yourself and those you love.
The biggest switch in your psychology of money and how you approach wealth comes when you see money as empowering instead of oppressive.
To do this, it’s necessary to start changing how we think about money and use it so that it becomes our friend instead of our foe.