Building a strong money mindset in 2024

Author: Lesley-Anne Scorgie Contributing Columnist

Source: The Toronto Star

A healthy money mindset looks like this: 

• You believe you can learn new concepts about money;
• When you receive constructive feedback about your finances, you consider it a gift, and you do something with it;
• You feel responsible for your financial success;
• You embrace failure as a learning opportunity, and try not to repeat;
• You try new systems and approaches to financial management because that's how you'll grow in knowledge and wealth. 

A blocked money mindset looks like this: 

• You believe you are permanently stuck and not making progress;
• You feel like you were born this way and say things like, "I'm just bad with money";
• When you fail, it reinforces your belief that you aren't good at managing money.
• Financial feedback feels like criticism, rather than helpful coaching; 

Getting out of your comfort zone to try a new approach to money is intimidating, so you don't bother to change.

Depending on which psychology magazines or research you read, or mindset podcasts you listen to, the general consensus from the wellness community is that at least 70 per cent of our financial decisions are emotion-based. The trouble here is that if you are not in a healthy and strong state of mind, your emotions can drive poor financial decisions; ones that are impulsive and not rooted in facts.

When financial stress is amplified, as is so for an extremely high number of Canadians at the moment, it's even harder to shift out of the fight or flight part of our brains and use our frontal lobes (the part of our brains responsible for rational thinking) to process information about our emotions and make better money decisions. If your stomach is turning while reading this, that's good. The way you work through this resistance is with persistence in these three mindset areas.

Give yourself a break

'Tis the season to be nicer to yourself. Your past financial mistakes belong in the past. No one on Earth is born "good" with money. Everyone must learn how to manage it. So, it's best to treat today as the first day of your financial transformation. Look for any silver linings from your mistakes while reflecting, but forgive yourself. Did your passion or your moral compass get you into this financial pickle to begin with? OK, well, you'll need to draw on both that passion and dedication to doing the right thing to get out of this financial pickle, too.

With this step you're also trying to interrupt any unhelpful comparisons you might be making consciously or subconsciously. Maybe give yourself a break from social media, too.

Form stronger money habits

Without better money systems, you're not going to see results.

The systems I recommend everyone have in place are budgeting, spending tracking and net-worth measuring.

Budgeting is a mindful practice every month of identifying the money you have coming into your accounts, and planning where it needs to go. The goal is to ensure your inflows equal your cash outflows, and nothing more.

Spending tracking is the act of keeping tabs on all your expenses; automatic payments, cash or debt/credit purchases. Every dollar needs to be accounted for.

Now, compare the budget you set up to the spending that actually happened. Did you stay on track or fall off your plan? Comparing allows you to identify opportunities for improvement and celebrate what you're really great at.

Net-worth tracking is an accounting of all of your assets and liabilities. The individual accounts, loans, investments, mortgage; all the balances need to be noted on a monthly or quarterly basis. When the liabilities are subtracted from assets, that's your bottom line. When that bottom line is improving - even just a little - each month, it means you're budgeting and spending tracking systems are working.

Saving is the magic ingredient

Saving money for your future and for short-term emergencies is an act of self-love. Even a small amount of money saved into a rainy-day fund, like $5 per week, is better than nothing. The same goes for investing in a TFSA or an RRSP for retirement.

This article was written by Lesley-Anne Scorgie Contributing Columnist from The Toronto Star and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.