There is no difference between being financially well and having a healthy money mindset.
It’s not that one is the result of the other, they are the same thing. This is why, when people try to out earn, restrict, or obligate their way out of their financial concerns to financial wellbeing, those efforts typically backfire.
Having a healthy money mindset isn’t about budgeting, restriction,or forcing yourself, it’s about learning to trust yourself with your money.
Approximate Read Time: 8 minutes
Conventional Financial Wisdom Undermines Trust in Yourself
There is poison lurking in conventional financial wisdom. Let’s talk about a few conventional money mindsets that are toxic.
Toxic Mindset #1: Restriction, frugality and scarcity mindset
Restriction tells a lie… “If I could just correctly restrict myself, I’d be safe.”
Restriction is the removal or reduction of choice. Our brains do not function well under limited choices (even if it’s just the perception of a reduction of choices).
Choice means control, and control means safety and survival. When we restrict ourselves, we signal to our brains that we are in a time of scarcity, and our brains respond with a sense of crisis, panic, or anxiety. At the same time as we’re putting our brains into a state of scarcity and crisis, we are also expecting ourselves to magically make better decisions.
Scarcity, similar to perfectionism, tells the lie that if somehow we could make the perfect choices, we’d be safe.
In general, scarcity presents in two ways:
-I don’t know when I’m going to have this money again, so I need to save it, lock it down, restrict myself.
-I don’t know when I’m going to have this money again, so I need to use it, spend it, and make use of it now.
We tend to focus on scarcity when we’re under pressure, and will often tunnel-vision down into frugality and restriction as further ways to make “good decisions”. Ultimately, decisions made under the influence of frugality are deeply emotional decisions. Because the pressure and expectations of frugality are so high and ever-increasing, we end up trapped in a cycle of failure.
The emotional impact of this repetitive failure is devastating. Someone stuck in the trap of frugality and restriction may feel isolated as they restrict socializing and connection with others. Socializing, taking time off, and rest can be seen as “off limits” or not allowed.
Restriction and frugality will also reinforce loss-aversion… something our brains are already kind of obsessed with. We try to use frugality to make “good” decisions, and that registers to our brains are pressure. And our brains do NOT make good decisions under pressure, just fast decisions.
Someone stuck in the trap of frugality and restriction may also feel like they don’t deserve or haven’t earned… well, anything nice. More on this judgment and shame in a moment.
Restricted spending IS emotional spending.
Toxic Mindset #2:”Just get your shit together”
Shame, judgment, guilt, regret, remorse are all incredibly common mindsets when it comes to finances.
Punishing or shaming ourselves for our past mistakes is the only tool many of us have been given to try to make better choices in the future. And if these “corrective” strategies are the only tools you’ve ever been given, of course they are the only tools you can use.
I often hear people trying to “teach themselves” a lesson through shame, guilt, and punishment, even if they’re just telling themselves they should be doing this, or should stop doing that. Shame and guilt are very subtle and can sneak into our decision making. Sometimes we can actually get things done by making ourselves feel like garbage, and sometimes we can’t. This inconsistency registers as failure on our part… like somehow you’re shaming yourself wrong. Failure on top of failure. Pressure on top of pressure.
Rather than “motivating” ourselves to make more logical and reasonable choices, shame only deepens our emotional decision making.
Toxic Mindset #3: Eliminate emotions
Emotions are tools, and are important to our decision making, but that doesn’t mean we need to make decisions from an emotional place. And I know I’m repeating myself, but making decisions from a place of guilt or restriction is a profoundly emotional way to make decisions.
The pressure of choices made from guilt, regret, shame, or restriction frequently result in two things that can look like a personality defect. Rebellion and resentment. And for most folks, both rebellion and resentment at the same time.
Our brains don’t know the difference between being shamed or restricted by an outside influence, or us shaming or restricting ourselves. A normal, healthy human brain will respond to restriction (having choices removed) or shame (pressure) with rebellion and resentment. This is important. If you can keep a restrictive budget for only so long before you rebel against it or get angry with yourself, that is the NORMAL reaction.
But like I said above, if restriction, shame, guilt, and regret are the only tools that you’ve ever been given to make good choices, they are the only tools you’ll be able to use. So what should you do instead? Learn to trust yourself, be resilient, and be aware of your behavior (spending or otherwise) without judgment. When a person can do that, they can build adaptive, personalized spending around themselves, and most importantly, they can practice expected spending, not restricted spending.
Healthy money mindset #1: Practicing expected spending
Let’s do a quick thought experiment.
