What’s Your Money Mentality? Here’s Why You Should Care
What’s a Money Mentality?
Ever felt a disconnect between you and your partner around how you each think about money? Or you and a parent? Sibling? Your money mentality deeply influences your financial behaviors and decision making. This not only impacts your relationships but also impacts how you approach financial planning, goal setting, and compromising between two married spouses (or family members, friends, etc) with different money mentalities. Money triggers emotions in all of us based on our own unique life experiences, personalities, and upbringing. Our money mentality drives how you spend, save, risks you’re willing to take financially and otherwise, emotions that come up when you think about money, and your general attitude toward money. Fortunately, money mentalities can be changed, but first you must identify your own, so you know how to proceed.
Types of Money Mentalities
For this article, we’ll cover the two prominent money mentalities…. the mentalities of “Scarcity” and “Abundance”. It’s important to know what each is, how they affect your finances, and your relationships.
What is a Scarcity Mentality?
A scarcity mentality means that you’re always afraid you’ll never have enough. This often occurs with people who grew up in a lower income household (or were raised by a parent who grew up in a lower income household) where money was tight and always front of mind. Our grandparent’s generation was big on living within their means, saving, being frugal, etc. They also grew up in the Great Depression, coincidence? I think not. Our life experiences shape our mindsets. If you don’t ever identify “how much is enough” financially, you’ll spend your whole life worrying and always feeling a “lack of”. Folks with scarcity mentalities are generally scared to part with money. It’s not always because they’re cheap or tacky, it often stems from a survival mechanism developed in childhood. There are multi millionaires out there who are still triggered at the idea of a high electric bill, a surprise parking ticket, etc. Like most things related to behavior, there’s a lot more than meets the eye so don’t be quick to judge.
What is an Abundance Mentality?
When you have an abundance mentality, you feel the world is full of possibility and there is more than enough money to go around for everyone. You know money will flow in and out of your life but are confident money will always be there. There are no limits around how much money you can have or how much you can make. You don’t hold yourself back from your dreams, live less burdened by financial fears, and see a world of abundance/opportunity waiting for you to go out and seize it.
If you grew up with a family who was financially comfortable, or with go-getter parents that never stopped until they got what they strived for, you may be more apt to have an abundance mentality.
The Challenges of Each Mentality
At first glance, a scarcity mentality seems ‘bad’ and an abundance mentality seems ‘good’ but they both have their challenges.
What are the Challenges of a Scarcity Mentality?
If you have a scarcity mentality, financial planning may feel impossible. You will likely feel like you never have enough and cannot justify parting with precious money even for something that could improve your life significantly.
If you focus on this, you’ll never believe you have enough and will always feel ‘behind’ on your finances. So how do you overcome it?
Identify How Much Is Enough - How much do you need to live on? If you lost your job or got an unexpected bill would you financially be ok? Write down some worst case scenarios and see if it really would hold you back as much as you think it would. I as a financial planner have this conversation all the time with clients to determine “how much is enough?”
Focus on what you have - Start a gratitude journal. It’s easy to get lost in the problems you have instead of focusing on the positives, but a gratitude journal can turn that around. Each night write down 3 things you’re grateful for or that went well that day and watch your mentality slowly change.
Start small – Set small goals to part with money in ways that matter to you… i.e. treating yourself to that one thing you’ve held off on buying, practice giving to charity, tipping extra at dinner, buy a gift for a friend, etc. These things help develop comfort and familiarity in parting with money so it becomes easier with time.
Surround yourself with people with an abundance mentality – You are who you surround yourself with, if you surround yourself with people who embody a scarcity mentality, that’s how you’ll live. Instead, surround yourself with successful people who possess an abundance mentality so you can begin to embody some of that mindset.
What are the Challenges of an Abundance Mentality?
An abundance mentality isn’t without its challenges, though. While it’s generally less plagued by financial fears than the scarcity mentality, folks with an abundance mentality can become overconfident in the future or too relaxed around proactively managing their finances. While the future may feel limitless to you, it’s important to still be practical and look at the big picture instead of just assuming everything will work out.
Here’s what to watch out for:
Getting too confident so you stop trying – If you are so confident in your abilities to have enough money you may stop trying or being intentional with it.
Not paying attention to your finances - You can believe you’ll always have enough money or create enough money, but you must still pay close attention to your finances and know where you stand.
Overspending because you think you’ll have enough – Overspending (aka using credit cards) assuming you’ll always have enough to pay them off can get you in financial trouble. Careful financial planning is still essential with an abundance mentality.
Identifying your Mentality (and your Partner’s)
Relationships are complicated, this goes double if you have different money mentalities. Identifying your mentality and that of your partner is the key to a successful relationship. Young families often divorce not because they fall out of love, but because they have such different views about money that they can’t get along.
So how do you avoid this?
Start by identifying one another’s money mentality. If you are opposites, figure out how you can meet more in the middle. For example, a partner with a scarcity mentality is likely to be scared to ever spend money or take chances, whereas a partner with an abundance mentality will act the complete opposite and maybe even overspend.
Have this conversation as early as you feel is right. Even if you feel you are on a similar page money wise, at the least you may learn some new things about your partner. Ask questions like:
“What was the general attitude towards money like growing up in your family?”
“How did your parents handle money and what values did they instill in you?
“How are you different from your parents in how you view and handle money?”
Talk to one another about your upbringing with money and how it influenced your thoughts around money today.
To create a financial plan together that you both feel comfortable with requires getting on the same page. Understanding your own money mentality is step #1 and that of your partner’s is step #2. You’ll both likely have to step out of your comfort zone, practice compromise with financial goals, but you’ll start to see more eye to eye on money, finally understand what factors influence their decision making, and be more empathetic. All these can do wonders for the success of a relationship.
Talking with a financial counselor, financial therapist, or financial planner, can be a great way to explore what healthy joint financial goals might be. Seeing a professional can help you both get on the same page as a couple (values, triggers, mutual understanding, empathy, patience, financial goals, etc). Your partner can also support you as you try to embrace a healthier mindset around money.
Final Thoughts
Identifying your money mentality is the key to successful financial planning, healthier financial behavior, and even a happy marriage. There isn’t a right or wrong money mentality, but identifying how you look at money and handle it is important.
If you were brought up in a scarcity mentality (and refuse to spend) or have an abundance mentality (and maybe spend too easily), either mindset could be holding you and your partner back from a more prosperous life. A financial planner can provide a judgement free space for you and your partner to explore your money mentalities, guided by the objective presence of a professional. For folks who wish to work through deeper emotional barriers around money, your financial planner can make referrals to a “financial therapist” if needed. These are all extremely important steps to take for yourself, your relationships, so you can live life with less fear, and define “what is enough” for the life you wish to live.
If understanding your money mentality (and how it impacts your family & relationships) is important to you:
Schedule a free 30 minute introductory call with me here
Together we can explore “you” in a new way, and help start a conversation to get you and your partner on the same page financially. I’m here to help you reach your financial goals so you can live an epic life today, while still being on track for tomorrow.
Jonathan Grannick, CFP®
Wonder Wealth LLC
San Diego Financial Advisor | Fee-only Fiduciary
Disclosure:
None of the information provided is intended as investment, tax, accounting, mental health, or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. The content is provided ‘as is’ and without warranties, either expressed or implied. Wonder Wealth LLC does not promise or guarantee any income or particular result from your use of the information contained herein.