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There are many different components to good financial management and maintaining a healthy relationship with money.
Knowing how to properly construct and stick with a good, functional budget, is certainly one key thing to get right. And it’s also frequently important, at various stages, to consider potential investment options.
When all is said and done, however, there’s a good argument to be made that one of the most essential things to “get right” when it comes to dealing with money, is your overall mindset.
Here are some reasons why it’s essential to get your mindset right with regard to financial matters.
Because many negative financial situations are exacerbated by learned helplessness
The concept of “learned helplessness,” was famously developed by the psychologist Martin Seligman, and describes a situation where individuals remain passive and endure negative circumstances and conditions, purely because they have been conditioned through past experiences and associations to believe that they are helpless.
In the context of maintaining a good relationship with your finances, “learned helplessness” could mean, for example, assuming that senior healthcare costs have to come directly out of your savings, without even investigating the avenues that may be opened up by consulting with a Medicaid Planning Attorney.
With regard to financial matters, in general, it’s important to consistently question your limiting beliefs and to maintain a “can-do” attitude. If you don’t, there is no knowing where you may simply be finding yourself held back by learned helplessness.
Because a scarcity mindset can lead to poor financial habits, just as much as an overabundance mindset can
You’ve probably heard the term “scarcity mindset,” and are likely also heard the term “abundance mindset” presented as a counterpoint to it.
A scarcity mindset, essentially, is at the heart of a lot of poor financial habits for many people. Always feeling as though you are at imminent risk of completely running out of money can, on the one hand, lead to impulsive spending – due to a fear that if you don’t enjoy the money now it will be gone.
It can also lead to the opposite problem of preventing you from spending when doing so would actually result in better long-term outcomes – both with regards to things like your own health, and the value of your property – due to a sense that you always have to hold onto whatever you earn.
An “overabundance” mindset is, famously, bad as well. It’s the essence of what causes us to “live beyond our means.”
But you need to strike the right balance somewhere between these two polar extremes. A scarcity mindset can be just as detrimental as an overabundance mindset.
Because effective long-term financial planning requires a bit of optimism
To embark on any effective and ambitious long-term financial planning effort, you need to have a bit of optimism. At the very least, you have to believe that it’s possible for you to actually achieve the goal in question.
A pessimistic view and approach, in general, frequently undermines savings goals and other financial endeavors – whether that means striving to save up and retire early, or whether that means something more modest like saving up for a new car.
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