Breaking Free from Your Limiting Money BeliefsBy Jesse Giordano, CFP® | January 18, 2019
Any behavioral finance expert will tell you that your money mindset has everything to do with your financial health. It’s no coincidence that those operating from a place of financial confidence thrive much more than those who approach their money with a sense of scarcity and lack. This is because, simply put, like attracts like—and there’s data to back it up.
Rational decision-making plummets when financial stress is high, majorly clouding our judgment in the process. According to one Science magazine study, cognition and reasoning both take a hit when financial anxiety spikes. Unfortunately, it’s something I’ve seen play out again and again among those who lack financial confidence.
The truth is that we all hold certain beliefs around money, and our personal upbringing and family values play a significant role. Those who watched their parents struggle with money and accumulate debt may have understandably adopted a fearful attitude around money. Conversely, growing up in a household that encouraged financial literacy usually sets the stage for confidence and abundance.
Our financial history is something that directly shapes our personal relationship with money. Why does this matter? Because these beliefs are what dictate our behaviors—which is by far the most important part of the equation. In money and in life, our actions have consequences.
Someone who believes that wealth is hard to come by will likely be a fearful investor. This fosters a cycle of selling low and missing out on future returns.
Those who believe they’re not that great at their job won’t advocate for themselves during salary negotiations because deep down they believe they’re not worth it.
Those who believe that investing is risky will always find excuses not to start that business they’ve been dreaming of.
Over-the-top active investors who believe they can routinely beat the market and consistently pick winning stocks on their own will likely net substantially less than if they’d invested in low-cost index funds over the long haul.
On and on it goes. Breaking the cycle, and breathing new life into your finances, ultimately comes down to flipping your self-limiting money beliefs. Here’s how.
- Identify your own biases: This requires some degree of cognition and personal awareness. Emotions easily drive 80 to 90 percent of our decisions. Years of financial planning and investing, for instance, can go south during a period of panic. Look back on your financial life and identify behavior patterns that have cost you, either in money lost of investment returns you never saw.
- Strategize while you’re clearheaded: Planning ahead is far and away the best way to make financial decisions that are rooted in reality. Instead of basing your behavior on distorted, self-limiting beliefs, you’re operating from a place of calm confidence. Crafting a personalized financial plan with a skilled advisor is the most effective way to lay the foundation. When you have a plan, you won’t be financially uprooted by times of uncertainty, like market dips or big life changes such as divorce or the death of a loved one. When emotions spike, you can let this plan be the compass that guides you through the storm.
- Stay connected to your financial plan: Your financial plan isn’t a static document, but rather a living, breathing tool that should reflect your goals and desires. This is vital to living a life of financial freedom and purpose. Unfortunately, it’s all too easy to feel empowered at first, only to stick your plan in a drawer and default back to your old self-limiting behavior patterns. Financial stability is equal parts sticking to your plan and being open and willing to revisit and course correct during different stages of life.
Transitioning to self-empowering money beliefs, and sustaining this habit, is what triggers true change—and this is what ultimately grows wealth. Teaming up with an advisor builds in a layer of accountability, making you much more likely to stick with it. It also means having a rational person in your corner who can help rein you back in during periods of anxiety or uncertainty. At Opal Wealth Advisors, this is precisely how we support our clients today, tomorrow and over the long haul.
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