Money Mindset Shifts for Financial Freedom

8 Money Mindset Shifts for Financial Freedom in 2021

If you seem to get in your own way, it’s time to make money mindset shifts for your financial freedom.

Because with all the outside challenges around money, the last thing you want is to engage in self-sabotage.

If you have a negative money mindset, you’re dealing with an insidious enemy.

In contrast, a positive money mindset can make the seemingly impossible happen.

Before we begin, this article isn’t part of the “think of money, and it will come” school of thought. You can have wonderful thoughts in your head around money, but just having those thoughts does nothing. You need to take action to make those thoughts a reality.

For example, a money mindset that financial independence is possible is a fantastic beginning. But if you don’t actually save and invest money, it will leave you with nothing more than fuzzy feelings.

So if you’re looking for magical, mystical ways to manifest money, you won’t find them here.

What you will find are practical ways to make positive money mindset shifts, so you can take action to improve your financial life.

Let’s get started.

What Is A Money Mindset?  

A money mindset is your personal set of beliefs about money. You may not even be conscious of them since they typically float around in your subconscious, below the surface of awareness.

These beliefs influence what you think and feel about money. In turn, those thoughts and feelings drive your behavior around money and affect your money decisions. Those behaviors and decisions then create your reality.

They move what’s in your head into the “real world” through your actions.

Here’s an example. Think of a money mindset where you believe you control your financial situation versus one where you think nothing you do matters. Which mindset is more likely to help you create a budget, the very thing that puts you in control of your financial situation?

Read on for more reasons why your mindset is critical to your financial success.

Why Does Your Money Mindset Matter?  

Your money mindset matters because it’s a heck of a lot easier to achieve something when you actually believe you can.

You need to believe you can achieve financial independence, not see it as something only other people can do. Remember, there are degrees of financial freedom or financial independence. It’s not an on or off switch.

Look for inspirational stories online. For example, the blog, A Purple Life, shows how one woman achieved her version of financial independence at 30! Keep your mind open and flexible around what financial freedom looks like.

If you don’t believe you can, no one can argue with you. You are correct.

“Argue for your limitations and, sure enough, they’re yours.”    -Richard Bach

That’s why it’s essential to put in the work to change your money mindset if it’s a negative one. It will stop you before you can take one step forward or make your journey miserable along the way.

With a long-term goal like financial independence, there will be plenty of obstacles on your way. Without a positive mindset and the belief you can do this, it’s much easier to give up.

How Is Your Money Mindset Formed?  

You develop your money mindset based on your childhood experiences, your parents, and the people in your environment.

But I believe this question leads to the wrong focus. If you have a crappy money mindset, instead of worrying about who is to blame or what the cause was, take the lessons you need from your past. Then use that awareness and knowledge to move forward.

When we’re kids, we don’t exactly have many choices about our environments.

But you do now. Take back control by taking responsibility for your current environment.

Ask yourself, who do you spend most of your time with? People actively working on their finances, doing the best they can, and grateful for what they have? Or people who complain and don’t take action to improve anything?

Pay attention to the mindsets of the people around you and their influence on you. Do what you can to find people with positive mindsets and hang out with them—it’s a reliable way to change your money mindset!

Maybe you can’t hang out with positive people directly. But you could “hang out” with them indirectly. You could change a poor money mindset by filling your head with positive peoples’ thoughts.

For example, you could listen to motivating financial podcasts and read inspiring financial blogs and books.

For me, financial independence podcasts like the Mad Fientist helped me shift my money mindset as I drove back and forth to work each day. Instead of feeling hopeless while sitting in traffic with tears rolling down my face, I could work to change my beliefs of what was possible.

Take a careful look at your environment and change what you can. The money mindset you start with wasn’t under your control. But now, with effort, you can make the shift to a more positive money mindset.

Scarcity Versus Abundance Mindsets 

 There are two opposite mindsets, scarcity versus abundance. These aren’t black and white, but varying shades of gray (or yellow).

These mindsets aren’t necessarily related to your actual life circumstances, like how much money you have. There are wealthy people with scarcity mindsets who feel unrelenting anxiety about money. Then there are people with almost no possessions who have an abundance mindset.

Remember, your money mindset is simply what you believe and how you think about money.

The Pain of a Scarcity Mindset  

A scarcity mindset is painful. It’s a feeling that you will never have enough, and you need to continually strive for more, more, and more. Anxiety, worry, and feelings of lack are all indicators of a scarcity mindset.

