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  • Writer's pictureAveril

The Psychology of Money: Unraveling Money Beliefs and Mindsets

Updated: 18 hours ago

Like it or not, money holds a significant place in our lives, influencing our decisions, aspirations, and overall wellbeing. But like all aspects of life, we each hold different beliefs (also referred to as ‘money mindsets’) that shape our relationship with and experience of money. This post delves into the intricate world of beliefs about money, exploring their origins and impact on our financial behaviour. Understanding these beliefs can help us gain insight into our financial mindset, make more conscious choices in managing our finances, and support more effective conversations with partners and loved ones about money.

Origins of money beliefs

As for many of our understandings about the world, we inherit and develop our beliefs about money from the people and circumstances with which we grew up. The ways our parents or caregivers spoke about and behaved with money, and the consequences we observed, shape our views as to the abundance or scarcity of money, its importance, and its use.

We may have learned to treat money in the same manner modelled by our parents, or have resolved as adults to do the exact opposite to avoid the same outcomes. We each tend to believe that we are correct in our own views about money, and may struggle to understand how others relate to money so differently. Read through and reflect on four common money beliefs below, and identify which you and your loved ones might hold.

Common money beliefs and mindsets

Money as a measure of a person’s worthiness

For some people, money is closely tied to their self-worth, and the worthiness they perceive others to have. Our society often seems to equate financial success with personal value, leading to a belief that having more money means that you are more successful in life, or will be more respected.

When a person’s net worth is believed to be a measure of their overall worth as a human being, it can lead us to constantly compare ourselves to others. We might feel worse about ourselves when we earn less than one friend or family member, and better when we know we earn more. We might evaluate the “success” of our lives or the lives of others based on finances, and feel a deep sense of shame or failure if our money situation is challenging. We all want to feel worthy, and this belief may drive us to constantly strive for wealth or stay up at night worrying about our future financial situation.

To address beliefs about money as a measure of our worth, it's essential to recognise that our value as human beings does not, and has never originated in our financial status. There are wonderful, admirable people with money, and wonderful, admirable people without money. The converse is also true. As such, the presence or absence of wealth must be taken as an unreliable indicator as to a person’s qualities.

Having a lot of money may come from luck, privilege, hard work, or intelligence, but those attributes in themselves similarly fail to tell us much about a person’s overall worthiness. Redefining success for ourselves, and cultivating a mindset focused on values, personal growth, relationships, and fulfilment can help shift the emphasis away from the number in a bank account or on a paycheck, or the acquisition of material possessions as a measure of self-worth.

Scarcity mindset and fear of financial insecurity

The “scarcity mindset” is a common name for believing that you will not have enough money to meet your needs, or that something will happen in which your money will run out and you will be unable to obtain more. This often arises in people who grew up with limited resources, or who saw their parents lose significant amounts of money, or who may have themselves already suffered difficult financial losses in their adult lives.

This belief leads to anxiety, excessive worry about money, and an aversion to taking financial risks. Anxiety about money might mean that a person only ever buys the cheapest item, putting quality a distant second. It can also result in overworking, hoarding or excessive frugality in an attempt to feel a sense of control and safety, even in situations where it may not be necessary.

To overcome the scarcity mindset, it's crucial to evaluate what is happening in the present, and what you may be reacting to from the past that is no longer as relevant. If you truly are on a low income, have a foreseeable large expense looming, or other realistic and current concerns, this is perhaps not indicative of a scarcity mindset and more of a sensible, responsible approach. Consulting a trusted other who seems financially stable themselves might help you to ascertain whether the strength of your money concerns is accurate for your circumstances.

If your feelings of financial insecurity tend to be more related to the past than the present, look around you and take in your current situation. Ask yourself these questions:

  • How are you and your life different to when you experienced financial struggles in the past?

  • How has your capacity to earn more or to problem solve challenging circumstances changed?

  • Who are your supports now, and how might they be able to help if you really needed?

  • What supports are available in the community, if you were experiencing financial difficulty?

  • What financial resources and safety nets have you already acquired, that you could draw on if needed?

  • Does the amount of thought and energy you put in to preventing financial disaster match the likelihood of it happening?

  • How much do you trust yourself (and your partner, if you have one) to navigate financial situations as they arise?

People with financial insecurity often feel all alone in having to navigate their money, forgetting that they may now have others in their lives who would be willing and able to provide support. They may also fail to appreciate how they themselves have grown and changed since they last experienced money stress, particularly if that occurred when they were children dependent on their parents, but are now capable adults themselves. Reflect also on how you have overcome other challenges in the past, appreciating any strengths you have developed that would also come to the fore during times of financial stress. If you haven’t already, educating yourself about financial planning and take steps towards building a secure future can alleviate some of the fear and anxiety surrounding money.

Money as the source of happiness

The economy is held up by advertising that suggests we will be happy once we acquire some new product or experience, so don’t chastise yourself if you hold this money mindset. There is conflicting research that either affirms or disproves this belief, suggesting that people are or are not happier in accordance with their level of income. It’s hard to argue against the fact that most of us appreciate having the financial capacity to take a much-needed vacation, and that being able to pay for an unexpected expense without it causing a significant impact helps us to feel more secure.

Issues arise, however, when we believe that money is the main or only route to happiness and satisfaction. Identifying and meeting our own personal values – the attributes and qualities of life that we individually decide make our lives meaningful – is a more reliable source of fulfilment. Money can facilitate us to meet our values – being able to buy a child a gift or experience they dearly want, for example, or afford a gym membership to support our health. However, if we widen our focus, there are often many other ways to fulfil the same value that don’t require us to spend money.

Money avoidance

Conversely, others may view money with disgust, believing that those with more than ample resources are greedy. They might believe that most people with money are bad people, that acquiring money always leads to more complications or difficulty, or that money has the power to turn you into a bad person.

Certainly, there is some valid concern in the amount of over-consumption in the world that impacts the state of our environment, and there are plenty of examples of the corruption that people will engage in, in order to access more money. People with money avoidance beliefs may have been negatively impacted themselves by others with more money, or have seen their parents suffer at the hands of wealthy employers. We have all heard stories of lottery winners who have ended up in dire circumstances.

Money avoidance may lead a person to feel a lot of guilt about the money they do have, especially compared to people who have less. They might feel undeserving of spending money on themselves, or feel so averse to thinking about money that they avoid necessary tasks of managing their own finances.

Those who hold money avoidance beliefs can benefit from learning to differentiate between money and the actions that people may take in relation to money. In and of itself, money does not have the ability to corrupt a person, and as discussed, the presence or absence of money has no cause-and-effect link to a person’s goodness. While no-one is required to become wealthier than they need, money can also be used in service of our values, including generosity and charity.

If you are fortunate enough to have more than the bare minimum, managing your money wisely also has wide-ranging positive effects. You can choose where to spend it to support the causes and businesses that are meaningful to you, as well as take care of your own wellbeing and future to relieve some of the burden from social systems that might otherwise pick up the slack.

Learning to identify our own money beliefs is key to recognising where we might be able to adapt them to enable a healthier relationship with our finances, as well as being able to discuss this often difficult topic with others. By understanding these beliefs and their origins, and appreciating how we might differ from one another, we can consciously challenge and reshape our money mindset if it would benefit us to do so. Through self-reflection, education, and the cultivation of healthier attitudes towards money, we can build a more fulfilling and balanced relationship with our finances.

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