Imagine you are the Human Resources Department Head for a Fortune 500 company. Every two years the CEO and CFO get together and make a plan for the company. And every two years you get an allotment of money to do your HR work. This two years you’ve been given 10 million dollars for HR. Rather than spend that 10 million, you decide you’ll be a frugal department head and only spend 2 million. Do you think you would keep your job?
More than likely you would not. That 10 million dollars had a job to do, and spending just 1/5 of planned spending would probably put the company in dire straits. Money has a job to do.
Practicing giving money a job and practicing expected spending (not restricted) is critical. Expected spending is also less emotional than frugal spending, which over time leads to better and better decision making. The opposite of frugality isn’t willy-nilly, free-for-all, unrestricted spending.
The opposite of frugality and restriction is thoughtful, intentional spending.
Only by practicing thoughtful spending can we get to a holistic, integrated, healthy relationship with our money.
A game to practice expected spending: Target Spending
1.Choose a small, variable part of your spending:
Good examples: coffee, ice cream, clothes, eating out
Not so good examples: mortgage payment, utilities
2.Choose a fairly short time frame:
Between two days and two weeks
3.Choose a specific dollar amount.
Example: “I’m going to spend exactly $17 on ice cream in the next 10 days.”
“We’re going to spend exactly $42 on towels in the next 2 weeks.
Not so good example:
“I’m going to spend up to $24 on pencils tomorrow.” (this is restriction)
Your job is now to spend EXACTLY that amount of money in that time. No more. No less.
We want this to remain a game, not a budget, so that’s why we’re keeping the time frame and scope of spending fairly tight. And this is just a game. So if you spend more or less, does that really matter?
Nope, because this is just a game.
You are now practicing expected spending. That $17 (or whatever amount you choose) has a specific job to do.
As you play this game what do you think you might notice? Do you think it will be easy or hard to spend exactly that amount on that specific thing in that specific amount of time?
There is a dual purpose to this game. First it’s to practice expected spending rather than restricted spending. Second is to begin to trust yourself with money.
Healthy money mindset #2: Practicing trusting yourself with money
You may have noticed that I’m using the word “practice” kind of a lot. This is intentional. While I hope to give you the tools that you need to immediately begin practicing expected spending and trusting yourself, this is a long-term practice. But that doesn’t mean it needs to be especially taxing or heavy. By keeping the stakes low and the practice marginally fun, trusting yourself with money gets easier and easier.
A game to practice trusting yourself with money: The $1/$5 Bill Game
The way the game works is that right this minute, you have to pick either $1 bills or $5 bills, and as of now, that denomination of money is no longer spendable. It is just not money.
Which do you choose? $1 or $5 bills?
Ok, so think about all the $1s or $5s in the world, flying around, in cash registers, in pockets, in piggy banks… every single one of them is now no longer money. Not to you, at least.
So let’s say you go with $1 bills not being money. You’re at the store and you get change back. You get a $10 bill and a $1 bill and some change. You don’t need to refuse that $1 bill, but if it makes it into your hands, it’s not money. The $10 bill is, and the change is, but the $1 bill is no longer money, you can have it, you just can’t spend it.
It’s just a rectangle.
The purpose of this game is to trick yourself into thinking that $1 bills or $5 bills are not money. You brainwash yourself, and then you watch your own behavior.
This game is an experiment.
All you have to do is start to brainwash yourself. You say “$1 bills are not money, $1 bills are not spendable” over and over and then just watch. What happens? Do $1 bills suddenly disappear for you? Do you see them everywhere? Do you tuck them away in a certain place?
Sometimes it takes a few days to do the brainwashing, so give yourself a break if this isn’t immediate.
Counter to what this sounds like, this is NOT a savings tool. This is a trust-yourself tool.
While this isn’t intended to be a savings tool, people do absolutely save money.
Let’s say someone brainwashes themselves that $5 bills are not money and then ends up with a little ever-growing wad of $5’s. How do you think this would impact their trust in themselves?
As you brainwash yourself, what do you think YOU might notice? Once you’re skilled at observing your own behavior around $1’s or $5’s not being money, what might be another way you can trust yourself with your money?
If shame and restriction were going to work, they would have worked by now.
You don’t need to make yourself feel like garbage to be financially well and have a healthy financial mindset. You don’t need a restrictive budget. Shame and restriction are easy. What I’m asking you to do is so much harder than shame and restriction. I’m asking you to trust yourself and to practice expected spending.
If you want your path to a healthy money mindset to be a little easier the one thing you can do is be patient with yourself. Be gentle with you.
Next Recommended Article: Successful but Unfulfilled
Last Updated: July 2023