In situations of acute scarcity, such as living in poverty, it can lead to poor decision-making by taxing your cognitive abilities. Here’s a quote from an article explaining this from the American Psychological Association:

“Every psychologist understands that we have very limited cognitive space and bandwidth. When you focus heavily on one thing, there is just less mind to devote to other things. We call it tunneling — as you devote more and more to dealing with scarcity you have less and less for other things in your life, some of which are very important for dealing with scarcity.”

A scarcity mindset feels terrible. It also prevents you from improving your situation since it steals from the cognitive resources you need to make changes. It’s a classic vicious cycle.

However, since we don’t fit into neatly defined categories, a scarcity mindset can lead to asset accumulation for some people.

For example, people who save lots of money because of an underlying feeling of panic that they need to set something aside “just in case.” Or extremely frugal people who feel sick merely thinking about spending their money. Or both.

In these cases, a scarcity mindset can lead to financial wealth, but it’s a psychologically painful way to get there.

Plus, a scarcity mindset will ruin the experience when that person hits financial independence or wants to retire. The shift from being a frugal saver to spending down their assets will cause intense anxiety.

(Note, almost all lifelong savers, regardless of mindset, have trouble with spending down money, but that’s a different article.)

Here we’re looking at ways to shift from a painful scarcity mindset to one of abundance.

The Pleasure of An Abundance Mindset  

An abundance mindset is the delightful feeling of having enough. You appreciate what you have. You allow yourself to experience joy.

It’s a feeling of prosperity versus survival.

It’s a mindset where you have confidence in your financial abilities. It frees up cognitive bandwidth to look at options and make excellent decisions.

It’s a mindset where another person’s success is simply that, their success. It doesn’t mean you get less.

There isn’t a pie with a limited number of slices, and someone else’s big slice means you get a smaller piece. With an abundance mindset, the pie is big enough for everyone. An abundance mindset is part of positive thinking, and science supports the benefits. As James Clear states in this article, “Positive thinking isn’t just a soft and fluffy feel-good term. Yes, it’s great to simply “be happy,” but those moments of happiness are also critical for opening your mind to explore and build the skills that become so valuable in other areas of your life.”

An abundance mindset is a calmer way of thinking and just plain feels better!

Before you read on, identify where you are in the spectrum between a positive and negative mindset.  Take a moment to write it out so you can see it clearly on paper.

You can’t deal with default negative thoughts unless you know what they are. You can’t change what you don’t know.

8 Ways to Make Money Mindset Shifts from Scarcity to Abundance 

I’d love to tell you to think positive thoughts and “control your thoughts and emotions,” and all will be well. But we have little control over either our thoughts or emotions. Instead, all you can control is what you focus on and the actions you take.

Over time, those actions can improve your mindset and make those shifts, like from scarcity to abundance.

“What you focus on expands, and when you focus on the goodness in your life, you create more of it. Opportunities, relationships, even money flowed my way when I learned to be grateful no matter what happened in my life”.     -Oprah Winfrey

Here’s a collection of ways to make positive money mindset shifts to achieve financial independence and enjoy the journey.

1. Focus on Little Luxuries

Focus on your “enough” — Focus on what you have, not on what you lack.

Prevent feelings of scarcity and instead promote feeling like you have enough by making it a regular practice to treat yourself with small luxuries.

“But wait,” you say, “isn’t frugality a critical part of attaining financial independence?”

Yes, it is. So, let’s define small luxuries. By this, I mean either free or inexpensive things that make you feel special. Or give yourself permission to indulge in a fun activity. Make a list of these things and create a habit to “indulge” once a week.

Don’t wait to treat yourself only after a crappy day, where you end up spending too much money in an attempt to feel better. Instead, give yourself small treats along the way. These little luxuries can promote that feeling of enough.

Things like small pieces of dark chocolate, scented candles, or the time to use those adult coloring books you’ve collected.

For me, it’s a trip to the library. I love to read, and my version of abundance is an armful of unread books. The indulgent part is then taking the time to read them!

By regularly focusing on what you do have and on the positive things in your life, you can shift a scarcity mindset to one of abundance.

By focusing on the positives, you can expand them in your life.

What you focus on expands, and there is science to explain why. A portion of your brain, called the Reticular Activating System (RAS), acts as a filter for your experience.

This two-minute video from the University of Minnesota Extension explains:

Get your brain to work for you instead of against you. Focus on the problems you can solve right now. Focus on the positive by focusing on solutions.

We can’t control our feelings, but we can change our focus.

2. Make Gratitude Your Money Mindset Shift Superpower 

Gratitude is the antidote to our feelings of never enough.

