Forget New Year's resolutions: the secret to financial success starts with your mindset.Jan 02, 2020
New Year’s resolutions offer a fresh start. Entering a new decade is exciting and full of unlimited potential, but it can also be overwhelming, especially if you’ve created financial goals that may look good on paper, but could be difficult to achieve without the right support system in place.
According to Scranton University, only 8% of people who set goals achieve them. This seems like an extremely low number, but I don’t doubt the research. Goal setting is easy, it’s the follow through that’s hard. Why? Well, it’s easier to just keep doing what’s familiar to you.
When it comes to your financial goals, it can be even more difficult to reach them. There are a couple of reasons, but it’s mostly human nature. Psychologists point to two main reasons:
- We tend to live in present, which means we underestimate how much we need to save for retirement or take on too much debt. I explored this theory in my article called “Why it’s hard to save for retirement” which you can read here.
- We are naturally optimistic and ignore or downplay the extent to which bad things may happen. Therefore, you may not have savings set aside for an emergency or perhaps haven’t purchased life insurance.
It makes sense, and you can be forgiven; living in the now is how we enjoy our life and money in the present fulfills our current needs. It seems like a huge sacrifice to do anything that would delay present day gratification.
If financial goal setting is so difficult, what can you do to improve your chances of success? There are a few ways, like hiring a financial coach to keep you accountable and setting clear intentions for the goals you seek to achieve. However, if you want to start making a real change with your finances, you need to start to build a better relationship with your money. This may seem trivial, but money is emotional and messy, and people are irrational when it comes to finances. In my experience, it starts with your attitude towards money, also known as your money mindset.
When you improve your financial mindset, it makes it easier to focus on your personal goals. It’s like noise cancelling headset – it permits you to tune out everything else around you and focus on what matters most to you. The deeper you can align your intentions and personal values to your financial goals, the better success you’ll have in reaching them.
The top 3 ways to improve your financial mindset:
1. Stop comparing your financial status to others.
This is harder than ever before, because the old “keeping up with the Joneses” no longer applies to just your neighbor, it’s everyone you engage with on social media. The entire world is now your backyard, and peeking over the fence will give you a glimpse into the curated life of anyone. Do they earn more or less than you? Who cares. What I’ve learned is that you have no idea what’s going on with anyone else’s financial situation. Thy could be up to their eyeballs in debt or just received a large inheritance. No one knows, so stop wasting your time and energy thinking about it.
2. Forgive yourself for poor financial decisions you’ve made in the past.
As humans, we tend to experience a loss much more acutely than a gain of the same magnitude. It’s loss aversion programming we’ve inherited from our ancestors to keep us safe, but unfortunately when it comes to money, it will make us will hesitate to take risks with our money. But it’s important to acknowledge the mistake and know that you’re simply learning. Forgive yourself and move on.
3. Express gratitude for everything you have in your life right now.
I repeat this often, but it’s been scientifically proven that when we express gratitude, we become happier, our feelings of jealousy decrease, and we stress less. You can also express gratitude for your finances. No matter what your situation is, money has helped feed you, clothe you, an provide shelter. Appreciate how your money provides for all that you have. If you do this on a regular basis, you will start to notice a shift in how you perceive your money.
Hitting the reset button at the start of the year is empowering, especially when it comes to your financial situation. The first step is to improve your relationship with your money. Your mindset is half the battle to changing your money behaviours and reaching the goals you set out to achieve.
If you need help creating a financial plan that aligns with your goals, set up a time to chat with me. As a financial coach, I can review your current financial situation, help you sort out your short, medium, and long-term goals, and work with you to create a financial plan that works for your lifestyle. I am also there to keep you accountable and motivate along the way.
When it comes to your financial situation, remember that you can make real change and progress towards achieving your goals, but it starts with your mindset first. You can become financially fit and make real progress this year and beyond.