If you have the basics, like housing, food, and clothes, consider how lucky you are. Right now, it’s winter where I live, so all I need to do is step outside for a moment to feel the bitter bite of the wind on my face, to be grateful for the gentle warmth of my home.

There is so much we take for granted in our modern world. Take a moment to feel gratitude for it and see how that shifts your mindset. We tend to focus on all that’s wrong with the world, but instead, look at what’s right.

Note, gratitude is a useful money mindset shift, but guilt is not. You help no one, including yourself, by feeling guilty. This isn’t about guilt—it’s about appreciation.

Another method to practice gratitude and make a money mindset shift is to give money away. That’s the exact opposite of the scarcity mindset.

Giving money to a charity aligned with your values is a win-win way of practicing gratitude for what you have. You’re showing your mind that you have enough money, enough that you can give it away.

Gratitude is a superpower to make a money mindset shift to abundance!

3. Stop Saying This One Phrase

 This mindset shift is from Robert Kiyosaki, the author of Rich Dad, Poor Dad. Never say “I can’t afford it,” instead ask, “How can I afford it?”

When you look at something you want and say the words “I can’t afford it,” it’s like a gut punch. It causes instant frustration and depression.

But asking “How can I afford it?” switches your mindset to one of creative problem-solving. You switch from powerless resignation to powerfully exercising your mind to look for possibilities.

It always amazes me what a difference words can make. This little change in phrasing leads to a liberating mindset shift.

Of course, this doesn’t mean you should buy everything you think of. Plus, I’d revise the phrase to “How can I afford it without debt?” Please don’t fall for the dark magic of debt with its “affordable monthly payments.”

You may not have the money right now, but that’s what a savings plan is for. Review your budget and move spending from another area to this one. Maybe, if you have the time and energy, you could start a side hustle or work overtime?

You may decide that the expense isn’t worth it. But reframe it as not worth it, not that you can’t afford it.

And if it is worth it to you, get that grey matter fired up!

The spirit of this is in the mindset shift. “I can’t afford it” promotes a scarcity mindset and enforces a feeling of lack. “How can I afford it?” promotes an abundance mindset.

4. Daydream—It’s Not A Waste of Time 

Visualization, or picturing something in your head, is a way to make something “real” in your mind first. Give yourself permission to daydream a little. Otherwise, you’ll struggle to make your goal real in the world if you can’t even imagine it in your own head.

Instead of only writing the words “upgrade kitchen” as a savings goal, start saving pictures of what your dream kitchen would look like. Look at those pictures and visualize yourself cooking in your new kitchen. Feel the smooth, cool granite countertops under your fingertips as you reach into your shaker-style maple cabinets for a mixing bowl.

A goal like financial independence is vague and a bit lifeless. So ask yourself, what would your fully funded intentional life look like? What would you do if earning money wasn’t the only focus of a job? Imagine what it would feel like to no longer depend on selling your time for money.

This can be tough because not all of us have a dream career or life in mind. So do your best. Again, give yourself permission to daydream.

Because when you visualize your goal in detail, the more real it will feel to you. The more it becomes possible.

Visualization establishes feelings of abundance in your mind first. That can give you the energy to make it real in the world.

5. Find Safety in Numbers 

Numbers can help you make mindset shifts. Emotions are irrational and can lead to irrational decisions, but numbers provide facts. Get to know your personal finance numbers, like how much you spend, save, and what you have in assets.

I know, numbers and math may not be enjoyable for most people. But numbers can cut through negative emotions.

If you don’t have a budget, create one. Even if your numbers aren’t favorable (meaning you spend more than you earn), at least now you know. Then you can deal with what you find and make the changes you need. A budget provides an instant mindset shift from the stress of the unknown to a feeling of calm.

If your numbers are favorable, and you fully fund your investment and savings accounts, but you still have a scarcity mindset, read on.

Please note, the following is only for you if you have a scarcity mindset, plenty of money, and you feel uncomfortable spending it.

Your scarcity mindset may be why you save so much and why you are so careful with your money. The problem is, when you have a scarcity mindset, you probably default to “can’t afford it” or “can’t do it,” even when you can.

Instead, run those numbers.

Maybe, just maybe, you have enough in your budget to go on that vacation. Let the numbers tell you. A scarcity mindset always says no.

If you struggle with guilt around spending money, create a category solely for fun. You need a “fun” category (that you actually put money in) in either your spending plan or budget.

By setting this money aside, then spending it on “frivolous” things, you can shift from a scarcity mindset to an abundance mindset. Try it with a small amount of money to see how it feels to you. It will be tough to spend at first, but it’s a step towards that new abundance mindset.

6. See Money for What It Really Is 

A huge money mindset shift to make is to see money for what it truly is—a tool.

It’s a tool, like a hammer. A hammer could build a house or smash a window, but it’s still only a hammer.

There is so much emotion surrounding money. Mindsets that money is “evil” or that “the rich” are bad. Cut through that emotion by recognizing money as only a tool.

Plus, you are in control of this tool. Think of your personal finances like a business, and you’re the business owner or the CFO (chief financial officer).

For example, when considering a large purchase, look at the underlying value it satisfies. Get creative. Is there a less expensive way? Do you even need money for this, or is money a shortcut?

Align your values with your money by trying a values-based budget.

You may not have much control over your fixed costs in the short-term, but you do in the longer term.  And you definitely have control over your discretionary expenses.

You’re in control of what you save and invest. Okay, maybe you can’t save or invest as much as you’d like right now, but you are the only one who can change that. Set up automated systems to save money before you even see it.

Feeling in control, and seeing money as only a tool, can flip feelings of helplessness to feelings of power.

7. Make an Investment with The Highest Return

A fantastic way to make a money mindset shift is to invest in yourself. Not in the marketing cliché way of buying yourself a sports car, because, you know, you’re worth it, and it’s an “investment” in yourself. No, the real type of investment in yourself, one of education or time.

Investing in your skills can provide returns far exceeding that of any financial instrument. A $500 class that gives you the skills to earn an extra $3,000 in a year would be a 500% return on investment! Obviously, this includes the work you put in, but those skills will help you continue to earn extra money over time.

Education and the knowledge you can gain from it are valuable. Invest in books, classes, workshops, training, or membership groups.

“If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest.”      – Ben Franklin

It pays to be a lifelong learner. In fact, studies show that self-made millionaires tend to be lifelong learners.

Also, learn all you can about finances or money. Financial education can mean the difference between feeling powerless and powerful. The more you know, the better off you’ll be. Start with the basics, like learning how to manage your money and work up to investment topics.

The ultimate investment in yourself is to work towards financial independence. As you approach it, you can gain the time freedom to do what means the most to you. It’s expensive, because instead of trading your time for money, you trade money for time in the form of opportunity cost. Sometimes the highest returns on your money aren’t financial.

Continuing your education, honing your skills, and using money to buy yourself time are excellent ways to invest in yourself and make positive mindset shifts.

8. Do This One Thing for The Biggest Money Mindset Shift

Out of all the ways to make a money mindset shift to achieve financial independence, this is the strongest. Make it a priority to save and invest your money.

Why?

Because nothing promotes feelings of abundance like money in the bank.

There are different degrees, starting with breaking the cycle of living paycheck to paycheck. Setting even a little money aside can create a positive mindset shift.

If you’re in debt, making those debt payments is critical, but get in the habit of setting money aside every paycheck. Even if that money ends up going towards paying down your debt, you’re training your brain to save first.

An emergency fund provides peace of mind and a feeling of security. Life can be a rough ride, and an emergency fund is your financial airbag in case of crashes.

Having a savings account not only feels good, but it can also prevent debt. Instead of borrowing money, save up first.

Then there is the exquisite feeling of having f-you money (Thank you, JL Collins!). It can buy you short-term freedom from working at a job you hate. It can buy you the time to find a better job. It’s freedom in the form of money.

“There are many things money can buy, but the most valuable of all is freedom. Freedom to do what you want and work for whom you respect.”     – JL Collins

Next up are the investment accounts for your future, like 401(k)s and IRAs. Investing means taking risks with your savings, but it’s the only way to achieve financial independence. Invest for the long-term and let money work for you. Compound interest can make millionaires out of middle-class earners.

The first step to change your money mindset is to save something, even if it’s only $50 to begin.

Money Mindset Shifts to Achieve Financial Freedom Begin with You 

I can provide ideas for making the money mindset shifts you need to achieve financial freedom or financial independence, but now it’s up to you.

By being aware of your current money mindset, you can shift it towards a more positive one. You prevent self-sabotage on your financial journey. You can get out of your own way.

Instead of a negative money mindset with its automatic red light, your positive mindset gives you green lights to go forward.

Remember, thinking positive thoughts is important, but it’s only the first step. Then the next step is to act. It’s the action that makes the reality. The thoughts only get the process started.

Changes to your money mindset will be a work-in-progress, and it takes constant effort.

So pick just one thing from this post to try. Something you can experiment with today to get the process started.

It takes time, so why not start today?

 

 

 

Photo by Helen Lord on Unsplash